File sharing has no impact on CD sales - research

 

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By Simon Aughton

Posted on 15 Feb 2007 at 14:03

In fact, the 2004 US Consumer Expenditure Survey found households without a computer, and therefore unlikely to engage in file sharing, said that they had reduced their spending on CDs by 43 per cent since 1999.

A more likely explanation for the decline in CD sales is competition from other sectors

'A shift in entertainment spending toward recorded movies alone can largely explain the reduction in sales,' they note. 'The sales of DVDs and VHS tapes increased by over $5 billion between 1999 and 2003. This figure more than offsets the $2.6 billion reduction in album sales since 1999.'

At the same time computer game sales rose by 40 per cent and mobile phone usage by teenagers tripled.

Oberholzer-Gee and Strumpf finish by arguing that file sharing will have little effect on the quality or quantity of new music.

'For artists who produce commercially relevant products, the effects documented in this study are simply too small to change the number or quality of recordings that they release,' they say. 'And for new bands that are about to launch their career, the probability of success is so low as to make the expected income from producing music virtually zero, so file sharing will not change the relevant incentives.'

And while file sharing may not be impoverishing the music industry, it is enriching the rest of us.

'The sheer magnitude of P2P activity, the billions of songs downloaded each year, suggests that the added social welfare from file sharing is likely to be high,' they conclude.

Oberholzer-Gee and Strumpf's findings were published in the February edition of the Journal of Political Economy and online at journals.uchicago.edu/JPE.