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Does illegal file-sharing cut into CD sales?
Stan Liebowitz says yes, rebutting the well-known arguments of Koleman Strumpf, published in the Journal of Political Economy. I would be happy to link to a response by Strumpf. In the meantime, two notes: a) I suspect non-fair use CD burning is in any case the bigger issue, and b) significantly lower musical sales, and yes sales are falling, still can be welfare-improving. The real consumption of music seems to be up.
Posted by Tyler Cowen on September 27, 2007 at 02:14 PM in Music | Permalink
Comments
It is for me!
Posted by: josh at Sep 27, 2007 2:17:30 PM
I trade albums online with friends all the time, and I buy more music because of it. Example: the band Doves. A friend gave me their third album. I liked it so much I bought their first two and I'll buy almost anything they ever release, ever again.
Do I buy one album for every one I get from a friend? No, not even close.
Do I delete the albums I don't like or don't plan on purchasing? Rarely.
Do I, however, buy more music than I did before all the sharing? Yes. A lot more. And it's because I hear so much more music now.
Posted by: dan at Sep 27, 2007 2:52:55 PM
Intellectual property theft as welfare-improving. Let's assume it's true. How far do you want to take this concept? It probably wouldn't be impossible to find cases where tangible property theft would be welfare-improving. Can anyone provide examples?
Posted by: Peter Schaeffer at Sep 27, 2007 4:06:18 PM
Peter, its not exactly a crazy conclusion. Copying music is only property theft by the definition of very specific laws in our legal system. It could easily be reclassified as non-theft. In fact, well-fare improving is pretty much the original justification for the entire system of intellectual property to begin with. The important difference between intellectual property theft and real theft is that with real theft there is a zero sum game. If I rip a CD the only thing that the music company loses is an opportunity for a sale. So with respect to intellectual property I say: make the laws as wellfare improving as possible. With respect to theft of non-duplicable property: liberty intervenes. Pretty simple, really.
Posted by: mpowell at Sep 27, 2007 4:15:44 PM
Squatters.
Posted by: 8 at Sep 27, 2007 4:18:08 PM
I refuse to get music illegally these days: I have far more interest in encouraging artists to make their work available electronically, and I'm willing to put my money where my mouth is. However, if the only way to acquire a particular song or album is to buy a CD, I frequently simply go without it -- the price is just not right. Rightly or wrongly, when I buy a new CD at the current prices, I feel like I'm getting gouged. I feel bad when people buy me CDs as gifts, because I feel like they got ripped off. I have no such reaction when I get music on iTunes: I sometimes think it's a little too expensive, but I don't feel like I'm getting ripped off.
So, for me, I listen to (and buy!) much more music than I used to, but I buy many fewer CDs. My friends appear to be doing the same as I am. This appears to be the trend elsewhere as well.
Posted by: Dolohov at Sep 27, 2007 4:19:40 PM
I have bought more music and went to more shows based on band i found via file sharing.
Posted by: at Sep 27, 2007 4:27:58 PM
Peter,
You also have to consider practicality. There are laws against counterfeiting and copying all sorts of things, but the main thing stopping most people is the difficulty.
How many people would pay Nike, if there was a "shoe copying" attachment to their computers? And more important how could we as a society, no matter our feelings, stop them without this being a bad place to live.
Basically, all of the ethical, moral and economic arguments are moot in the face of the current technological situation. Of course that could change, but I wouldn't hold my breath...
Posted by: RobbL at Sep 27, 2007 4:42:33 PM
It's, "yes, sales are falling..."
Posted by: AQ at Sep 27, 2007 4:57:38 PM
In Canada it is not the downloading but the sharing of music that is actually illegal. We actually pay royalties to the music industry whenever we buy a blank CD/minidisk etc. There is even talk of adding royalties to ipods. Distributing however is not allowed. I can give someone my cd and they can copy it. I cannot copy the cd.
That having been said I love to support music by taking it in live. A much larger portion of the proceeds goes to the artist vs. buying the music on an album or from itunes. I both download music free (illegal in the states) and buy it. The only reason I still buy is I think keeping the music industry alive is important as it provides an efficient wide scale distribution network for music.
Posted by: Dubbs J at Sep 27, 2007 5:03:03 PM
In pharmaceuticals, where firms face such large fixed costs, patents appear (maybe?) to be relatively efficient ways of encouraging productive activity, combined with some expiration of the patent. This lets the monopolist recoup their fixed costs. But, does this really carry over to music and media, generally? Even if there are fixed costs there, they are much smaller in comparison to the typical pharmaceutical firm. Maybe we're granting monopoly rights over production and distribution of music/media that are too restrictive, in comparison.
Posted by: jason voorhees at Sep 27, 2007 5:40:55 PM
One data point: My iTunes music, subtracting books, podcasts, tv shows, etc.. contains 1,657 songs with 225 purchased through the iTunes store. All of my CDs sit unplayed having been translated into digital form. The number of non-purchased songs: 4 (because they aren't in iTunes or Amazon).
The last four CDs I've purchased have been at live music venues, after listening to the acts-- not at stores (lately Sonny Landreth, who's going to be out by GMU).
CDs are the hardback books of our generation. You only buy them when there is no alternative, or you want them for gifts.
Posted by: The other Eric at Sep 27, 2007 7:29:28 PM
Actual musicians do not make money from the sales of music anyway. Or at least very few of them do. Instead, that goes to the record companies. They make money off of ancillary products like concerts, tours, and merchandise.
In a way, illegal downloading music benefits the actual artists because their music is disseminated further, boosting the likelihood that more people will buy the products and tickets that actually put money in their pocket. Complaints about music downloads are coming from record companies whose middle man role is increasingly obsolete.
As mentioned previously in this thread, intellectual copyright laws are specially constructed to define "theft" in a way not normally recognized. Those rules are artificial and were developed to create a social good. If the rules of the game has changed, one can legitimately argue a weakening of those rules if they create a higher good.
I am not convinced by the arguments of the record companies any more than I am convinced by the arguments of the medieval guild system against markets and new competitors outside the guild system. The laws they are referring to were set up specifically by them to benefit themselves.
Posted by: Chris Durnell at Sep 27, 2007 7:46:04 PM
mpowell is right. Unlike the theft of tangible objects, unauthorized copying is not a zero sum game. If I steal your car, you have lost your car. If I copy a Metallica CD, Metallica may have lost or they may have not. If the Metallica CD is selling for $15 and it is worth $20 to me, then I would have purchased it, so Metallica loses $15 if I copy it. However, if the Metallica CD is only worth $10, then I would not have purchased it anyhow. By copying it, I would gain $10 worth of utility but Metallica would have lost nothing. Therefore, in aggregate, unauthorized copying can increase total utility. This is especially true if Metallica still has an incentive to produce music due to other revenue sources, like rock concerts.
I think iTunes makes for a happy medium. People who only want one or two songs on an album are less likely to purchase the entire album. So, if iTunes sells the songs for $1 each and I only want two songs on the album, I pay $2 for the songs (which I would not have purchased previously) and I gain $8 worth of utility ($10 - $2 = $8). Metallica then gains $2 which they would not have gotten prior to iTunes.
Posted by: James at Sep 27, 2007 8:04:12 PM
I meant to say, "However, if the Metallica CD is only worth $10 to me, then I would not have purchased it anyhow."
Posted by: James at Sep 27, 2007 8:06:57 PM
Peter Schaeffer writes:
Intellectual property theft as welfare-improving. Let's assume it's true. How far do you want to take this concept? It probably wouldn't be impossible to find cases where tangible property theft would be welfare-improving. Can anyone provide examples?
Intellectual property is not property, but just a term invented by the French
legislature in the 18th-century as a figleaf to cover up what is in fact a
government-granted monopoly.
Tangible property is property because it has boundaries, can be possessed,
and can be alienated. If you sell me your house, you no longer have the use of it.
But if you convey an idea to me, you still have it.
As John Perry Barlow (and others before him) have pointed out, ideas
can't be owned, but can only be experienced.
If you can't own an idea, you can't own a derivative of one, as embodied in
copyright (and patent).
If "intellectual property" is not property, there can be no such thing as
"IP" theft.
Posted by: Bill Stepp at Sep 27, 2007 8:11:06 PM
Dolohov writes:
I refuse to get music illegally these days: I have far more interest in encouraging artists to make their work available electronically, and I'm willing to put
my money where my mouth is.
Musical artists make far more money by touring, live concerts, endorsements,
and paraphenalia (not that kind) sales than they do by selling CDs.
Recall that Prince gave away free copies of his latest CD in Britain in
July, to the consternation of the music industry there. He didn't do it because he's a
nice guy, but because he's a good businessman.
The music recording industry needs to change its business model, or it
might go the way of other dinosaurs.
Posted by: Bill Stepp at Sep 27, 2007 8:27:29 PM
CDs are the product of record companies. Their value-added is in marketing. To me, marketing is a net loss as it makes it harder to find good music do to the pollution. Thus i have no interest in helping them stay in business.
Posted by: yoyo at Sep 27, 2007 8:49:03 PM
The boundaries between real property and intellectual property are fuzzier than you might think. In the US trespass is considered to be a crime and stopping trespassers is quite legal. In Sweden hiking across private land is considered to be a right (or so I am told by Swedes). Is the US restriction on trespassing an artificial constraint on personal freedom (hiking) or a defense of private property rights?
As for music as “contrived” intellectual property, why not take the argument further? Why tolerate patents or any other copyrights? Why should pharmaceutical companies be able to enforce their patents any more than music copyright holders should be able to enforce theirs? Why should J.K. Rowling have a monopoly on Harry Potter books? I could print them and sell them for a lot less? Wouldn’t that be welfare enhancing? Certainly cheaper drugs would increase welfare?
I would be the first to agree that enforcing music copyrights is near impossible in the current technical environment. I would also agree the DRM is doomed for the foreseeable future. However, that doesn’t demonstrate the copyright violations are either morally defensible or gains to net welfare.
Posted by: Peter Schaeffer at Sep 27, 2007 11:34:20 PM
One reason cd sales are falling is because most new music is crap. Record companies do not give bands time to develop. If your first album is not a success, then you lose your record deal. Tom Petty did not have a successful album until his third. Springsteen and Aerosmith also had unsuccessful first albums. No record company today would let an artist record a third album if the 1st two were commercial disappointments.
Posted by: adam at Sep 28, 2007 12:11:42 AM
Significantly lower musical sales, and yes sales are falling, still can be welfare-improving.
Now that's something I'd like to see shouted from the rooftops.
Posted by: ed at Sep 28, 2007 3:15:37 AM
What would happen if we just ended copyright protection for songs? Musicians would still have concerts as a source of income, and we would get rid of a huge and costly control apparatus. Sure, the music industry would be less profitable and as a result we would get fewer new bands. But honestly, who cares? I'm serious, by the way.
Posted by: Phoebe at Sep 28, 2007 3:28:08 AM
I am undecided on the morality of breaking the copyright laws so I have been doing without. I doubt that patent and copyright yield a net benefit to humanity.
Posted by: Floccina at Sep 28, 2007 10:07:30 AM
Never underestimate the power of spite. In any buisness model does suing your customers make them want to buy your product?
Posted by: jacob at Sep 28, 2007 10:21:57 AM
I'm firmly in the "I buy more albums and go to more shows because of illegal downloading" and "most music is crap" camps.
Posted by: eriks at Sep 28, 2007 11:32:01 AM
