From:
Sent: Monday, March 29, 2004 2:20 PM
Subject: For Immediate Release: CD Sales Not
Reduced by File Sharing, Say Researchers at Harvard Business School and
University of North Carolina, Chapel Hill
Contact: Jim Aisner
HBS Communications
(617) 495-6157
jaisner@hbs.edu
For Immediate Release:
March 29, 2004
CD Sales Not Reduced by File Sharing, Say
Researchers at Harvard Business School and University of North Carolina, Chapel
Hill
BOSTON -- A new study by two researchers at Harvard Business School and the University of North Carolina, Chapel Hill, finds that sharing digital music files has no effect on CD sales. This is the first study that directly compares actual downloads of music files and store sales of CDs.
The authors, Associate Professor Felix Oberholzer-Gee of Harvard Business School in Boston and Professor Koleman Strumpf of the University of North Carolina, Chapel Hill, conclude that File sharing had no effect on the sale of popular CDs in the second half of 2002. While downloads occurred on a vast scale during this period 3 million simultaneous users shared 500 million files on the popular network FastTrack/KaZaA alone most people who shared files appear to be individuals who would not have bought the albums that they downloaded, say the authors.
File Sharing
Cannot Explain the Decline in Sales of Music during This Period
Even in the professors most pessimistic
statistical model, it takes 5,000 downloads to reduce the sales of an album by
a single copy. If this worst-case scenario were true, file sharing would have
reduced CD sales by 2 million copies in 2002. To provide a point of reference,
CD sales actually declined by 139 million copies from 2000 to 2002.
More Popular CDs
Benefit from File Sharing
The effect of file sharing on sales depends on
the popularity of a release, according to the researchers. For the least
popular albums (with sales of less than 36,000 copies) the authors found a
small negative effect. In contrast, for the top 25% of albums (with sales of
more than 600,000 copies) they found a positive effect: 150 downloads increase
sales by one copy. This effect is particularly important because the
profitability of the music industry depends almost entirely on the success of
the most popular albums.
File Sharers
Download a Small Selection of Songs
In this study, the researchers track downloads
of songs on 680 popular albums. All albums in their study were included in one
of the Billboard Charts in the fall of 2002. Although these albums do well
commercially (the average release sells more than 150,000 copies), more than
50% of the songs on these albums are never downloaded. 75% of the songs are
downloaded no more than two times, 90% are downloaded fewer than 11 times.
Songs from Top
Current Albums Are Most Often Downloaded
Not surprisingly, not all types of music are
equally popular among file sharers. Songs from albums that are on the Top
Current Billboard Chart are most likely to be downloaded. Alternative Albums
are the second most popular musical genre among file sharers, followed by Hard
Rock and Catalogue albums. The least likely to be downloaded are songs in the
categories Jazz, Latin, and New Artists.
Marketing
Strongly Influences What People Download and What They Buy
The study finds strong evidence that the music industrys
marketing campaigns continue to influence what individuals listen to. For
example, showing a music video on MTV increases both the number of downloads
and the legal sales of that release.
U.S. Has Largest
Number of File Sharers
31% of all individuals who download music live
in the United States. Other important countries are Germany with a 13% share of
worldwide users, Italy with 11%, Japan with 8% and France with 7%. File sharers
in the United States are particularly active. While they represent 31% of
worldwide users, they download 36% of all files.
Germany Is the
Most Important Foreign Supplier of Music Files
U.S. file sharers download files from all over
the world. Only 45% of the files downloaded in the United States come from computers
in the U.S. 16% of music files are downloaded from computers in Germany, 7%
from Canada, 6% from Italy, 4% from the U.K. A legal strategy that focuses
mostly on the United States is unlikely to change the supply of music files.
This Study Is
Unique
Previous studies have relied on surveys to
assess the effect of file sharing on music sales. This is problematic because
it is impossible to know if survey participants truthfully respond to questions
about an illegal activity. This study is unique in that it uses data from
file-sharing servers, where the authors directly observed 1.75 million
downloads during 17 weeks in the fall of 2002. Using statistical methods, they
can then test if the sale of an album declines more strongly if that album is
downloaded more often.
Full Study
The full study is available at
http://www.unc.edu/~cigar/papers/FileSharing_March2004.pdf
Contact Information for Authors
Felix Oberholzer-Gee
Harvard Business School
foberholzer@hbs.edu
(617) 495-6770
Koleman Strumpf
UNC, Chapel Hill
cigar@unc.edu
(919) 966-4485