|Title:||Illegal Music Downloading and Its Impact on Legitimate Sales: Australian Empirical Evidence|
|Citation:||McKenzie, Jordi. (2009). Illegal music downloading and its impact on legitimate sales: Australian empirical evidence. Australian Economic Papers, 48(4), 296-307.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|Linked by:||Martikainen (2011)|
|About the Data|
|Data Description:||The data set is compiled from weekly Top 40 (digital) and Top 50 (physical) singles charts as released each Sunday by the Australian Recording Industry Association (ARIA) covering fifteen weeks from 5 November 2007 through 11 February 2008. The full sample of 1350 observations (600 digital and 750 physical).|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
This paper explores illegal music file-sharing activity and its effect on Australian sales of singles in the physical and digital retail markets. Using fifteen weeks of Australian Recording Industry Association weekly chart rankings of physical and digital sales, combined with a proxy for download activity derived from the popular peer-to-peer (P2P) network Limewire, the evidence suggests no discernible impact of download activity on legitimate sales. Whilst significant negative correlation between chart rank and download activity is observed in the digital market, once download endogeneity is purged from the model and song heterogeneity is controlled for no significant relationship remains.
Main Results of the Study
- There is no evidence of relationship between the downloading and sales in the physical sales market but there is a significant negative relationship with the digital market.
- Results point towards market segmentation.
- The econometric results reveal, however, that once the regression methodology accounts for song fixed effects, week fixed effects, and the endogenous (illegal) download variable no significant negative relationship remains. This finding may be cautiously interpreted as (illegal) downloading activity having no effect on sales in either the physical or digital markets.
Policy Implications as Stated By Author
The problem of illegal downloading has recently caught the attention of the recently elected Australian Labor Government who is considering a three strike policy to deal with repeat offenders similar to the system recently employed in the UK. Under this arrangement ISPs would have to police users and take action against those who access pirated material, and would see them warning, suspending, and finally cancelling internet access under the three strike system. It is evident that this is an important issue and one that has many stakeholders to consider.
Coverage of Study
|Level of aggregation:||Single Charts|
|Period of material under study:||2007-2008|