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Study Finds P2P Has No Effect on Legal Music Sales

Posted by Zonk on from the everybody-feign-deep-shock dept.

MBrichacek writes "The Journal of Political Economy is running the results of a study into P2P file-sharing, reports Ars Technica. The study has found that, contrary to the claims of the recording industry, there is almost no effect on sales from file-sharing. Using data from several months in 2002, the researchers came to the conclusion that P2P 'affected no more than 0.7% of sales in that timeframe.' 803 million CDs were sold in 2002, according to the study, which was a decrease of about 80 million from the previous year. While the RIAA has been blaming that drop (and the drop in subsequent years) on piracy, given the volume of file-sharing that year the impact from file sharing could not have been more than 6 million albums total. Thus, 74 million unsold CDs from that year are 'without an excuse for sitting on shelves.'"

8 of 294 comments (clear)

  1. The Original Report by eldavojohn · · Score: 5, Informative
    The paper that The Journal of Political Economy is citing is The Effect of File Sharing on Record Sales: An Empirical Analysis[PDF Warning!] which I found hosted on Koleman Strumpf of UNC Chapel Hill's school homepage although it is also available via one of my favorite (though not very comprehensive) research sites, Citeseer.

    Something interesting to note is that this paper is dated March of 2004 (not too new as Ars Technica reported) and it causes me great wonder why I've never come upon this before (or why it's never been cited in the news). I recall reading tons of reports from one of the Associations where piracy is proven to hurt record sales but several years after this one is published, I finally see it.

    For those of you interested in the data, pages 34 on contain some very interesting data whereby downloads are broken down by song, album, country & genre (in case everyone was trying to pin illegal downloads on those damned teeny boppers).

    For those of you who wish to question the sample size, see Section B. "File Sharing Data and Album Sample" of the paper. You will also be interested in reading Appendix A in which they call into question their own sample sizes and weigh in on how accurate they might or might not be. To quote the paper for some more detail on the downloads samples,

    Over the sample period we observe 1.75 million file downloads or roughly ten per minute.10 This is about 0.01% of all the downloads in the world. A significant majority of the downloads were music files. U.S. users accounted for about one third of the downloads (and the data contain about 0.01% of all music downloads by U.S. users).
    To quote the paper on album sales samples,

    The mean of sales for these albums during our observation period is 151,786 copies, ranging from 71 copies to 3.5 million copies.
    Don't kid yourself, this is a difficult study to do. Both the downloads and album sales must be sampled and modeled correctly to draw correct conclusions. In the end, it would be hard to verify/discredit any studies done on this topic since A) consumers are human and therefore erradic & B) macro economics still isn't well understood.

    Now, for those of you who just want the bottom line at the end of the paper,

    We find that file sharing has no statistically significant effect on purchases of the average album in our sample.
    And, from the very end of the paper,

    If we are correct in arguing that downloading has little effect on the production of music, then file sharing probably increases aggregate welfare. Shifts from sales to downloads are simply transfers between firms and consumers. And while we have argued that file sharing imposes little dynamic cost in terms of future production, it has considerably increased the consumption of recorded music. File sharing lowers the price and allows an apparently large pool of individuals to enjoy music. The sheer magnitude of this activity, the billions of tracks which are downloaded each year, suggests the added social welfare from file sharing is likely to be quite high.
    Yeah, that's right, the research concluded that "file sharing probably increases aggregate welfare." I'll bet if we all got drills & augers, we could get that into the brains of the people running the RIAA & MPAA.
    --
    My work here is dung.
    1. Re:The Original Report by Gr8Apes · · Score: 5, Interesting

      Yeah, that's right, the research concluded that "file sharing probably increases aggregate welfare." I'll bet if we all got drills & augers, we could get that into the brains of the people running the RIAA & MPAA. That's been one of the main facets of those opposed to the xxAA camps. However, this study mentions some symptoms without delving into them.

      File sharing enables more acts to be exposed to a larger audience. File sharing is probably hurting radio more than it is artists, as it becomes increasingly difficult to cater to the growing diverse tastes of what used to be their audience. Basically, I pose that file sharing is taking the place of radio to promote artists. Why do I say promote? If you've ever heard an MP3 or other compressed format played at a reasonable or louder volume on quality equipment, you wouldn't be asking.

      Control of musical output is being taken away from large conglomerates, and is actually being put back into the hands of the people. Over the course of the last 20 or so years, the FCC has allowed the independent radio station to become extinct as they were gobbled up mainly by one of 2 corporations: Infinity and ClearChannel. These corporations, namely ClearChannel as I have personally seen them destroy the selection of radio stations in my city, have attempted to create a one size fits all set of stations to pump music and [lack of] talent through to the chumps, um, audience. Via this control, and payola, for which I have no direct proof other than the absolute crap on the radio that has driven away large portions of their audience, they thought they were setup to just print money by promoting talentless acts with crappy contracts that would "sell" just because they promoted them.

      What happened instead is this internet thing and P2P, wherein people started sharing music, music that wasn't promoted, wasn't on the local airwaves, and thus not in the RIAA members's maximized profit model. It got even worse when sites like MySpace (yes, I have to give it some props) started serving as an alternative promotion source for bands.

      So there's much more to P2P and music sales than what these or any statistics show. Falling sales are not related to increased P2P. I'd argue that sales haven't fallen any more than they have explicitly because of P2P. Why? Take a look at the last 6 months of album releases. Can you name more than 2 albums of note? I can't. I haven't seen a single Rock/Alternative/Pop album I wanted in the past 6 months. Is it because there aren't any musicians out there? Naah, it's because tripe has been promoted and is all that's for sale.
      --
      The cesspool just got a check and balance.
  2. Re:Exactly by Mad+Dog+Manley · · Score: 5, Insightful

    I believe the reason for CD sales declining is far more simplier than "P2P caused it" or even "all new music sucks". Maybe the real reason is simply that the format is starting to die. I own dozens of CDs but I don't even play them anymore. I play MP3s on my computer or on a portable device (that conveniently connects to my home and car stereo on demand), or the very least listen to the digital radio stations on my digital cable (which also carries 15 local radio stations from the city where I live). 15 songs per cd? That's *so* 90's.

  3. Hey record companies. by robably · · Score: 5, Funny

    You know what would shift those 74 million unsold CDs? Robot monkeys. A free robot monkey with each CD. Ones wearing little black leather jackets for the rock CDs, pink tutus for girl bands, green hair for punks. You could call them Andy The Happy Robot CD Monkey & His Fab Monkey Pals if you like.

    My pleasure.

  4. Study is Wrong by phoenixwade · · Score: 5, Insightful

    Filesharing HAS caused a drop in CD sales.

    Because:
      A. File sharing has caused RIAA lawsuits
      B. RIAA lawsuits have pissed off customers
      C. Pissed off customers look for other things to buy instead of CD's.

    A->B->C so A->C

    On a more serious note.... This reminds me of the global warming debate.. First you have those that say it's happening and those that say it isn't. Then enough studies come out that Global warming happening becomes the prevailing idea. So the next debate is Well, humans are causing it/it's natural. and so forth.

    So we've seen the Cd sales are diminishing debate, CD sales ARE going down, now we're looking at why, the debate is File shareing / not file shareing / impact of file shareing.

    I will be quite happy when the debate turns to "Your artists are CRAP, CD sales is dropping because the consumer is moving to buy independent artists' work, where they can find decent music."

    --
    A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.
  5. Give us something worth buying... by Elbowgeek · · Score: 5, Insightful

    That's the comment I got from various American youths. The music they are interested in has no long term value, unlike the Beatles/Stones/et al. Partly this has to do with the fact that most of modern pop is programmed on a cold computer and utterly devoid of real feeling; I get the feeling that while the kids are diggin' modern music at the same time they are unable to form a true connection to it, in the same way a human can't truly fall in love with a computer, because one knows it's an inanimate object at the end of the day. (And yes, I have read Isaac Asimov's robot story on the subject)

    When I listen to music I'm partly looking to be wowed by the performance of at least some part of the piece. Current electronically generated and produced pop has no real performances to speak of, or if there is one can't be sure whether it's a sample of some old record thrown into the mix.

    The point to all of this is that people now feel no reason to want to own the tracks they think they like (so that they can be listened to years down the road with fond memories) as music has become as commoditized and disposable as Gillette razors - only meant to be used for a certain period of time before being chucked in the bin.

    There's a lot more to the problem of course, but the above does play an important part. The record companies need to produce artists (and they are out there) who produce real music and do it well. Fiddling with MIDI settings all day isn't producing music - it's computer programming.

    Cheers

    --
    Who is this delectable creature with an insatiable love of the dead?
  6. Re:How bizarre... by inca34 · · Score: 5, Insightful

    I didn't see any parading, though I did see evidence that it hurts sales by no more than 0.7%. How does openly discussing causal relationships in economics with respect to P2P hurt the credibility of a /., a news website that's centers a discussion about a topic for us to hash about until we set the facts straight?

    Really, until you actually RTFA and tell me why they're wrong, I'll stick with the only person who has developed a point so far: TFA.

  7. Re:How bizarre... by BlueCodeWarrior · · Score: 5, Funny

    One might even say that some people think that P2P affects sales, while other people think it effects sales.