File Sharing May Boost Popular Music Sales

As reported on October 15, 2004, in Socialiast Worker Online, "Studies suggest that not only does downloading not hurt music industry sales, but it may actually help them. During a 17-week period in 2002, professors from the Harvard Business School and the University of North Carolina looked at 1.75 million downloads, and compared them to album sales. According to Harvard professor Felix Oberholzer-Gee, 'We just couldn't document a negative relationship between file sharing and music sales.' In fact, for the most popular albums--the top 25 percent that had more than 600,000 sales--the study found that file sharing actually boosted sales."

Felix Oberholzer and Koleman Strumpf state in the conclusion totheir March 2004 study that "File sharing has no statistically significant effect on purchases of the average album in our sample. . . . Based on our results, we do not believe file sharing will have a significant effect on the supply of recorded music. . . . If we are correct in arguing that downloading has little effect on the production of music,
then file sharing probably increases aggregate welfare. Shifts from sales to downloads are simply transfers between firms and consumers. And while we have argued that file sharing imposes little dynamic cost in terms of future production, it has considerably increased the consumption of recorded music. File sharing lowers the price and allows an apparently large pool of individuals to enjoy music. The sheer magnitude of this activity, the billions of tracks which are downloaded each year, suggests the added social welfare from file sharing is likely to be quite high.