Academic Studies on the Effect of File-Sharing on the Recorded Music Industry: A Literature Review

Abstract

Is file-sharing responsible for the slump in recorded music sales or does it create demand? The empirical research literature is inconclusive. What has clearly emerged is that there are a number of different dynamics at work, yielding a mixed result with respect to album sales, a likely positive result for the music industry as a whole through gains in concert and merchandising revenues, and a clearly positive effect on social welfare through improved market chances for non-star music, greater cultural diversity and increased consumer surplus. While the nearly eighty empirical studies under review cannot support allegations by IFPI that illegal file-sharing has been a major factor in the decline in music sales, they do show trends in the music sector and raise questions about the economic rationality of the current copyright regime.

Keywords: economics, methodology, creativity, culture industries, record industry, concerts, file-sharing, peer-to-peer, substituion, discovery, social welfare, cultural diversity, DRM, IFPI

JEL Classification: D12, L82