Study finds piracy doesn't hurt digital music sales

Researchers in Europe are telling copyright holders, when it comes to illegal music downloading, don’t worry, be happy

There’s general agreement in the academic (and business) world that the availability of illegal music downloads has hurt physical music sales. After all, if you like a song enough to buy a whole CD to get it, being able to download the song for free can mean that the album sale has been lost. But does illegal downloading have the same effect on digital music sales? That’s a question that a study released this week attempts to answer, and the conclusions might be surprising.

music_store-600x450_0.jpgImage credit: REUTERS/Paul Hackett
Piracy hurts CD sales, but what about digital music sales?

The study, conducted by researchers at the Institute for Prospective Technological Studies, which is part of the European Commission’s Joint Research Centre, attempted to find a causal relationship between illegal music downloads, as well as online music streaming, and the legal purchase of digital music.  They looked at Nielsen Clickstream Data collected from 25,000 people in the U.K., France Germany, Italy, and Spain over the course of 2011. Using regression analysis they were able to control for demographic variables, as well as things like general interest in music (presumably, the more that people like music in general, the more legal and illegal downloading they will do).

The results they found show that illegal music downloading actually has a small but statistically positive effect on legal downloading. Specifically, they conclude that a 10% increase in illegal downloads leads to a 0.2% increase in legal digital music purchases. They also found that streaming music online had a positive and slightly greater effect (0.7%) on legal music downloads.

The ability to purchase songs individually via iTunes and such services, as opposed to having to buy a whole CD, seems to be the key to explaining the different effect on digital sales. When people illegally download a song, these results suggest they aren’t forgoing a purchase they would have otherwise made digitally. If anything, the illegal download and, to a greater extent music streaming, stimulates more digital purchases. As the researchers theorize, “Sharing can allow consumers to sample specific songs or albums which can inform them on what to buy. Similarly, the sampling of a specific song may stimulate individual demand for other songs by the same artist.”

Reaction from the music industry is starting to come in, and, predictably, it’s not favorable. The International Federation of the Phonographic Industry (IFPI) begs to differ with the researchers methodology and conclusions. In particular, they argue that counting clicks on music download websites is not an accurate proxy for actual transactions. Plus, they also say that illegal downloading can other hurt other sources of digital revenue such as subscription services and free streaming (for which copyright holders get royalties).

What do you think? Should copyright holders stop worrying about illegal music downloads? Or should piracy still be viewed as a problem for the music industry? Share your opinions in the comments.

Read more of Phil Johnson's #Tech blog and follow the latest IT news at ITworld. Follow Phil on Twitter at @itwphiljohnson. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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