This is the final part 20 of the re-publication of my meta-analysis of what filesharing studies really say.
[Originally published on ZeroPaid on May of 2012.]
We’ve just finished out lengthy series on what file-sharing studies really have to say about file-sharing. The series has drawn quite a lot of attention, so, we felt the need to cap off this series with some final thoughts and a list of links to all the studies and more.
First, for those wanting a complete list with sources, here it is:
(We would like to note that our sources of these studies very likely differs from the ones mentioned below)
Part 1 – Litigation a Failure?:
Study: Impact of Legal Threats on Online Music Sharing Activity: An Analysis of Music Industry Legal Actions
Year: 2006
Journal: Journal of Law and Economics
Source (PDF) [Link fixed from original publication]
Part 2 – P2P Has No Effect on Music Sales
Study: Don’t blame the P2P file-sharers: the impact of free music downloads on the purchase of music CDs in Canada
Year: 2010
Journal: Journal of Evolutionary Economics
Source (Paywalled)
Part 3 – RIAA Suppresses Innovation
Study: How industry associations suppress threatening innovation: the case of the US recording industry
Year: 2011
Journal: Technology Analysis & Strategic Management
Source (Paywalled) [Linked fixed from original publication]
Part 4 – MPAA Preserving its Oligopoly
Study: Hollywood versus the Internet: the media and entertainment industries in a digital and networked economy
Year: 2006
Journal: Journal of Economic Geography
Source (Paywalled)
Part 5 – Producers Lose Less Than $2 Per Album
Study: Music file sharing and sales displacement in the iTunes era
Year: 2010
Journal: The Wharton School, University of Pennsylvania
Source (PDF) [Link fixed from original publication]
Part 6 – Lower Prices, Not Enforcement is Key
Study: Unauthorized file-sharing and the pricing of digital content
Year: 2004
Journal: Economic Letters
Source(Paywalled)
Part 7 – Piracy Increases Producers Profits
Study: Turning Piracy into Profits: a Theoretical Investigation
Year: 2010
Journal: Department of Economics of the University of Bologna
Source (Paywalled)
Part 8 – Supply of Music Has Not Shrank Because of Napster
Study: Bye, Bye, Miss American Pie? The Supply of New Recorded Music since Napster
Year: 2011
Journal: The Carlson School and Department of Economics University of Minnesota and NBER
Source (Free!) [Link fixed from original publication]
Part 9 – ‘Graduated Response’ Laws Failed to Strike a Balance
Study: Toward a Regulatory Model of Internet Intermediary Liability: File-Sharing and Copyright Enforcement
Year: 2011
Journal: Northwestern Journal of International Law & Business
Source (Paywalled)
Part 10 – FileSharing’s Growing Popularity
Study: A View of the Data on P2P File-sharing Systems
Year: 2008
Journal: Journal of the American Society for Information Science and Technology
Source (Paywalled)
Part 11 – Public Performance Profits Skyrocketing
Study: Supply Responses to Digital Distribution: Recorded Music and Live Performances
Year: 2005
Journal:
Source (Free to view!)
Part 12 – Media Industry Must Adapt
Study: The Impact of Illegal Peer-to-Peer File Sharing on the Media Industry
Year: 2010
Journal: California Management Review
Source (PDF)
Part 13 – Lower Prices Decreases Filesharing and Increases Sales
Study: Estimating consumer preferences for online music services
Year: 2010
Journal: Applied Economics
Source (Paywalled) [Link fixed from original publication]
Part 14 – File-Sharing Litigation Never Worked in Asia Either
Study: A Legal and Cultural Comparison of File-Sharing Disputes in Japan and the Republic of Korea and Implications for Future Cyber-Regulation
Year: 2008
Journal: Colombian Journal of Asian Law
Source (Paywalled)
Part 15 – People Who Download Buy More
Study: Measuring the Effect of File Sharing on Music Purchases
Year: 2006
Journal: Journal of Law and Economics
Source (Paywalled) [link fixed from original publication, but is now paywalled unfortunately]
Part 16 – Focus on Adaptation, Not Shuttering P2P
Study: Peer-to-Peer File Sharing and the Market for Digital Information Goods
Year: 2010
Journal: Journal of Economics & Management Strategy
Source (PDF)
Part 17 – Culture and Ethics of FileSharing
Study: Ethical Decisions About Sharing Music Files in the P2P Environment
Year: 2008
Journal: Journal of Business Ethics
Source (Paywalled)
Part 18 – Yet Another Study Recommending Adaptation
Study: Investigating the User Behavior of Peer-to-Peer File Sharing Software
Year: 2011
Journal: International Journal of Business and Management
Source (Free to view!)
Part 19 – Biggest Threat to the Recording Industry? The Recording Industry
Study: The Music Market in the Age of Download
Year: 2007
Journal: Fondazione Eni Enrico Mattei
Source (PDF)
We should also point out that the 20th study that was found in the initial sweep of searching for studies was already previously covered here on ZeroPaid. That study found that losses due to file-sharing are statistically indistinguishable from zero. You can find a copy of that study in full by following the links.
We would also like to add a few more studies that was previously covered here on ZeroPaid. One study we covered in 2010 which file-sharers are big content spenders. Another study which corroborates with another study in our series said that former Mininova users flocked to other sites after it went legit. An additional study in 2010 said that artists revenues were up 66%. In 2009, a study found that artists earned more in a file-sharing world. So, the total here is 24 studies.
Claims and Facts About File-Sharing
Since this series was a response to a study used to promote SOPA, we decided to revisit out article to look back at some of our immediate responses to it in light of this large amount of data.
Claim:
One of the claims the Phoenix study that we picked up was that finding a legal framework to stop infringement online has proven to sell politically.
Fact:
After our extensive review, we found that, even though there is fierce opposition towards laws such as SOPA and any form of graduated response, the problem isn’t actually political. The problem is that there is no scientific basis for laws such as a “graduated response” or censorship of the Internet. After we examined the studies, there was a general theme that the best approach to dealing with file-sharing was not legal enforcement, but rather, a change in a business model that’s adapted to today’s digital reality. If you wanted to find debate where there was no real consensus, then it’s exactly how the industry is suppose to adapt their business model to the digital environment. While many pointed to price point, some suggested trying to find other ways of selling music like what iTunes has done. In fact, one study suggested that enforcement does not bring back customers by itself, but rather, building a model that is actually palatable so the customers return to you more voluntarily. Even the most pro-enforcement study we came up with said that if you’re going to actually do something like litigation, build a better business model as well, but simply resorting to legal tactics against file-sharers is not necessarily a good idea.
Claim:
Another claim the Phoenix study made was that (in the process of disagreeing that there is a difference between a physical stolen piece of property and an unauthorized download) there is no incentive for producers and artists to make music. In addition, because of the activities of file-sharing, there will be less creative works made available.
Fact:
Let’s cut to the chase. Part 8 of our series explicitly debunked the claim that file-sharing causes the decrease in quantity of music. The authors of that study explicitly state that they found no evidence of any kind that linked any decline in the quantity of music and file-sharing. If there was any decline that happened during the existence of file-sharing, the decline was merely a continuing trend since before Napster.
In addition, numerous studies point to the trend of an increase in profits for artists both before this series and during this series thanks to the sampling effect. In fact, the only evidence that file-sharing is even hurting artists at all points out that it’s only the super rich and super famous top acts in the entire industry that may suffer any sort of loss at all (as seen in part 19 of our series). Again, as far as our series and the previous studies are concerned, not true at all.
Claim:
File-sharing displaces legitimate sales. The evidence points to that.
Fact:
This is a classic case of error by omission. What we found in our investigation was that there are numerous reasons why music sales were in decline in the early 2000’s other than the existence of file-sharing. Explanations included an increase in other entertainment sectors, the unbundling of the music album and returning to the singles model (re: the comments of deadweight losses) and an increasing pressure of the consumers bottom line in the face of todays economic realities. So, judging by the evidence we’ve collected, the evidence does not point in the direction that file-sharing, in and of itself, displace sales, but rather, other factors would also play a role in displacement of sales.
Claim:
Since people can enjoy music that they downloaded, they are taking away from society and therefore placing a tax on society which means file-sharing must be stopped.
Fact:
This model, when compared to all of the models we’ve seen, is completely out to lunch. There’s been plenty of calculations and economic models and non of them say anything like this. The closest we can recall in our series was Part 5 in our series which used the flawed theory of 1 download means one lost sale. While the models suggest that consumers do get something out of downloaded material, the losses still only account for less than $2 per album.
Claim:
The losses experienced by the entertainment industry is entirely the fault of file-sharing (one of the studies cited in the Phoenix study, not the model itself)
Fact:
There are way too many market variables to make such a claim. In fact, to put the entire blame of losses in the industry on file-sharing is completely unfounded. As we already discussed in our wrap-up, not only are there other explanations for any possible losses in the music industry, but there is also a well known and well-documented effect of an increase in music sales thanks to file-sharing.
Claim:
The debate should move forward on how to stop file-sharing and online copyright infringement and that we should “discount the argument that on-line theft of IP causes no harm and therefore no foul.”
Fact:
Trying to legislate your way out of this in ways specifically designed to hamper file-sharing was resoundingly rejected in the studies we looked at. This is merely a business problem, not a legal problem. Even the litigation tactics was, for the most part, discounted as a failure. At best, litigation would only work if there was a viable legal alternative to file-sharing (something that has yet to emerge). In fact, one study specifically looked at the “graduated response” laws (Part 9) and found that, while in theory, it’s a good idea, in practice, they are unfairly favoring the industry and that they lack any consumer protection at all (i.e. protection against false infringement claims). I think if you asked these researchers that looked at file-sharing before 2008, none of them would have said that we should be blocking websites and instituting a three strikes law. In fact, some would have said that there would be technological and innovative damage done in the process.
Additional Observations
In addition to the above, I think it’s fair to say that, going from one study to another, you get that sense of “litigation fails”, “industry should innovate”, “focus on price”, “innovate”, “price”, “price”, “innovate”, “innovate”, “innovate” and then contrast it to what the industry is actually pushing (i.e. three strikes laws and massive censorship), you can almost get that sense that the reaction in the education community would be “now where did that come from?”. You barely, if at all, even get a sense that this is where things should be headed when reading these studies. It’s like these ideas were either completely out of the blue or as a result of ignoring sound science into these matters. Based on all the scientific reasoning, scientific predictions and models and a whole lot more that we got from this series, we shouldn’t even be anywhere near the kinds of debates we are having now with respect to copyright enforcement (yes, not even close). Instead, we should, at minimum, be seriously considering things like an ISP levvy or creating a framework for legal file-sharing or trying to think of services that imitate the file-sharing structure to help artists and the industry make money. It’s like we’ve shunned all science and economics and headed down the road of trying to constrain, restrict and, in some ways, shut down the Internet instead. It really puts into perspective just how shocking idea’s like the “graduated response” or three strikes laws and censoring websites really are.
Also, on a personal note, this study required a substantial amount of hard work. So, if you want to conduct your own research on the sort of magnitude on something like file-sharing, think to yourself if you’ve studied through research papers before. You will find things you don’t understand in research papers and studies unless you focus exclusively in a field of your expertise (and even the, the chances are pretty good that you’ll find something you won’t immediately understand). I hate to discourage anyone, but this kind of thing is not for the faint of heart. Even I, someone who has read through numerous research papers and studies, was really pushing myself throughout this series. Having said that, if you can stomach a large quantity of heavy reading, I think you should be encouraged, if you are able and have access, to find your own research on the topic of file-sharing. Don’t take my analysis, but rather, take the comments made by the papers themselves and try and do some note comparisons to verify the general ideas of what they are saying. That’s the point of a scientific approach – testing everything to make sure they are accurate.
In following the notions of science, we chose to use multiple studies instead of a select few. The reason for this is that we can have a sense of redundancy to make sure that what we were saying was reasonably accurate. If you can have five different ways of measuring a certain economic problem and come to a general consensus of a few basic facts, then you increase your chances of being accurate. Can you test something multiple times and come to the same or very similar conclusions about a question? I think that is a very scientific question and one we more or less used when approaching the issue of file-sharing in this series. Even if there were mistakes along the way on a specific study in this series, the consensus of facts can overcome such issues. In this series, I think we can establish some basic patterns of facts and I don’t think our conclusions about file-sharing are (if they are off to begin with) that far off at all.
Based on my reading of these studies and my years of experience, I think the industry should be focused on making profits, not problems.
Drew Wilson on Twitter: @icecube85 and Google+.
