What Filesharing Studies Really Say: Part 2 – P2P Has No Effect on Music Sales

Part 2 of the republication of my meta-analysis.

[Originally published on ZeroPaid in 2012.]

Earlier, we began an investigative news series on what various studies really say in response to a poorly written study that attempted to argue that the US should start censoring the internet. We continue this series with a 2010 study that says that unauthorized downloading has no effect on the sales of music at all.

The study is entitled “Don’t blame the P2P file-sharers: the impact of free music downloads on the purchase of music CDs in Canada” which was published in 2010 in the Journal of Evolutionary Economics. The papers abstract says that it measures any theoretical negative effects of file-sharing (i.e. not willing to pay for the music) and positive effects of file-sharing (i.e. market creation) and says, “on the whole, these two effects ‘cancel’ one another out, leading to no association between the number of P2P files downloaded and CD album sales.”

The authors go on to be more explicit in their intentions of the paper, saying, “The primary objective of this paper is to analyze the effects of P2P file-sharing on pre-recorded music purchases in CD markets. The focus is, in particular, on whether such downloading and P2P file-sharing displaces (substitutes) or increases/stimulates music purchases.”

The study goes on to make the following point:

We believe that the decision to engage in music downloading or P2P filesharing is not only a response to the price of music, but is also a response to the availability of musical works. For example, rare songs, music from bands that have not signed with a record label, or private recordings from life concerts may be available through P2P networks but may not be available for sale.

While I don’t speak for everyone, this has definitely been my personal experience. If it weren’t for the internet in general, I don’t think I would have even really discovered electronic music in general such as Trance, Hardcore and Drum N’ Bass to name a few genre’s. Now, not only have I been exposed to so many artists in these genre’s of music, I’m also producing music in similar genre’s as well. I don’t think I’d ever find artists like Temple City and Dan Vine in local HMV store as they’d be too busy selling music from Coldplay and The Headstones – music that just isn’t within my musical tastes at all. With the internet, I am able to discover huge volumes of different kinds of music that would not otherwise be available in my area of the world. That certainly plays in to the market creation hypothesis suggested in the study.

The study then goes on to describe how the authors collected the data:

This paper adds to the discussion on the effects of music downloading and P2P file-sharing by using microeconomic survey data representative of the Canadian population and by extending the analysis to account for a wider range of relevant factors underlying music purchasing. This survey was designed by Birgitte Andersen with support from Industry Canada, and data collection was conducted by Decima Research in 2006.

The study also makes a valuable point when talking about the data:

Most previous studies on the relationship between P2P file-sharing and CD sales have utilized aggregated (e.g. macroeconomic) data. Thus, the analyzes using those data merely indirectly explain the statistical relationships on which micro-assumptions and conclusions are based.

While some people might criticize the approach of a survey, it is certainly better than the mere guesswork approach made by those who feel that they’ve found a direct correlation between file-sharing and a perceived decline in music sales. In short, it’s better to ask a few people than to just pull numbers out of the air and guess which was one of my big criticisms of the Phoenix study.

After analyzing the data, the study concludes with the following:

When analyzing the effects of P2P file-sharing on pre-recorded music purchases in CD music markets, the focus was in particular on whether P2P filesharing displaces/substitutes or increases/stimulates music purchases. Based on our findings, we argue that P2P file-sharing behavior may not be bad news for the industry, because such activities create a range of new business opportunities.


Thus, this paper show 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, due to the sampling effect. However, technological innovation (spurring the way in whichmusic is now electronically delivered and consumed) pushes a need for the music industry to change its organization of such appropriation, in order to match the emerging new structures that are able to supply music at cheaper prices, especially for those who download freely from P2P file-sharing networks, because they perceive the album price as too expensive.

In essence, the music industry needs to change its business model to adapt to the technological realities of today. You can’t blame file-sharing for any losses in music sales because you can’t prove that file-sharing is to blame given the numerous variables of sampling new music, discovering new music and a host of other factors that would affect music sales when looking strictly from the perspective of unauthorized downloading and authorized music purchases.

Drew Wilson on Twitter: @icecube85 and Google+.

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