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Study Finds Digital Music Sales the Least Hurt By Piracy… Eight Years Ago

Is there a silver lining to online music piracy? A new research paper (that focuses on some fairly old data) delves into the relationship between file sharing and music sales, coming up with mixed results and little closure for the contentious issue.

In a study called "Purchase, Pirate, Publicize: The Effect of File Sharing on Album Sales," Jonathan Lee of Queen’s University in Ontario monitored both the sales and pirated downloads of 2,251 albums… from 2008. (For some perspective, that's the same year that Spotify arrived in the U.S.)  Legitimate album sales data came from Nielsen SoundScan, while file sharing stats were pulled from a BitTorrent tracker. "From the results, I conclude that file sharing activity has a statistically significant but economically modest negative effect on legitimate music sales," he writes.

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An artist’s popularity played a major role in how big that impact was. Lee’s evidence showed that for top-tier artists, file sharing caused a decrease in physical sales but a modest increase in digital sales, suggesting that the impact of word-of-mouth is most felt in the digital market. For mid-tier artists, physical sales were unaffected while digital was slightly up. Sales for lesser-known artists were "significantly hurt by file sharing," according to Lee, "which could indicate that file sharing helps lesser–known artists only if they are actually talented."

The researcher argued that how listeners choose among physical, digital and illicit markets is "illuminating in its own right, and the interaction of conventional markets with diffuse digital markets is of broad interest to researchers."

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He added, "But the results can also inform business and policy decisions in the market for music and for other media as well. Trade groups such as the Recording Industry Association of America (RIAA) and the International Federation of the Phonographic Industry (IFPI) spend considerable effort and resources to deter piracy and shut down file sharing networks like the one studied in this paper. If the effect of file sharing on sales is small, this expense may not be worth it. The results of this paper should help to inform such cost–benefit analysis by trade groups, law enforcement agencies, and policymakers."

The full paper can be found here.