Analysis Finds Negligible Impact of P2P on Album Sales

In this paper entitled "The Effect of File Sharing on Record Sales: An Empirical Analysis" in the peer reviewed journal Journal of Political Economy by Felix Oberholzer-Gee of Harvard University and Koleman Strumpf of the University of Kansas, the authors find no statistically significant effect of peer-to-peer downloads on music sales. The paper is significant, in my mind, not because of the results, which are interesting, but because it is the first paper (that I know of) to use open data sets and rigorous data analysis instead of surveys, which are more prone to error. While there have been a number of academic studies on the theoretical constructs we should use to evaluate and understand how peer-to-peer downloads effect sales, those studies have generally concluded that the dominant effect cannot be determined without empirical analysis, as there are positive and negative theoretical impacts. I look forward to more analysis along these lines. Since this site is not geared toward discussion of econometric analysis, I will leave out the more technical aspects of how the conclusion was reached and leave you with the abstract:

For industries ranging from software to pharmaceuticals and entertainment, there is an intense debate about the appropriate level of protection for intellectual property. The Internet provides a natural crucible to assess the implications of reduced protection because it drastically lowers the cost of copying information. In this paper, we analyze whether file sharing has reduced the legal sales of music. While this question is receiving considerable attention in academia, industry, and Congress, we are the first to study the phenomenon employing data on actual downloads of music files. We match an extensive sample of downloads to U.S. sales data for a large number of albums. To establish causality, we instrument for downloads using data on international school holidays. Downloads have an effect on sales that is statistically indistinguishable from zero. Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period.