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Is the music industry, and perhaps the entertainment industry, being ruined by piracy (or otherwise losing a substantial amount of money?)

For example, the record label EMI has blamed piracy for the loss of about 2,000 jobs and a slump in revenue. However, is it just a scapegoat for poor financial performance?

Have any independent studies been conducted to see if their claims are true?

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    Subjective & Argumentative. The term "ruined" can be interpreted in a variety of ways. – Christian May 5 '11 at 9:54
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    @Christian, Okay, let's say "losing money over". I don't believe it is losing money over piracy; but neither do I listen to crappy pop music (that's the reason I think they are losing money.) – Thomas O May 5 '11 at 11:26
  • I've fixed the title to reflect the milder wording you suggested. – Sklivvz May 5 '11 at 11:36
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    As a professional musician for 20 years and someone who has followed the culture of ownership debate fairly closely, I can say that any attempted answer to this question is going to be highly debatable. Some labels and artists have actually benefited greatly because of the digital age, Dave Matthews and John Mayer immediately come to mind as artists who have embraced the rapid and social exchange of free music and used it to their advantage. Others fight it tooth and nail and usually end up on the losing side. The "Industry" isn't losing money but certain players with in it are. – erikthebassist May 5 '11 at 12:04
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    It isn't directly comparable, but look at the Baen Books free library (baen.com/Library). They claim that having had free electronic versions of books they published increased sales. – David Thornley May 5 '11 at 12:26
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As one can imagine, many studies have been conducted regarding the relationship between the rise of P2P networks and the drop of CD sales. I have looked at several papers, some come to the conclusion that file sharing actually contributed to more CDs being bought, others attribute atleast some part of the decline of CD sales to file sharing. What some studies also suggest is, that music sales have shifted some what from the majors to smaller labels.

In THE EFFECT OF INTERNET PIRACY ON CD SALES: CROSS-SECTION EVIDENCE, 2004, CESIfo:

[...] we find that music downloading could have caused a 10% reduction in CD sales worldwide in 2001. [...] The story for 2002 is different, at least for the US, as the number of people downloading music has only slightly increased. As a matter of fact, our estimates imply a 2% loss in CD sales due to music downloads, a small number compared to the observed 9% drop in 2002 in the US.

But the paper also points out, that the music industry could benefit:

Besides, there are reasons to believe that the music industry might actually benefit from digital distribution. Indeed, numerous surveys (documented in Peitz and Waelbroeck 2003b) highlight the potential sampling role of digital copies. [...] As a result, labels may benefit from file-sharing because, as Peitz and Waelbroeck (2003c) have argued, they may be able to save on marketing and promotion costs, by letting consumers search for their most preferred music.

In [The Impact of Digital File Sharing on the Music Industry: An Empirical Analysis] (http://www.bepress.com/bejeap/topics/vol6/iss1/art18/), 2005, Nicholls State University:

Music industry representatives argue that the practice decreases CD sales, while supporters of file-sharing allege the practice could actually increase sales. Using household-level data from the Consumer Expenditure Survey, we find support for the claim that file-sharing has decreased sales.

In Music Sales in the Age of File Sharing:

For younger people, Internet access predicts a decrease in sales. For older people, Internet access predicts an increase in sales. The overall effect of Internet access is positive -- the magnitude of the Internet effect is larger in the older age groups, and the older age groups represent a greater proportion of the population. This strongly suggests that file sharing is not the cause of the recent decline in the record industry

Even if the RIAA’s lawsuits against file sharers successfully deter people from sharing music over P2P networks, I would not expect to see a short term increase in sales. If the older demographic is more responsive to the threat of legal action than the younger demographic, the lawsuits would even tend to decrease sales in the short run

In File Sharing and International Sales of Copyrighted Music: An Empirical Analysis with a Panel of Countries:

I find that countries with higher internet and broadband penetration have suffered higher drops in music sales, suggesting that music downloads may explain at least part of the recent reduction in sales.

In The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study for Industry Canada:

In the aggregate, we are unable to discover any direct relationship between P2P filesharing and CD purchases in Canada. The analysis of the entire Canadian population does not uncover either a positive or negative relationship between the number of files downloaded from P2P networks and CDs purchased. That is, we find no direct evidence to suggest that the net effect of P2P file-sharing on CD purchasing is either positive or negative for Canada as a whole.

However, our analysis of the Canadian P2P file-sharing subpopulation suggests that there is a strong positive relationship between P2P file-sharing and CD purchasing. That is, among Canadians actually engaged in it, P2P file-sharing increases CD purchasing. We estimate that the effect of one additional P2P download per month is to increase music purchasing by 0.44 CDs per year.

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There's a study somewhere, which showed sales down amongst computer owners, but stable with non puter owners, and that sales for computer owners raised when Napster shut down. I think that means there is a direct correlation to being able to file share and stopping sales. However, the same report suggested more obscure artists benefit from file sharing.

I'll try and find it.

This is the closest match I could find to this report

  • It would be great if you could find this report. I think I've heard of it before. – Thomas O May 22 '11 at 22:09
  • @Thomas O I have added a link above – Hairy May 23 '11 at 8:10

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