Liebowitz finds that MP3s are hurting the music industry
Related link: http://wwwpub.utdallas.edu/~liebowit/intprop/records.pdf
Update June 5: A report by The NPD Group comes to more or less the same conclusion as Liebowitz -- that filesharing is part though not all of the decline.
An economist who had previously argued that there was no evidence of filesharing hurting the CD business now says there is evidence:
The bottom line: MP3 downloading is harming sales. No other explanations that have been put forward to explain the recent decline hold up under analysis.
Liebowitz has seesawed back and forth, but as far as I know he is the sole source of non-crap economics related to filesharing. Anything that brings down the hysteria is a good thing, so I'm happy to see even news that could hurt us in the short run.
Liebowitz' paper is worth the read if you have time. It's long but not dense, and it's full of interesting nuggets of information. Also, something you get from reading the whole thing that you won't from reading the headline is how hard it is to figure out whether MP3s hurt RIAA members.
.Two key quotes from the paper:
If the analysis in this paper is correct, MP3 downloads are causing significant harm to the record industry. It is not clear, however, whe ther such downloading in our current legal environment will cause a mortal blow to the industry. I suspect that the worst damage to the industry is behind us, but we will know soon enough as new data are made available.
and
The goal of this paper was to provide some empirical analysis to replace what has often been little more than emotional wrangling and haranguing on both sides. Answers to difficult policy questions are not likely to be well informed without such an understanding of the empirical backdrop to the issues.
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Comments (9)
Read More Entries by Lucas Gonze.
piracy
Hasn't everyone downloaded at least one song off of Kazaa, or (REST IN PEACE) Napster? Information longs to be free to the people. If only software vendors realized, if they sold their software at lower prices, people would buy it legally? I've seen bootleg copies of the new Eminem CD for 5 dollars, pretty good copies too. Then, I went to FYE to buy it "legally" and it was 21 bucks! Now, as a consumer looking for the best price, same CD, same songs, only thing missing is lyrics printed on a page that cost them what, 10 cents at most to make.. I would've bought the bootleg instead! I'm not saying I have or anything, just saying as a consumer I would obviously make the choice of buying something cheaper.
MP3s and music sales
You are right on with this, in fact, many issues in society would be resolved if the campaign finance reform happens. The lobbyists in all sectors of industry have far too much self interest power. I would go so far as to say that it's to the point of bribary.
Take a stand on piracy and get the Music, Movie and Microsoft money donations. Take a stand on clean burning coal and oil, and oxymoron if ever there was one, and get the oil money donations.
Perhaps some flawed logic...
People tend to assume that "harm" = "destruction". I have absolutely no doubt at all that the availability of a fast, reliable, and inexpensive distribution model such as file sharing has in fact caused the industry "harm". What I don't believe is that (1) this harm is irreparable, and (2) the record companies are doing anything more than "crying wolf" when they decry the practice and point to profits. I personally have only bought about four CDs in the past couple years (to add to my collection of just under 300). The reason? Cost. I'm no longer willing to shell out $18.99 + tax for a new CD that has only one or two songs on it that I like. Now, I don't generally go and download these songs either - what I do on occasion download are songs I haven't heard in awhile and cannot locate anywhere on CD, or songs that I want to listen to once then toss in the trash, or even the odd new artist that I download to sample their music.
The real bottom line, "harm" or no "harm" is that the industry's sales were declining before Napster due to a combination of low quality, high production values, and high cost of CDs. We're seeing an increase in quality of the music now, I think (IMHO), but we're still seeing the cost of CDs remaining stagnant over the past 5-10 years. That's what's killing the industry.
academic credibility
It's part of academic status seeking. They feel they have to publish in PDF or it's not serious work.
Why oh why
Do they have to make papers like this so hard to read? PDF would be fine if it were decently formatted for either screen or print, but this one looks heinous either way. Pathetic.
MP3s and music sales
This comes down to a need for campaign finance reform. Of course the government doesn't owe the labels a living, but the labels blow too much money on lobbying to be ignored.
A couple years ago I was trying to sell the spin that this wasn't about piracy, it was about campaign finance. Not many takers. :(
price v. mp3 graph would be interesting
Liebowitz finds that CD prices have increased perfectly in step with inflation, i.e. there's no price hike. I've seen a refutation of the inflation/price graph to the effect that prices have increased faster than inflation, but it was just an informal note on a mail list... Intuitively, it seems insane to me to say that twenty bucks for a CD is just inflation, because my earnings haven't gone up proportionally.
I'd like to see that graph too.
MP3s and music sales
The most fundamental question we need to ask is,
do we define what is legal and what is fair use based on how much a particular industry is hurting (even assuming for the argument sake,that the sharing activity is hurting the industry) ?
Most other industries are penalised for declining profits however it seems the opposite in the music industry, which is especially surprising considering its a near monoply.
Capitalism inherently has the limitation that it is easy for the first few players to establish a monopoly and often their interests do not concur with the interests of the soceity since that point. Factors other than the industry's interest play a very crucial role in providing a balance between the corporate interests, motivating the innovation and fair use of all resources by the society.
It is a great time now to sit back and cosider how much of the music industry's declining profits are due to the slump in economy in general, how much is due to the fact that this industry does not seem to understand or atleast does not seem to acknowledge the supply and demand theory of prices, and how much is due to the fact that people of downloading music for free.
I for one would love to download music and not for free. But somehow my options are very limited in this area. Are we finally getting into the situation that the industry has to prove it's point stubbornly instead of atleast trying to see the dynamics of economics?
Having been through the same experiences in past everytime there was a innovative breakthrough in music recording and distribution technology do we still want to continue head-long without learning any lessons?
Answers to this I guess will be seen over time.
price v. mp3 graph would be interesting
there must be a graph somewhere plotting mp3s v. sticker price, where eventually the price is low enough that consumers start buying the retail cd rather than hunt for all the tracks or settle for the "hits" off the cd. two horizontal lines converging in a graph.