Latest Research Shows No Noticeable Impact On CD Sales From Downloads

from the oops dept

Papa Fox writes in to point to the latest economics study on the impact of file sharing on CD sales. It’s done by two economists, Felix Oberholzer-Gee and Koleman Stumpf (rather than the RIAA studies, which are all done by companies hired by the RIAA and whose statistical methodology always has huge holes — such as counting downloads automatically as “lost sales” or simply getting basic math and economics wrong). This latest study, with help from a bunch of extremely well-known and well-respected economists (including the guy who first taught me economics), found that “downloads have an effect on sales that is statistically indistinguishable from zero.” Admittedly it is a difficult thing to work out the direct impact, but they did a few ingenious things to try to account for different variables weighing in on sales and downloads. From the short review of the paper (the full paper isn’t available to see), they tried to account for various possibilities by looking at when German schoolkids were on holiday — assuming that would not impact US sales. It would be nice to see a few more details from the report, but this is just the latest in a series of research coming from academics showing no real impact to sales from downloads — which is also supported by stories like the success of the Shins’ latest album after it was leaked to the internet months before it was released. Of course, we still don’t expect the RIAA to accept the idea that downloads act as free promotion — though it does seem odd that they won’t believe actual research that suggests they’re wasting an awful lot of effort on things like lawsuits and DRM. You would think that actual data would be more convincing than superstitious beliefs when it comes to how you’re wasting your money.


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Comments on “Latest Research Shows No Noticeable Impact On CD Sales From Downloads”

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45 Comments
Paul Kimelman says:

Downloading and CD sales

I think the problem for the RIAA is the fear of the cat getting out of the bag (so to speak). They fear that if something changes from illegal/illicit to legal, it will change how people act. That is, we have a cultural sense of fair play, so many of us would buy the song or CD once we know we like the song and will listen to it a lot. Obviously not all, but the increased number of people who can have a listen (through one means or another), means that those people probably make up for the pure cheaters. I know I buy more CDs because I can listen to the songs to know I really like the CD (avoiding the many disappointments of the past). Further, online sites make it easier to discover new artists.
So, although I think the RIAA is on the wrong track, I can understand their fear. Of course, since you can easily rip a CD and share it, they should drop the DRM on paid downloads, and focus on making content easy to buy.

bullshit says:

nobody buys CD’s anymore, unless it’s one of their favorite artist. I bet most people haven’t bought more than 5 CD’s in the last 5 years. Anyone else agree? Just quit with the crap… people are going to continue to download songs illegally until it gets to a point where either law enforcement steps in, or when it is more convenient to buy than to download. It cost , what, 2 dollars to produce the disk, case, and booklet. Why charge 18 dollars?? I don’t think any album is worth that…

Paul K says:

Re: Re:

Sorry, Bulls***t, but I buy lots of CDs and I know many who do. This includes young and old (I am 47).
As to being easy to buy, you can download through a number of download stores (iTunes, etc) and you can order CDs through many online stores. I think it is easier than using BitTorrent, since marketers make far more effort to organize their sites to make it easy to find music.

Anonymous Coward says:

hey man I’m not disagreeing, I know a lot of people that buy CD’s too. They are mostly people who don’t have computers or just don’t know how to get free music. Do you think a college kid making $5.15 an hour is going to spend 4 hours worth of work on the next art garfunkel cd?? also, how do you justify the price per song when some CD’s have 20 songs and some have 15? Just a friendly debate…

Paul K says:

Re: Re:

Well Anon Coward, I agree that the current pricing model for songs is not a market model, as it should be. I would expect “A-side” songs vs. “B-side” ones to have a different price, but that can’t really happen until the DRM nonsense is removed.
CD pricing is usually market priced – based on what people are willing to pay. They usually come down in price after they have been on the market for a while. CD pricing is never based on number of songs, but number of minutes may influence the price; however, the trend is to ignore time as well. It is notable that some recent releases have been 2 CD sets at 1 CD pricing, and some bands have released CDs with barely 30 minutes on them.
Per song pricing being fixed price is a problem, but the argument has been that people will only generally buy the most popular songs, or they will buy the album (whether via download or CD). So, there has not been a real push for market pricing. Of course, that also means that some $.99 tracks are 10 minutes and some are 3, but fairness is not about cost per minute, but how much you enjoy it (value to you). Truthfully, if you play a 10 minute song 4 times before you tire of it, it is a much worse deal than a 2 minute song you listen to 100 times.

Ryan (profile) says:

the problem

the main problem is that no matter what happens to CD sales, it still fits the RIAA’s delusions.

Example:

If sales decrease, it’s because of piracy… we need more DRM and lawsuits.

if sales increase, it’s because of DRM fighting piracy, so we need more DRM and lawsuits.

no matter what happens, it fits their model, and we get more DRM and lawsuits.

chris (profile) says:

Re: the problem

the main problem is that no matter what happens to CD sales, it still fits the RIAA’s delusions.

Example:

If sales decrease, it’s because of piracy… we need more DRM and lawsuits.

if sales increase, it’s because of DRM fighting piracy, so we need more DRM and lawsuits.

no matter what happens, it fits their model, and we get more DRM and lawsuits.

that’s brilliant. you hit the nail right on the head.

Problems with legal sales says:

One of the problems with paying for music online is that it requires a credit card. Young people, especially teenagers account for a large portion of music downloads, but many of them do not have access to credit cards. How can they buy music online legally without a source of funds. I only have a debit card that doesnt support online purchases either.

Anonymous Coward says:

Re: Re: to post #10

Not that I think the RIAA is totally in the right or anything, but don’t you realize that piracy can be considered a form of greed? You want it and either don’t want to spend the money or can’t afford it, so you perform an act of piracy to achieve it. Personally… the quality of the songs you find via file sharing is usually crap anyway. I personally would like to be able to download a song in order to preview it so I can buy a professionally copied high quality copy of the album. At that point I make a backup copy and the original is put away. It is never read again unless my backup dies. If you really pay attention though… not many of the songs you can download at file sharing sites are 360bit rates (close to CD quality), they are usually 128.

TheDock22 says:

Re: Re: Re: to post #10

I totally agree with you. The quality of music on those P2P networks are a complete waste of time to download. And ripping programs usually don”t even come close to CD quality. I will continue to buy cds until the quality of digital songs are not only better, but unanimous across the bored. I want a world where I can go anywhere and download cd quality songs (and not pirated)

I do think the RIAA is being kind of stubborn though. They really should embrace digital music in one way or another. As far as cds being old technology, that’s like when I said books will be old technology. Nice to think about, but might not happen for hundreds of years. 😉

Anonymous Coward says:

Re: Re: Re:3 to post #13

dude dont’ even start with this shit… if we put in the same cd in a cd player, 1 of them a wav file on an original cd, and the other one, the same song, in mp3 format…. How many people do you think could actually tell the difference??? dont be a tech junkie and rely on numbers

Anonymous Coward says:

Re: Re: Re:4 to post #13

Don’t get upset and start cursing because you don’t have the cognitive capacity to come up with a descent argument to my comment. You tell me not to rely on numbers and then go and throw some numbers at me asking how many people will notice. One is fact… mp3’s are not cd quality. The other is opinion… for instance… I like higher quality better. The fact that you don’t doesn’t make a difference to me. It was simply my opinion. Accept it or rant further, I have defended my standing in being allowed to have an opinion.

Anonymous Coward says:

Re: Re: Re:5 to post #13

Hey I appologize dude, I wasn’t saying your statement about sound quality was wrong no matter what your opinion is, I am just stating my opinion that an mp3 can be ripped to have the same sound quality as a wav file. The reason CD’s aren’t released in mp3 format (im guessing) is because many people still rely on wav format compatibility for their old cd players… now i could see if we were debating divx files and dvd format

the guy from post 2 & 4 says:

I agree with you Paul that the price is based on the value of the public. I really don’t think there is an anwer to this debate, because it is more of an opinion of one’s mind. My opinion is that if cd’s were a little cheaper, say 5 bucks, your average person would have probably spend over 4 or 5 hundred dollars on them in the past few years. Instead, that person went out and bought a 100 pack of blank cd-r’s for 25 bucks. I really do think the artists are talented and deserve to be compenseted greatly for their music, but they won’t get my support. They are greedy just like your typical large corporation. It’s a shame, but piracy has to exist to control the market.

Noel Le (user link) says:

Nice study, but its in the minority

This study was comprehensive, and put together by many talented people. However, it falls in the far minority of academic research on the topic; its only one of a handful of academic studies I’m aware of that does not find declining revenue due to sales displacement via P2P filesharing and piracy.

I’ll do a write-up of the studies I’ve looked in some time in the next few weeks.

An interesting thing about sales displacement studies is that they address dead weight loss and consumer welfare. To some extent, piracy is good for society when it occurs at limited levels. Society benefits b/c consumers obtain goods/services that that otherwise would not have translated to legal transactions. However, there is a point where piracy displaces transactions that would have happened, and affects the ability of producers to raise prices; in such scenarios, piracy has a negative effect on revenue, and consumer welfare.

Overcast says:

Who cares?

Seriously. CD’s are old technology.

The RIAA’s pushing old technology, when there is MUCH better out there.

CD’s wear over time, get scratched, etc.
Digitial Music never degrades, never gets scratched.

I put my entire collection of CD’s on 2 DVD’s. The whole stinkin’ thing. Of course, I didn’t rip every track, just what I wanted.

Now I can make 2 copies of those DVD’s – even if one gets scratched or my PC crashes, I have a back up.

Even if my DVD’s both get scratched, and my Hard Disk crashes I have a copy of them all on another PC.

Now if a music service was to allow you to create an account on their servers, that tracked your purchases, so that not only could you listen to them from anywhere, but copy them back to your computer if you had a ‘technical’ issue, the value would be far and above that of a CD by far.

So while I still must use a DVD to backup my music, the fact is that I’m not Dependant on a SINGLE CD to preserve the music I BOUGHT.

I think far and above anything else, this is what the RIAA hates – it’s unlikely that they will be able to sell you the same music 4 times. Like they always have done.

If that’s *not* true – why hasn’t the music industry already put up servers where you could buy music, and their databases would keep a record of what you had purchased?

Other industries do it – even Amazon remembers what you have bought. There’s a game online called ‘Galatic Civ 2’ – you buy it online, and if you ever crash your PC, you simply login to their site and re-download the game – FAR better value than a physical CD that’s prone to damage.

Computers in concept now are very fault tolerant, a Physical CD isn’t – unless you make copies.

Luke says:

$5.15 per hour?

Anon Coward #4 said that college kids making $5.15 an hour wouldn’t pay for CDs.

1) Wow. I don’t know that I would’ve ever worked minimum wage while in college. (I think I started at $5.50 in 2001 on the Work-Study program…Fed. tax free so was worth more).

2) When I was making $10 per hour as a junior I still didn’t buy CDs.

3) I make more than that now and do buy CDs.

Why do I buy CDs now (I’m 23…I’ll be out of college 2 years in May)? I figured out a lot of the genres that I liked and know the ones that I dislike. Being able to download lots and lots of songs and listen to them as I please helped me to learn the types of genres I’m interested in and the ones that I just can’t stand.

Now I visit a band’s website or Amazon or some place and listen to the songs (occasionally I still download a full album to hear the album) so that I can know the CD is worth it. I always buy the full cd because I don’t want to be held in place by DRM and this way I have 100% proof that I bought the content for my use.

Anyway, being able to freely obtain music from my peers helped me to broaden my musical tastes and understand myself a little more. (I.e. I used to only listend to Country and bluegrass, now I enjoy punk, ska, some rock, and the occasional rap song….I would’ve never had that exposure without downloading some songs).

Anonymous Coward says:

Re: $5.15 per hour?

Luke,

You just completely contradicted what i Said. you said that you didn’t buy cd’s when you made 5.50 or even when you made 10. My point exactly, people who make lots of money will buy CD’s. Most college kids or high school kids don’t make more than 10 bucks an hour last time I checked. Of course, i’m glad you can test the music online before you buy… but your probably making 3 times as much as a high school kid working full time. and you mentioned 5.50 an hour, big fuckin woop… that’s an extra 14 bucks a week , almost enough to buy a cd 😉

Paul K says:

MP3s make tradeoffs, but can you tell

Unless you listen to classical music, you likely cannot tell the difference. But, some people can. Further, some prefer to have the least/no loss on general principle, especially if they have fancy playback equipment. The highest rate VBR is a good trade-off (especially with MP3Pro), since it uses run length encoding and Huffman compression to save space without loss of any information (given that it has been digitized already if from a CD).
But, the loss model of MP3 (and WMA) is intended to throw out what you would not notice, though it can affect “brightness” or “ambiance” (the barely heard part of music).

ScytheNoire (profile) says:

what about records and tapes?

Why aren’t the RIAA complaining about the decline in sales of vinyl records and magnetic tapes? I mean, their sales have all but dropped dead.

I wonder why they continue to hang onto CD’s and there are DVD’s and now HD-DVD’s. This means that the music industry is behind in the delivery of media content by two generations by still using CD’s.

Maybe that’s the problem. Because CD’s might explain why record and tape sales have all but died off. So DVD’s and now HD-DVD’s might explain why CD’s are dying off.
And this doesn’t even factor in downloadable content, which is going to be a replacement eventually for all of those formats, assuming the telco’s can stop screwing up things and catch up with Asia when it comes to broadband.

The Cat says:

Long live the CD (well, good ones)

The tech nerds and freeloaders endless proclamation of the end of CD, and the end of any sound technology older than 5 years, is pathetic. The world of music lovers is a lot bigger then their ‘chase the latest gadget’ mentality.
There is a sizable market for high quality CDs – classical, jazz, fusion and others. These folks demand the high performance of CD, and laments the apparent demise of SACD. To us, music and reproduction is serious art and and we can show our multi-thousand dollar equipment and collection to prove it. Only well-produced CDs can recreate wide soundstage, precision imaging, distortion free sound, and deep clean bass. MP3 and other compression methods, no matter how advanced, destroy much of these quality. Every CD we buy is a well-considered decision, and we gladly pay top dollars. Smart music executives pay attention to the ‘serious’ market, and don’t get swept up with cheap downloaders and throw-away music.

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