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Profit Leak? Pre‐Release File Sharing and the Music Industry

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  • Robert G. Hammond

Abstract

Using data from an exclusive file‐sharing Web site that allows users to share music files using the BitTorrent protocol, I exploit exogenous variation in the availability of sound recordings in file‐sharing networks to isolate the causal effect of file sharing of an album on its sales. Using within‐album variation in illegal downloads and sales, I find that the effect is essentially zero: The elasticity of sales with respect to illegal downloads is one‐tenth of one percentage point. However, the finding that file sharing is not harmful to individual artists is not inconsistent with the well‐documented fact that file sharing is harmful to the music industry (the fallacy of composition). More important, I find that file sharing benefits more established and popular artists who are signed to major labels, which is consistent with recent industry trends.

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  • Robert G. Hammond, 2014. "Profit Leak? Pre‐Release File Sharing and the Music Industry," Southern Economic Journal, John Wiley & Sons, vol. 81(2), pages 387-408, October.
    • Handle: RePEc:wly:soecon:v:81:y:2014:i:2:p:387-408
    DOI: 10.4284/0038-4038-2013.059
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    References listed on IDEAS

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    2. Michael Arnold & Éric Darmon & Sylvain Dejean & Thierry Pénard, 2014. "Graduated Response Policy and the Behavior of Digital Pirates: Evidence from the French Three-strike (Hadopi) Law," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201401, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    3. Brett Danaher & Michael D. Smith & Rahul Telang, 2014. "Piracy and Copyright Enforcement Mechanisms," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 25-61.
    4. Wojciech Hardy, 2018. "Pre-release leaks as one-time incentives for switching to unauthorised sources of cultural content," IBS Working Papers 03/2018, Instytut Badan Strukturalnych.
    5. Éric Darmon & Thomas Le Texier, 2014. "Private or Public Law Enforcement? The Case of Digital Piracy Policies with Non-monitored Illegal Behaviors," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201403, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    6. Godefroy Nguyen & Sylvain Dejean & François Moreau, 2014. "On the complementarity between online and offline music consumption: the case of free streaming," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 38(4), pages 315-330, November.

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