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Music file sharing and sales displacement in the iTunes era

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  • Waldfogel, Joel

Abstract

A growing empirical literature examines the relationship between music file sharing and legal purchases of music, but existing studies examine the period before consumers had attractive legal digital a la carte options. The iTunes Music Store has grown quickly since its appearance in 2003, and digital music now accounts for a third of US recorded music sales. Using two new surveys of University of Pennsylvania undergraduates in 2009 and 2010, we ask how music file sharing and sales displacement operate in the iTunes era, when the alternative to file sharing is purchasing individual songs, rather than entire albums. We find large amounts of file sharing in this population. Respondents have more stolen than paid music, but the music obtained via file sharing is, for the most part, low-valuation music which the respondents would likely not have purchased. The rate of sales displacement implied by the relationship between stolen and purchased music across respondents in both samples is between -0.15 and -0.3. That is, an additional song stolen reduces paid consumption by between a third and a sixth of song. Perhaps surprisingly, this is about the same as the CD sales displacement rate found for the pre-iTunes era using a similar empirical approach on a similar study population.

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Bibliographic Info

Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 22 (2010)
Issue (Month): 4 (December)
Pages: 306-314

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Handle: RePEc:eee:iepoli:v:22:y:2010:i:4:p:306-314

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Web page: http://www.elsevier.com/locate/inca/505549

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Keywords: Intellectual property piracy iTunes Recorded music;

References

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  1. Rafael Rob & Joel Waldfogel, 2004. "Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students," NBER Working Papers 10874, National Bureau of Economic Research, Inc.
  2. Zentner, Alejandro, 2006. "Measuring the Effect of File Sharing on Music Purchases," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 63-90, April.
  3. Felix Oberholzer-Gee & Koleman Strumpf, 2007. "The Effect of File Sharing on Record Sales: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 115, pages 1-42.
  4. Bhattacharjee, Sudip & Gopal, Ram D & Lertwachara, Kaveepan & Marsden, James R, 2006. "Impact of Legal Threats on Online Music Sharing Activity: An Analysis of Music Industry Legal Actions," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 91-114, April.
  5. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
  6. Hong, Seung-Hyun, 2007. "The recent growth of the internet and changes in household-level demand for entertainment," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 304-318, October.
  7. Hui Kai-Lung & Png Ivan, 2003. "Piracy and the Legitimate Demand for Recorded Music," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-24, September.
  8. Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 117-55, April.
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Cited by:
  1. Handke, Christian, 2012. "Digital copying and the supply of sound recordings," Information Economics and Policy, Elsevier, vol. 24(1), pages 15-29.
  2. Markus Pasche, 2014. "Welfare Effects of Endogenous Copyright Enforcement - the Case of Digital Goods," Jena Economic Research Papers 2014-008, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Piolatto, Amedeo & Schuett, Florian, 2012. "Music piracy: A case of “The Rich Get Richer and the Poor Get Poorer”," Information Economics and Policy, Elsevier, vol. 24(1), pages 30-39.
  4. Brett Danaher & Michael D. Smith & Rahul Telang, 2013. "Piracy and Copyright Enforcement Mechanisms," NBER Chapters, in: Innovation Policy and the Economy, Volume 14, pages 25-61 National Bureau of Economic Research, Inc.
  5. Joel Waldfogel, 2012. "Music Piracy and Its Effects on Demand, Supply, and Welfare," NBER Chapters, in: Innovation Policy and the Economy, Volume 12, pages 91-109 National Bureau of Economic Research, Inc.
  6. Bai, Jie & Waldfogel, Joel, 2012. "Movie piracy and sales displacement in two samples of Chinese consumers," Information Economics and Policy, Elsevier, vol. 24(3), pages 187-196.

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