Piracy and the Legitimate Demand for Recorded Music

National U. of Singapore, School of Computing

27 Pages Posted: 16 Apr 2001  

Kai-Lung Hui

National University of Singapore (NUS) - School of Computing

Ivan P. L. Png

National University of Singapore (NUS)

Date Written: July 2002

Abstract

Publishers of computer software and music claimed losses of nearly $16 billion to piracy in 1999. Theoretically, however, piracy may raise legitimate demand through positive demand-side externalities, sampling, and sharing. Accordingly, the actual impact of piracy on the legitimate demand is an empirical issue. Addressing this issue in the context of recorded music, we develop and test hypotheses from theoretical models of end-user and re-seller piracy on international panel data for music CDs. Empirically, we find that the demand for music CDs decreased with piracy, suggesting that "theft" outweighed the "positive" effects of piracy. However, the impact of piracy on CD sales was considerably smaller than industry estimates. Further, we estimated that, accounting for both demand losses and price adjustments, the industry lost no more than 6.6% of revenue to piracy.

Keywords: music, copyright, pricing

JEL Classification: K42, L11, L82, Z11

Suggested Citation

Hui, Kai-Lung and Png, Ivan P. L., Piracy and the Legitimate Demand for Recorded Music (July 2002). National U. of Singapore, School of Computing. Available at SSRN: https://ssrn.com/abstract=262651 or http://dx.doi.org/10.2139/ssrn.262651

Kai-Lung Hui

National University of Singapore (NUS) - School of Computing ( email )

Department of Information Systems
3 Science Drive 2
Singapore 117543
+65 874 4483 (Phone)
+65 779 4580 (Fax)

Ivan P. L. Png (Contact Author)

National University of Singapore (NUS) ( email )

Singapore, 117543
Singapore
+65 6516-6807 (Phone)

HOME PAGE: http://sites.google.com/site/iplpng/

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