Economists Suggest File-Sharing Did Not Kill the Radio Star

While Big Content has bemoaned file-sharing for as long as we've been able to snatch up hit songs without ponying up big bucks to the record industry, the London School of Economics has come out with an interesting paper that challenges that theory.

Sure record sales are down (from over $26 billion in 2000 to under $16 billion last year) but so is everything else. In a recession, entertainment is generally the first to go. When the "free" money was flowing, the debt-crippled consumer was far more likely to cash in home equity for an impressive CD collection to stuff in that Ikea entertainment center. Duh.

Ars technica has an excellent write-up on the subject:

"Downward pressure on leisure expenditure is likely to continue to increase due to rising costs of living and unemployment and drastic rises in the costs of (public) services," says the report.

Having less money for entertainment has played a huge role in the decline of items like CDs. A 2004 US Consumer Expenditure Survey showed that even spending on CDs by people who had no computer (and were therefore unlikely to download and use BitTorrent) dropped by over 40 percent from 1999 through 2004.

"Household budgets for entertainment are relatively inelastic as competition for spending on culture and entertainment increases and there are shifts in household expenditure as well," the LSE study notes.

And if file-sharing wasn't the major cause of the revenue downturn, stepping up copyright enforcement is unlikely to return the industry to those heady days.

And while it is true that many consumers have turned to illegal file sharing in bad economic times, a 2007 Journal of Political Economy study found that most downloaders would not buy that content, even if they couldn't share it.

"Downloads have an effect on sales that is statistically indistinguishable from zero," the authors flatly concluded then. "Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period."

The recorded music's global trade body, the IFPI, said in its 2010 annual report that the industry would "struggle to survive unless we address the fundamental problem of piracy." But according to market research group NPD, P2P use has dropped from 16 percent of all US Internet users to 9 percent over the last three years. Part of that decrease could possibly be contributed to the death of popular file-sharing service LimeWire last fall. "Limewire was so popular for music file trading, and for so long, that its closure has had a powerful and immediate effect on the number of people downloading music files from peer-to-peer services and curtailed the amount being swapped," said NPD analyst Russ Crupnick.

That won't stop Big Content from pushing an ISP kill switch that would allow ISPs to disconnect super users, which would involve some serious surveillance on their side. Who's to say those files aren't porn or movies?

That's still allowed, right?

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Bob English said...

We've seen this before. From Oct 3, 1970 Billboard: