Abstract
Between 2004 and 2009 it is estimated that over 30 billion songs were downloaded illegally on different peer-to-peer sharing networks according to the Recording Industry Association of America (RIAA). In an attempt to stop this during the late 1990’s and early 2000s the RIAA and other music labels engaged in a very public and vigorous campaign of prosecution of firms, such as Napster and Limewire, for copyright violations in order to reduce piracy. Due to the public backlash, in late 2008 the RIAA announced that they would begin to stop litigation on a grand scale. This paper examines the impact that this model of piracy prosecution had on music sales. We find evidence that the RIAA’s model of litigation actually backfired and led to decreased legitimate album sales. Additionally, we find that variation in per capita seasonally adjusted album sales cannot be explained by the existence of both Limewire and Napster file sharing services.
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Source: Authors' calculations using data from Nielson SoundScan (2015) and the Census Bureau (2015)
Source: Authors' calculations using data from Nielson SoundScan (2015) and the Census Bureau (2015)
Source: Authors' calculations using Lexis Nexis (2015)
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Notes
Since the publication of these studies, this data is no longer supplied by the RIAA.
The RIAA requested that Verizon Internet Services turn over the names of two suspected MP3 file traders based upon their internet usage. Verizon refused to comply and was sued by the RIAA. A lower federal court ordered that Verizon had to turn over the name. On appeal to the Washington, D.C. Circuit Court of Appeals, the lower court’s ruling was overturned (RIAA v. Verizon 2003).
While Nielsen SoundScan publishes this data, they are in no way responsible for the findings of this research. Nielsen neither confirms nor denies the conclusions reached by the authors here.
Some of these effects could be changes in average download speeds for MP3s from the internet which, in theory, could have an impact on the amount of piracy. However, even for piracy occuring on a very slow 56K modem, someone could download a 3 MB MP3 file in fewer than seven minutes, a relatively short time to wait for ‘free’ music.
Of course, Limewire is not the only option for inclusion in the analysis. One could also pick from any of a number of other P2P services such as Gnutella, Kazaa, Scour, Grokster, etc. However, since all of these P2P sites perform a similar service and have operated for roughly the same time frame, including a dummy variable for each of them would be redundant.
This does not mean that the RIAA and record companies did not persue litigation against piracy and theft before or after these dates. In fact, they did. These dates merely correspond to their public announcements that they were going to begin to pursue civil actions on a broad scale. The announcement in December of 2008 that they were going to cease broad scale civil litigation was widely seen as the RIAA ‘‘throwing in the towel’’ on the litigation strategy.
The authors urge caution when interpreting this result because it is sensitive to the subsample window used which is evidenced in Table 3.
There are services that attempt to measure the amount of file sharing such as Big Champagne, comScore Media Metrix, and the Pew Internet and American Life Project, but each of these services has limitations in their methodology. See Liebowitz (2006) for a discussion of the problems and limitations in measuring file sharing activity.
The amount of data necessary to engage in this level of analysis would be quite large. For example, to understand how piracy impacts artist A’s sales of their fourth album, you would also need to know how sales of artist A’s first, second, and third albums impact the fourth album, as well as the impacts from sales of artists’ B, C, D, etc. albums. To put this problem in context, consider that in any given year approximately 75,000 different albums are released.
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Mitchell, D.M., Scott, C.P. & Brown, K.H. Did the RIAA’s Prosecution of Music Piracy Impact Music Sales?. Atl Econ J 46, 59–71 (2018). https://doi.org/10.1007/s11293-017-9567-1
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DOI: https://doi.org/10.1007/s11293-017-9567-1