The Effect of File Sharing on Record Sales: An Empirical Analysis

Posted: 7 Feb 2007  

Felix Oberholzer-Gee

Harvard Business School, Strategy Unit

Koleman S. Strumpf

University of Kansas - School of Business

Abstract

For industries ranging from software to pharmaceuticals and entertainment, there is an intense debate about the appropriate level of protection for intellectual property. The Internet provides a natural crucible to assess the implications of reduced protection because it drastically lowers the cost of copying information. In this paper, we analyze whether file sharing has reduced the legal sales of music. While this question is receiving considerable attention in academia, industry, and Congress, we are the first to study the phenomenon employing data on actual downloads of music files. We match an extensive sample of downloads to U.S. sales data for a large number of albums. To establish causality, we instrument for downloads using data on international school holidays. Downloads have an effect on sales that is statistically indistinguishable from zero. Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period.

Suggested Citation

Oberholzer-Gee, Felix and Strumpf, Koleman S., The Effect of File Sharing on Record Sales: An Empirical Analysis. Journal of Political Economy, Vol. 115, pp. 1-42, February 2007. Available at SSRN: https://ssrn.com/abstract=961830

Felix Oberholzer-Gee (Contact Author)

Harvard Business School, Strategy Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Koleman S. Strumpf

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
1300 Sunnyside Ave.
Lawrence, KS 66045
United States
785-864-7485 (Phone)
785-864-5328 (Fax)

HOME PAGE: http://people.ku.edu/~cigar/

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