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Music piracy: Bad for record sales but good for the iPod?

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  • Leung, Tin Cheuk

Abstract

Music piracy is a double-edged sword for the music industry. On the one hand, it hurts record sales. On the other hand, it increases sales of its complements. To quantify the effect of music piracy, I construct a unique survey data set and use a Bayesian method to estimate the demand for music and iPods, and find three things. First, music piracy decreases music sales by 24% to 42%. Second, music piracy contributes 12% to iPod sales. Finally, counterfactual experiments show that, if music were free, the increase in Apple’s profits from iPod can more than compensate the loss of musicians. The last result implies that a Pareto improving iPod tax is possible.

Suggested Citation

  • Leung, Tin Cheuk, 2015. "Music piracy: Bad for record sales but good for the iPod?," Information Economics and Policy, Elsevier, vol. 31(C), pages 1-12.
    • Handle: RePEc:eee:iepoli:v:31:y:2015:i:c:p:1-12
    DOI: 10.1016/j.infoecopol.2015.04.001
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    Citations

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    Cited by:

    1. Kim, Jin-Hyuk & Leung, Tin Cheuk, 2021. "Eliminating digital rights management from the E-book market," Information Economics and Policy, Elsevier, vol. 57(C).
    2. Wojciech Hardy & Michal Krawczyk & Joanna Tyrowicz, 2015. "Friends or foes? A meta-analysis of the link between "online piracy" and sales of cultural goods," Working Papers 2015-23, Faculty of Economic Sciences, University of Warsaw.
    3. Tyrowicz, Joanna & Krawczyk, Michal & Hardy, Wojciech, 2020. "Friends or foes? A meta-analysis of the relationship between “online piracy” and the sales of cultural goods," Information Economics and Policy, Elsevier, vol. 53(C).
    4. Dan Wu & Guofang Nan & Minqiang Li, 2020. "Optimal Piracy Control: Should a Firm Implement Digital Rights Management?," Information Systems Frontiers, Springer, vol. 22(4), pages 947-960, August.
    5. Jin-Hyuk Kim & Tin Cheuk Leung, 2013. "Quantifying the Impacts of Digital Rights Management and E-Book Pricing on the E-Book Reader Market," Working Papers 13-03, NET Institute.
    6. Hardy, Wojciech, 2021. "Displacement from piracy in the American comic book market," Information Economics and Policy, Elsevier, vol. 57(C).
    7. Kanazawa, Kyogo & Kawaguchi, Kohei, 2022. "Displacement effects of public libraries," Journal of the Japanese and International Economies, Elsevier, vol. 66(C).
    8. Chao, Hong & Ho, Chun-Yu & Leung, Tin Cheuk & Ng, Travis, 2017. "To root or not to root? The economics of jailbreak," Journal of Comparative Economics, Elsevier, vol. 45(3), pages 481-497.
    9. Luis Aguiar, 2015. "Let the Music Play? Free Streaming, Product Discovery, and Digital Music Consumption," JRC Working Papers on Digital Economy 2015-16, Joint Research Centre.
    10. Wojciech Hardy, 2022. "Brace yourselves, pirates are coming! the effects of Game of Thrones leak on TV viewership," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 46(1), pages 27-55, March.
    11. Shinichi Yamaguchi & Hirohide Sakaguchi & Kotaro Iyanaga & Hidetaka Oshima & Tatsuo Tanaka, 2023. "The impact of licensed and unlicensed free goods: an empirical analysis of music, video, and book industries in Japan," SN Business & Economics, Springer, vol. 3(3), pages 1-22, March.
    12. Peng, Shuxia & Li, Bo & Wu, Shuang, 2023. "Presence of piracy and legal protection: Decisions in the digital goods market under different contracts," European Journal of Operational Research, Elsevier, vol. 309(2), pages 578-596.
    13. Leung Tin Cheuk & Tsang Kwok Ping & Tsui Kevin K., 2020. "Why Are Inferior Seats “Underpriced”? Evidence from the English Premier League," Man and the Economy, De Gruyter, vol. 7(1), pages 1-26, June.
    14. David M. Mitchell & C. Patrick Scott & Keneth H. Brown, 2018. "Did the RIAA’s Prosecution of Music Piracy Impact Music Sales?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(1), pages 59-71, March.

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    More about this item

    Keywords

    K42; L82; O34; Demand estimation; iPod; Music piracy;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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