Two US universities have released research that flies in the face of music industry claims that file sharing hurts CD sales: it "is not so", they say.
Professors Felix Oberholzer at Harvard University and Koleman Strumpf at the University of California got together to track music downloads across 17 weeks in 2002. They matched their data on file transfers with the actual market performance of the songs and albums being downloaded.
They concluded that even large amounts of file-swapping had little effect on album sales: "Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates – moreover, these estimates are of moderate economic significance and are inconsistent with claims that file-sharing is the primary reason for the recent decline in music sales," they wrote.
"While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing."
Other factors involved
They add: "At most, file sharing can explain a tiny fraction of (music sales) decline. This result is plausible given that movies, software, and video games are actively downloaded, and yet these industries have continued to grow since the advent of file sharing".
The boffins point out several factors that may have affected music sales: "While a full explanation for the recent decline in record sales is beyond the scope of this analysis, several plausible candidates exist. These alternative factors include poor macroeconomic conditions, a reduction in the number of album releases, growing competition from other forms of entertainment such as video games and DVDs".
The researchers also pointed at the tidal wave of media company consolidation that's been taking place worldwide. This has led to identi-kit playlists and radio stations that UK live music Tsar Fergal Sharkey told a lecture at the Royal Society "target teenage girls exclusively".
They describe the effects of such consolidation as: "A reduction in music variety stemming from the large consolidation in radio along with the rise of independent promoter fees to gain airplay, and possibly a consumer backlash against record industry tactics."
Historically, record sales declined in the late 1970s and early 1980s, and that sales in the 90s may have been high simply because music consumers were replacing their vinyl records with CDs.
Major labels unaffected
The researchers are vehement: "We do not believe file-sharing will have a significant effect on the supply of recorded music", they said. They observe that major labels rely on a small number of mass-market hit albums for their business.
"For these albums, we find that the impact of file-sharing on sales is likely to be positive, leaving the ability of major labels to promote and develop talent intact."
The artists most affected by file sharing are the smaller, developing ones – on whom the label's business proposition does not rely – but call the bad effects of the practice even on this segment as "statistically insignificant".
They also find that most artists can't make a living from album sale royalties, meaning most musicians also rely on live gigs and tours, merchandise and other spin-off businesses.
"Because the economic rewards are concentrated at the top and probably fewer than one per cent of acts ever reach this level, altering the payment rate should have very little influence on entry into popular music," they said, adding that "file sharing probably increases aggregate welfare".
Labels deny report
The researchers used logs from two OpenNap servers in late 2002 to observe about 1.75 million downloads over 17 weeks. They found average users logged on just twice to download about 17 songs. They tracked a random sample of 500 albums from the charts of different genres and compared sales to downloads.
They said: "It takes about 5,000 downloads to displace sales of just one physical CD".
"Despite the huge scale of downloading worldwide, that would be only a tiny contribution to the overall slide in album sales over the past several years", they added.
The Recording industry Association of America dismissed the independent university-level research, telling Silicon.com: "Countless well-respected groups and analysts have determined that illegal file-sharing has adversely impacted the sales of CDs. Our own surveys show that those who are downloading more are buying less."
However, peer-to-peer technologists welcome the research. Sharman Networks CEO Nikki Hemming said: "Consider the possibilities if the record industry actually co-operated with companies like us instead of fighting. We've offered content providers the opportunity to work with peer-to-peer customers for nearly two years, yet the record industry continues its narrow-minded strategy of litigation and legislation."