Is file-sharing killing the music industry?

Posted on 3 Jan 2010 at 00:00

“Precisely measuring illegal behaviour will always require a small degree of estimation, however – because file-sharing is illegal, people tend to under-report what they are doing.”

The difficulty of finding reliable data extends to calculating lost revenues. The CIBER report claims losses from file-sharing and counterfeiting hit £10 billion conservatively in 2004. The report quotes a press release issued by law firm Rouse & Co celebrating the Government’s decision to create an IP Crime Strategy group.

The law firm drew the figure from a report by the Anti-Counterfeiting Group, which takes in the entire gamut of fake goods in the UK, from software to handbags. The figure also assumes that every counterfeit is a lost sale, ignoring the possibility of people who sample music and go on to buy it, or had no intention of buying it in the first place.

The tendency of these reports to focus on lost sales while ignoring the potentially positive implications of file-sharing on the industry is an issue addressed by Harvard Business School’s File-Sharing and Copyright report.

“As music becomes effectively available for free, the price of concerts, a complement to music, is likely to rise, and artists who earn income from concerts might not be hurt by a decline in music sales,” reads one example, cited by report authors Felix Oberholzer-Gee and Koleman Strumpf.

“Studying 2,135 artists over a ten-year period, the demand for concerts increased due to file-sharing. One way to see this is to ask how many CDs an artist needs to sell to produce $20 of concert revenue. This number fell from 8.47 in the pre-Napster era to 6.36 in the 1999 to 2002 period.

Not surprisingly, artists responded to these incentives by touring more frequently. Overall, the shift in relative prices and activities led to a sharp increase in income for the typical artist.”

So is file-sharing killing the music industry? The answer, it seems, depends largely on what report you read, and how deeply you’re willing to dig into its sources. There’s little doubt that file-sharing is a problem, but whether it’s quite as dire as the IFPA suggests is an entirely different question.

Whatever the case, all the studies referenced in this article agree on one thing: more research needs to be done if we’re truly to understand the impact of this new technology on our creative industries.

Author: Stuart Turton

1 2