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The impact of internet file-sharing on the purchase of music CDs in Canada

Author

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  • George Barker

    ()

  • Tim Maloney

    ()

Abstract

This paper re-examines data from a survey commissioned by Industry Canada on the effects of internet peer-to-peer (P2P) file sharing activities on music purchasing behaviour. The survey was designed to “inform Industry Canada's policy development work” (Quote from project Description from Industry Canada’s website at http://www.ic.gc.ca/eic/site/ic1.nsf/eng/01464.html downloaded 23 January 2012) and the need for copyright law reform in Canada in light of the technological innovation posed by P2P file sharing. The Journal of Evolutionary Economics published a study of the Industry Canada data by Andersen and Frenz (AF) in 2010 which claimed to show “… no association between the number of P2P files downloaded and CD album sales (Andersen and Frenz 2010 ibid p 374),” and “… that P2P file-sharing is not to blame for the decline in CD markets. Music markets are not simply undermined by free music downloading and P2P file-sharing (Ibid p375).” Our paper corrects a number of fundamental errors in this analysis of AF, in particular the fact AF biased their results by excluding from their analysis the group of consumers who had completely stopped purchasing CDs (potentially because of P2P activity) prior to 2005. This is the very group who were most responsive, or likely to have substituted P2P downloading for CD purchases. We use longitudinal analysis of how reported changes in P2P downloading by individuals related to their reported changes in CD demand between 2004 and 2005 to better test the hypothesis of whether P2P downloading may reduce CD demand. Contrary to AF’s results we find negative and generally statistically significant partial correlations between CD purchases and P2P downloads under a number of specifications and sample definitions. The range of these estimated correlations is between −0.047 and −0.061. This implies that a 10 % growth in P2P downloads is associated with between a 0.47 and 0.61 % decline in CD purchases. Our estimated relationships between CD sales and P2P downloads are broadly consistent with market sales data up to the time of the Industry Canada survey, unlike AF. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • George Barker & Tim Maloney, 2015. "The impact of internet file-sharing on the purchase of music CDs in Canada," Journal of Evolutionary Economics, Springer, vol. 25(4), pages 821-848, September.
  • Handle: RePEc:spr:joevec:v:25:y:2015:i:4:p:821-848
    DOI: 10.1007/s00191-015-0416-6
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    References listed on IDEAS

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    1. Rob, Rafael & Waldfogel, Joel, 2006. "Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 29-62, April.
    2. 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.
    3. Liebowitz, Stan J, 2006. "File Sharing: Creative Destruction or Just Plain Destruction?," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 1-28, April.
    4. Birgitte Andersen & Marion Frenz, 2010. "Don’t blame the P2P file-sharers: the impact of free music downloads on the purchase of music CDs in Canada," Journal of Evolutionary Economics, Springer, vol. 20(5), pages 715-740, October.
    5. 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.
    6. Zentner Alejandro, 2005. "File Sharing and International Sales of Copyrighted Music: An Empirical Analysis with a Panel of Countries," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-17, October.
    7. Steven G. Medema (ed.), 1995. "The Legacy Of Ronald Coase In Economic Analysis," Books, Edward Elgar Publishing, volume 0, number 618, April.
    8. Michel Norbert J, 2006. "The Impact of Digital File Sharing on the Music Industry: An Empirical Analysis," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-24, September.
    9. Seung‐Hyun Hong, 2013. "Measuring The Effect Of Napster On Recorded Music Sales: Difference‐In‐Differences Estimates Under Compositional Changes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(2), pages 297-324, March.
    10. Waldfogel, Joel, 2010. "Music file sharing and sales displacement in the iTunes era," Information Economics and Policy, Elsevier, vol. 22(4), pages 306-314, December.
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    More about this item

    Keywords

    Copyright law; Economics; Internet peer-to-peer (P2P) file sharing Music; Downloads; K11; K29;

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K29 - Law and Economics - - Regulation and Business Law - - - Other

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