Marginal Revolution links to a new paper
by economist Stan Liebowitz on the economic effects of file sharing on the recording industry. It's a response to an earlier paper
that argued peer-to-peer file sharing has had little impact on CD sales. Leibowitz digs into the arguments and finds a number of problems. For example, one of the arguments in the original paper depends on the assumption that college kids use peer-to-peer networks less during the summer than during the school year. Unfortunately, Liebowitz presents data suggesting that's not true: in two of the three years they studied, file-sharing activity was actually slightly higher in the summer than the rest of the year. Liebowitz also faults the authors for failing to release their full datasets; he says he was unable to replicate several of their results using publicly available data. In the end, Liebowitz makes a pretty convincing case that file-sharing technologies are hurting the recording industry: industry revenues in the United States fell by a third from 1999 to 2005. Of course, Liebowitz's data also suggests that the RIAA's current strategy of suing everyone in sight—which they launched in 2003—isn't working so well either: revenues continued to fall between 2003 and 2005. They've tried suing technologists and suing customers, and neither has saved them. Maybe it's time they tried some more creative approaches
that don't involve hiring lots of lawyers.
It's also worth noting that neither study looks at trends in the overall music industry, which includes not just CD sales but concerts, T-shirt sales, sponsorship contracts, musical instruments, music lessons, and so forth. These are all important part of the music industry, and some of them have been doing quite well lately. As people use peer-to-peer networks to discover more music they love, they're likely to be inspired to spend more money on these other music-related products and services. As long as plenty of good music is being created and listened to, then the copyright system is working the way it's supposed to, even if the people who ship little plastic discs around the country aren't making as much money as they used to.