File-Sharing: Creative Destruction or just Plain Destruction?

Abstract:     
The impact of copying, in the form of file-sharing, has become a stormy policy issue. Previous copying technologies have mostly failed to live up to the extravagant predictions of harm that arose with those new technologies although precise measurements of copying's impact was rarely accomplished or attempted. One impediment to measuring the impact of copying with prior technologies was the difficulty of measuring copying activity. File-sharing is the newest technology for making copies and carries with it the possibility of more precise measurement of copying than has been possible in the past. This paper examines the measurement of file-sharing activity, the theory of file-sharing's likely impact, and the impact of file-sharing. Analysis of various data sets indicate that they do not yet live up to their hoped for precision. Data limitations not withstanding, the evidence seems compelling that file-sharing is responsible for the recent large decline in CD sales for which it has been blamed.

Keywords: Copying, copyright, mp3, file sharing, piracy, peer to peer

JEL Classifications: K0, L0, L5, L8

Working Paper Series