Review of File-Sharing Papers

by on November 22, 2005 at 7:10 am in Economics | Permalink

Rufus Pollock draws the following conclusions from the literature on file-sharing:

The basic result is that online illegal file-sharing does have a
negative impact on traditional sales. The size of this effect is
debated, and ranges from 0 to 100% of the sales decline in recent
years, but a figure of between 20 and 40% would be a reasonable
consensus value (i.e. that file-sharing accounted for 20-40% of the
decline in sales not a 20-40% decline in sales).
Beyond this
basic result several other very interesting facts have emerged.

First
is the differential impact of file-sharing on an artist depending on
their existing popularity. According to Blackburn who investigates this
issue the ‘bottom’ 3/4 of artists sell more as a consequence of
file-sharing while the top 1/4 sell less.

Second is the first tentative estimates (by Waldfogel and Rob) of the
welfare consequences of file-sharing. Waldfogel and Rob’s dramatic
result is that file-sharing on average yields a gain to society three
times the loss to the music industry in lost sales.

The conclusion seems right to me – file-sharing increases social-welfare, so in theory a win-win solution is possible, but in practice the increase comes at the expense of music firms.  See here for the blog post and here for a summary of each of the main papers in the literature.

Hat-tip to Cory Doctorow at Boing-Boing Blog.

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