A heritical view of file sharing

[MikeHunt]

A Heretical View of File Sharing
By JOHN SCHWARTZ

Published: April 5, 2004

he music industry says it repeatedly, with passion and conviction: downloading hurts sales.

That statement is at the heart of the war on file sharing, both of music and movies, and underpins lawsuits against thousands of music fans, as well as legislation approved last week by a House Judiciary subcommittee that would create federal penalties for using what is known as peer-to-peer technology to download copyrighted works. It is also part of the reason that the Justice Department introduced an intellectual-property task force last week that plans to step up criminal prosecutions of copyright infringers.



But what if the industry is wrong, and file sharing is not hurting record sales?

It might seem counterintuitive, but that is the conclusion reached by two economists who released a draft last week of the first study that makes a rigorous economic comparison of directly observed activity on file-sharing networks and music buying.

"Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates," write its authors, Felix Oberholzer-Gee of the Harvard Business School and Koleman S. Strumpf of the University of North Carolina at Chapel Hill.

The industry has reacted with the kind of flustered consternation that the White House might display if Richard A. Clarke showed up at a Rose Garden tea party. Last week, the Recording Industry Association of America sent out three versions of a six-page response to the study.

The problem with the industry view, Professors Oberholzer-Gee and Strumpf say, is that it is not supported by solid evidence. Previous studies have failed because they tend to depend on surveys, and the authors contend that surveys of illegal activity are not trustworthy. "Those who agree to have their Internet behavior discussed or monitored are unlikely to be representative of all Internet users," the authors wrote.

Instead, they analyzed the direct data of music downloaders over a 17-week period in the fall of 2002, and compared that activity with actual music purchases during that time. Using complex mathematical formulas, they determined that spikes in downloading had almost no discernible effect on sales. Even under their worst-case example, "it would take 5,000 downloads to reduce the sales of an album by one copy," they wrote. "After annualizing, this would imply a yearly sales loss of two million albums, which is virtually rounding error" given that 803 million records were sold in 2002. Sales dropped by 139 million albums from 2000 to 2002.

"While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing," the professors wrote.

In an interview, Professor Oberholzer-Gee said that previous research assumed that every download could be thought of as a lost sale. In fact, he said, most downloaders were drawn to free music and were unlikely to spend $18 on a CD.

"Say I offer you a free flight to Florida," he asks. "How likely is it that you will go to Florida? It is very likely, because the price is free." If there were no free ticket, that trip to Florida would be much less likely, he said. Similarly, free music might draw all kinds of people, but "it doesn't mean that these people would buy CD's at $18," he said.

The most popular albums bought are also the most popular downloads, so the researchers looked for anomalous rises in downloading activity that they might compare to sales activity. They found one such spike, Professor Oberholzer-Gee said, during a German school holiday that occurred during the time they studied. Germany is second to the United States in making files available for downloading, supplying about 15 percent of online music files, he said. During the vacation, students who were home with time on their hands flooded the Internet with new files, which in turn spurred new downloading activity. The researchers then looked for any possible impact in the subsequent weeks on sales of CD's.


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[MikeHunt]

oops...http://www.nytimes.com/2004/04/05/te...partner=GOOGLE

[smokingbevel]

"While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing,"

I believe this to be an accurate statement, but it's also obvious that at least a marginal amount of potential consumers are, or could be lost through filesharing because, instead of retaining valuable resources, strong organizations invest in opposition. Once again, the first priorities of particular governing legislative branches involve supporting the few wealthy and powerful which finance them. Thus, some would say the powers of the masses, from impoverished to moderately well-off, are relatively limited to decisions concerning what exactly to "consume", or rather, which products are superior and fair, and what producing organization will have leaders burdened with a possible 60% cut of generated profit.
No, Mr. MikeHunt. Although the post contained a segment of an article, an opinion was omitted, so the resulting negative statement "No, MikeHunt", concludes this reactionary post.

[camoor]

I love how there are always people, even on this board, who will believe a CEO before a professor. Excuse me, but which person devoted their life to the pursuit of knowledge and truth, and which one goes out to make money whatever way he/she can.

[Afn]

Most research is funded by corporations. Grants for research is more and more a competitive game where the money goes to the research team that will give results favoring the sponsors.

in the end, with what ever system that is mandated, the transnational corporations and national players will get a greater marketshare and profit from the system. A system that helps the independent and single work author should be on the mind of every american. Right now, the corporations are using an issue to gain exclusive control of what information people have access to, who gets information, and ensuring only those who have money get access.

(if drm is ever made law, make it owned by no one, make content a pool and charge a standard rate per download for a work of art, .03 each.)

It would be a great idea if only people could own intelectual property. Make that concept law, and it would take away the ablity for corporations to act as people under the law and amass millions of works of art, and then extorting the public by manipulating the law to extend copyright and other forms of intelectual protection.

[RobinSena]

Imagine a world in which copyrights of the works of Mozart, Tchaikovsky, Chopin, Beethoven, etc. were retained by a single corporation. The musical world would be deprived of performances because of modern musicians lack of ability to present a show which would use thier works. The corporations retaining the copyrights would charge an exorbitant price for musicians to put on a public presentation of these great muscial works of art. So although artists do have a right to profit from their art, it would benefit the public much more to have some of the lengthy copyrights rescinded.

[Afn]

artists do have a right to profit from their art

Do corporations have a right to profit from manufactured art? I think not.

The system rewards the corporations with unlimited power to control and manipulate individual artists, technology and the law. If copyright was ONLY for people, corporations would be in service of people, not the other way around. People enslaved by the corporate order and corporate elite would end.

In the future, a few corporations will control what you see, how you see it and who gets access and who does not. If you are not an employee of a powerful corporation, then you get no access.