Illegal Music Downloading and its Impact on Legitimate Sales: Australian Empirical Evidence

Abstract

This paper explores illegal music file-sharing activity and its effect on Australian sales of singles in the physical and digital retail markets. Using fifteen weeks of Australian Recording Industry Association weekly chart rankings of physical and digital sales, combined with a proxy for download activity derived from the popular peer-to-peer (P2P) network Limewire, the evidence suggests no discernible impact of download activity on legitimate sales. Whilst significant negative correlation between chart rank and download activity is observed in the digital market, once download endogeneity is purged from the model and song heterogeneity is controlled for no significant relationship remains.