|Testing file-sharing's impact by examining record sales in cities
|Liebowitz, S. J.
|Liebowitz, S. J. (2005). Testing file-sharing's impact by examining record sales in cities. School of Management University of Texas Paper, September, 1-31.
|Definitive , Open Access
|Key Related Studies:
|Albinsson (2013), Andersen and Frenz (2008), Giletti (2012), Grolleau, Mzoughi and Sutan (2008), Handke (2012a)
|About the Data
|Using a data set for 99 American cities containing information on Internet use, record sales, and other demographic variables, an econometric analysis is undertaken to explain the change in record sales before and after file-sharing
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The transmission of digitized music files, particularly on filesharing networks, is having a profound impact on the consumption and production of music. Although previous forms of copying have been found to often have benign effects on copyright owners, the rise in file-sharing has coincided with a steep decline in the sale of sound recordings. This paper attempts to empirically examine whether file-sharing has caused the decline in record sales. It examines the size and pattern of file-sharing and its theoretical impact on record sales. Using a data set for 99 American cities containing information on Internet use, record sales, and other demographic variables, an econometric analysis is undertaken to explain the change in record sales before and after file-sharing. The results imply that file-sharing has caused the entire decline in record sales that has occurred and also appears to have vitiated what otherwise would have been fairly robust growth in the industry. Looking at sales in individual musical genres reinforces the primary conclusions. The record industry’s risky strategy of assiduously fighting filesharing, therefore, appears to have a rational basis.
Main Results of the Study
- The decline due to file -sharing appears to be larger than the measured decline—the regression results indicate that file-sharing not only reduced sales but also vitiated an increase that otherwise would have occurred* When given the choice of free copies versus purchased originals, a significant number of individuals who might have purchased originals will chose to substitute the free copy. When this can happen without limit, among strangers, it would be amazing if there were not a powerful substitution effect.
Policy Implications as Stated By Author
- The researcher putting forth empirical findings needs to be particularly tentative about results for markets that are in transition, because the future may always prove you wrong* Some suggest that the industry should embrace file-sharing. Although it is far from clear that industry attempts to restrict file -sharing will be successful, the results of this paper imply that the industry is at least following a rational course.
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