Piracy on the High C's - NBER Study on Music Downloading
Joel Waldfogel of the Wharton School and Rafael Rob, both of UPenn, published a working paper that some in the media (BBC) are using to support the argument that sharing of music is affecting music spending (and therefore sales) - to the tune of 13-27% in the 421 students they measured. But the conclusion their paper arrives at paints not so drastic a picture:
"...downloading displaces sales among a convenience sample of college students...downloading reduced expenditure by 13 to 27 percent. While downloading reduces expenditure (on hit albums, 1999-2003) by $25 per capita in the sample, it raises sample consumers’ welfare associated with these albums by $70 per capita. Some of the benefit to consumers are transfers from sellers, but most of the benefit ($45 per capita) comes from reductions in deadweight loss. Two facts bears emphasis again. First, our sample is not representative, so our results should not be generalized. Second, our evaluation of welfare takes supply as given. It is entirely possible that downloading has important effects on the quantity and types of music recorded and marketed in the first place. This is an important area for further research."
... so this once again supports the idea that music sharing enables consumers to make better choices with regard to music spending - try before you buy. The end result might be that the big record labels will lose sales of their top-40 dross acts - most of which has no artistic value whatsoever. Perhaps this kind of finding will further encourage the labels to produce better music, and refocus their business model accordingly.
If you want to pay NBER for the paper, click here.
If you want to download the paper for free, click here.