File Sharing and CopyrightOBERHOLZER- GEE, F. ; STRUMPF, K

C A P. 2 , P. 1 9 - 5 5 . I N : L E R N E R , J . ; S T E R N , S . P. I N : I N N O VAT I O N P O L I C Y A N D T H E E C O N O M Y. [ S . L . ] : N AT I O N A L B U R E A U O F E C O N O M I C R E S E A R C H U N I V E R S I T Y O F C H I C A G O , V. 1 0 , 2 0 1 0

Apresentação: Gustavo Viegas Rodrigues

File sharing technology x industry sales decline

Empiric research shows that the effect could be up to 20%

The matter of the artist motivation From 2000 to 2009 music production more than doubled, films rose by 30% and books by 66% (2002-7)

File sharing as an stimulus to sell more concert tickets

File sharing and Copyright

“How much weaker the incentives to create new works would be in a regime with more constrained copyright?”

“How producers would respond to weaker incentives. Would they offer fewer works or perhaps works of lesser quality?”

Does file sharing harm sales?

Average iPod -> 3,500 songs* 64% of those songs -> never played!!!

Business Software Alliance -> 1 file downloaded = 1 file not sold. Really?

What about complementing products Mp3 music and iPods

* (Lamere, 2006)

A little History… In the 20s, the music industry tried to block radio set producers…

… and now they pay “jabá”

Also the entertainment industry reacted to the creation of the VCR…

… but they probably didn´t complain against the DVD player or Blu-Ray player because they learnt to make money out of home-movies.

Now, there are ambiguous views about file sharing:

65% didn’t buy an album because they had downloaded it;

But 80% said they’d bought an album because they’d sampled it beforehand!

Key Events on File Sharing

The lawsuit disputes

Based on Sony Betamax decision, P2P services had a chance

Supreme Court ended up overruling the lower instance decision

RIAA decides to stop suing in 2008! The idea was to act on the backstage with ISPs

And then, BitTorrent came up

Data on File Sharing

File Sharing on Internet2*Apr, 2010

* http://netflow.internet2.edu/

Consumer BehaviorSample of ~10k songs

In a sample of ~10k songs:

60% were never downloaded in 17 weeks

81% were downloaded less than 5 x

Global nature of file sharing

Unless industry supports the music launch, downloads won’t pick up

Does file sharing reduce the sale of copyright materials?

Theoretical modeling states that file sharing can either hurt or help producers

Majority of empirical studies indicate that sharing is harmful

Rates range from 3.5% in movies (Rob and Waldfogel, 2007) to 30% in music (Zentner, 2006).

A typical estimate is 20% of displacement

Even the papers that show some loss, it is usual to find subsamples not affected

Challenges on the empirical literature Choice of sample

Measures of piracy

Unobserved heterogeneity

Alternative – Instrumental variable techniques

How important are complementary source of income?

Concerts and merchandising have become an important source of income

8.5 CDs to produce $20 of concert revenue (pre-Napster) vs. 6.4 CDs in 99-02

Concert prices rose above CPI

Not considering only CD sales, the industry is in better shape (07 vs. 97)

CD only = - 15%

CD + Concerts = + 5%

CD + Concerts + iPods = 66%

Does file sharing undermine artistic production?

chance of successful launch is < 1/100

Musicians get $1 or $2 per album sold

Over ¾ of musicians have a non-music related job

Album launches rising – other media too

Does file sharing reduce the sale of copyright materials?

Conclusions

Copyright exists to encourage innovation

Looking only to CD sales is too narrow – what about the total income?

Empiric research is confuse Papers using actual file sharing data suggest that piracy and music sales are largely unrelated

The distribution of impacts of related sales offsetting CD sales decrease is still understudied

The Effect of Digital Sharing Technologies on MusicBHATTACHARJEE,S. , GOPAL, R.D. , LERTWACHARA, K . , MARSDEN, J .R. , TELANG, R.

Apresentação: Gustavo Viegas Rodrigues

Introduction

Is Music sharing harmful or helpful to the music business?

Decline could be a result of both increasing competition for consumer attention and downturn in macroeconomic conditions

Problems of data collection on empirical work

The study

Study: top 100 songs on Billboard chart vs. songs’ downloads on WinMx –

Before mid’98 and after mid’00,

Data collection pre and post that window (95 – 04)

3 time segments

Variables

Debut rank

Artist reputation

Record label

Artist descriptors

Study objectives

Assess impact of market technological developments on music sales

Evaluate impact of P2P sharing on album’s survival on the chart

“Does the level of sharing of sharing influence survival time on the

charts?”

Influences of key

explanatory variables

Analysis of gender effect

Isolation of sharing

on albums survival

length

Related Literature

Nature of music as an experience good

Sampling and experiencing prior to purchase can leverage sales

Number of albums released every year and odds of success

Related to search costs of new artists

Learning process reinforce the trend to like popular artists

Larger recording labels – larger support

“Bandwagon effect” – the more on top, the better

Modelling

Ordinary Least Squares (OLS) regression

One equation for album survival

Another for impact of sharing on survival

Authors decided to twitch the formula due to strong correlation of sharing with unmeasurable data

Use of instruments to consider RIAA decision in Jun’03

Data

34 weeks

Each album was tracked until its drop-off the list

Start date of measurement:

Survival

Debut rank

Debut post-TS

Albums released

Superstar

Minor Label

Soloa Male

Solo Female

Group

Holiday_month Debut

Data set 1

14 to 10 weeks

49 to 40

Data set 2 Analysis is focused on sharing levels of each album during its debut week

Two alternative measures of sharing: Share_debut

Share_max

Album SurvivalResults – without interaction

Each unit change in rank on debut adds 1.98% less

chance of survival

35% more

chance of

survival23% less chance

of survival

vs. major

Album survivalResults – with interactions

The effect on survival gets more dramatic as the debut rank grows.

Analysis of sharing on survivalResults without instrument

It would seem that Shares_max leads to longer survival

Analysis of sharing on survivalResults with instrument

When measure Feb-May vs. July-Oct survival times, there was no significant difference

The RIAA announcement proved to be a highly influential variant, confirming the results of 80% less sharing after it came up

Debut rank again came significant

Sharing didn’t come significant (although negative)

Analysis of sharing on survivalResults with instrument + 2 additional regressions

Coefficients on the regression instruments (RIAA announcement indicator & RIAA announcement indicator x debut ranks) are highly significant

Again top albums are not negatively affected by sharing

The effect of sharing is more negative for numerically higher ranked albums

Impact of sharing on survival

Higher survival for higher debut ranksHigh = 5.12

Mid = 3.12

Low = 1.12

Mean survival timeHigh debut rank (>20) = from 2.92 to 4.7 weeks (!!!!!!)

Low debut rank (<=20) = from 13.11 to 13.65 weeks

Conclusions – 1/2

Debut rank impacts survival

Survival time drops 42% after controlling other variables (although the above prevails)

Superstar’s albums survive 35% more on the Top100

Female artists survive longer

Albums promoted by major labels survive longer

Conclusions – 2/2

There was a significant decrease on sharing after the RIAA announcement

The estimated effect of sharing is worse for less popular albums (lower on charts)

The research only considers tracking an album when it reached the Top100. Sharing prior to that could have an effect not considered

OBRIGADO!