One of the things that make blogs particularly interesting are series. In this blog, for example, Phil features a series on “microcredit myths“. The “series” series recommends series at related blogs. This time I introduce the series “How Evil is File-sharing?” at the German research blog “musikwirtschaftsforschung“.

Peter Tschmuck, founder of “musikwirtschaftsforschung” (“music industry research”), is an economist by training, who is situated at the University of Music and Performing Arts Vienna. In his works he pursues a holistic approach in researching how technological and regulatory changes affect the music industry. Unsurprisingly, new practices such as online file-sharing (see also: “Internet Piracy: A Perfect Excuse?“) play an important role in his research as well as on his blog, where he started a series titled “How Evil is File-sharing?”. We feature this series not only because it gives a great overview – regrettably only available in German -, but also because it is the main topic of the upcoming “Vienna Music Business Research Days” (English PDF), June 9-10, 2010.

After having reviewed 17 studies on file-sharing in the course of the series (see list of studies below), in post #18 Peter Tschmuck groups the extant literature into three categories (number of studies in brackets):

  • Formal approaches (4): Due to the very unrealistic assumptions of these either microeconomic (e.g. Liebowitz 2006) or game theoretical (e.g. Curien & Moreau 2005) models, Tschmuck summarizes their implications as ranging from “no usable information” to “interesting but still empirically unfeasible insights”.
  • Survey-based approaches (7): With one exception (Huygen et al. 2009), all available surveys lack representative samples, thus making generalizations difficult. Interestingly, Huygen et al.’s study, which is representative at least for the Netherlands, finds no connection between the decline in CD sales and file-sharing activities.
  • Econometric approaches (6): Among the econometric approaches, Tschmuck highlights the two Harvard-studies of Oberholzer-Gee & Strumpf (2007) and Blackburn (2004) as being particularly reliable.

In what follows, Tschmuck delineates propositions for further research on the issue. For the supply side he mentions the following three characteristics: The music industry resembles (1) oligopolistic market structures, labels in general and major labels in particular (2) seek to maximize market share and due to copyright regulation we find (3) monopolistic competition.

On the demand side, in turn, he acknowledges the existence of (1) a substitution effect of file-sharing and record sales, which is however balanced by something Tschmuck calls (2) “network effect” in form of new music discovered via file-sharing. The latter lies at the heart of market development and market segmentation.

As a conclusion, Tschmuck offers the following (translation L.D.):

Anyone who wants to belong to future winners has to abandon traditional business models and harvest new opportunities for making profit. The battle against music file-sharing networks is thereby definitly not a sensible way to pursue. One should rather consider how these new forms of using music can be economically capitalized, which brings us to the discussions on music flat-rates and new types of copyright.

Which, in turn, brings us back to posts on this blog such as, for example, “Extending Private Copying Levies: Approaching a Culture Flat-rate?” regarding the former and “Competition for Copyright Collectives: New Market Logics” regarding the latter.


Appendix: Studies reviewed in the series “How Evil is File-sharing?”:

  1. Huygen, Annelies et al., 2009, „Ups and Downs – Economic and Cultural Effects of File Sharing on Music, Film and Games”.
  2. Liebowitz, Stan J., 2006, „File Sharing: Creative Distruction or Just Plain Destruction?” Journal of Law and Economics XLIX, April 2006, pp. 1-27
  3. Oberholzer-Gee, Felix und Strumpf, Koleman, 2007, The Effect of File Sharing on Record Sales: An Empirical Analysis”. Journal of Political Economy, Vol. 115, No. 1 (2007).
  4. Rob, Rafael und Waldfogel, Joel, 2006, “Piracy on the High C’s: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students”. Journal of Law and Economics, Vol. XLIX (April 2006), pp. 29-62.
  5. Andersen, Brigitte und Frenz, Marion, 2007, The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study for Industry Canada.
  6. Tin Cheuk (Tommy) Leung, 2008, Should the Music Industry Sue Its On Customers? Impacts of Music Piracy and Policy Suggerstions. Job Market Paper, University of Minnesota.
  7. Peitz, Martin und Waelbroeck, Patrick, 2006, Why the music industry may gain from free downloading – The role of sampling”. International Journal of Industrial Organization, Vol. 24 (2006), pp. 907-913.
  8. Bounie, David, Bourreau, Marc und Waelbrock, Patrick, 2005, Pirates or Explorers? Analysis of Music Consumption in French Graduate Schools. Telecom Paris Economics Working Paper No. EC-05-01, Juni 2005.
  9. Gopal, Ram D., Bhattacharjee, Sudip und Sanders, Lawrence G., 2006, “Do Artists Benefit from Online Music Sharing?” The Journal of Business, Vol. 79 (3), pp. 1503-1533.
  10. Zentner, Alejandro, 2006, “Measuring the Effect of File Sharing on Music Purchases”. Journal of Law and Economics XLIX (April 2006), pp. 63-90.
  11. Tanaka, Tatsuo, 2004, Does file sharing reduce music CD sales?: A case of Japan. Working Paper 05-08 des Institute of Innovation Research, Hitotsubashi University in Tokio.
  12. Lee, Seonmi, 2006, The Effect of File Sharing on Consumer’s Purchasing Pattern: A Survey Approach. Working Paper, University of Florida.
  13. Michel, Norbert J., 2006, The Impact of Digital File Sharing on the Music Industry. A Theoretical and Empirical Analysis”. Topics in Economic Analysis & Policy, Vol. 6, No 1, Article 18.
  14. Bayaan, Ibrahiim, 2004, Technology and the Music Industry: Effects on Profits, Variety, and Welfare. Working Paper, Emory University.
  15. Curien, Nicolas und Moreau, François, 2005, The Music Industry in the Digital Era: Towards New Business Frontiers? Working Paper am Laboratoire d’Econométrie, Conservatoire National des Arts et Métiers Paris.
  16. Boorstin, Eric S., 2004, Music Sales in the Age of File Sharing. Masterthesis at Princeton University.
  17. Blackburn, David, 2004, On-line Piracy and Recorded Music Sales. Working Paper at Harvard University.