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6/17/2009
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Economists List File Sharing's Benefits

Despite weakened copyright protection, the number of albums, books, and movies -- and overall revenue to the entertainment industry -- has grown since 2000.

In a newly published Harvard Business School paper, economists Felix Oberholzer-Gee and Koleman Strumpf argue that while file sharing has weakened copyright protection, weak copyright protection benefits society.

File sharing, the paper states, has not discouraged creative artists from producing new works.

"While album sales have generally fallen since 2000, the number of albums being created has exploded," the paper explains. "In 2000, 35,516 albums were released. Seven years later, 79,695 albums (including 25,159 digital albums) were published (Nielsen SoundScan, 2008). Even if file sharing were the reason that sales have fallen, the new technology does not appear to have exacted a toll on the quantity of music produced."

The paper makes similar observations about the number of feature films produced and the number of books produced in the past decade.

The paper, however, acknowledges that content quality has not been considered. Its argument would be less compelling were it discovered that the increase in albums since 2000 consisted mainly of music cobbled together from Apple GarageBand loops.

Entertainment industry complaints about falling revenue, the paper suggests, don't tell the full story. Revenue may have declined in some areas, but that calculation changes with the inclusion of a broader set of revenue streams for the industry. "The decline in music sales -- they fell by 15% from 1997 to 2007 -- is the focus of much discussion," the paper states. "However, adding in concerts alone shows the industry has grown by 5% over this period. If we also consider the sale of iPods as a revenue stream, the industry is now 66% larger than in 1997."

The paper also skewers the logic of industry trade groups that treat every unauthorized copy of digital content as a lost sale. The authors point to a 2006 study that found that the average iPod held over 3,500 songs and that 64% of them had never been played. This, the paper states, makes it unlikely that the iPod owners would have paid much for the music they owned.

"While it is difficult to say how representative this sample is, there is no doubt that trade groups such as the Business Software Alliance vastly exaggerate the impact of file sharing on industry profitability when they treat every pirated copy as a lost sale," the paper states.

Unfortunately for content creators hoping to make a living selling digital media -- books, music, film, and software -- the report doesn't offer any easy path to reach a living wage. It suggests that being a creative artist is more or less like playing the lottery and that those trying to make money off of creative endeavors should look to ancillary revenue streams like concerts, speaking fees, and merchandising.


InformationWeek Analytics has published an independent analysis on increasing application performance. Download the report here (registration required).

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