How Bad Is Music File Sharing? – Part 19

The study of Tanaka (2004) “Does File Sharing Reduce Music CD Sales?” was based on the the one hand on micro data of CD sales, which were collected on a weekly basis of 30 best selling CDs from June to November 2004 in Japan. On the other, download figures were obtained on each weekend in the sample period from the completely decentralized and most popular Japanese file sharing network Winny. In addition, the author also carried out a non-representative user survey among students on file sharing and CD purchases. Neither the micro data based estimation results nor the students’ survey indicated a negative impact of music file sharing on record sales.

On the basis of this analytical framework, Tanaka and his team collected 261 CD titles, for which total sales were available. This sample was matched with download figures on the Winny file sharing network. The result was that in the case of most downloaded titles, the number of download reached 35% of sales. In constrast, there were no downloads for 65 titles too. Tanaka assumed that if file sharing reduces CD sales, a decline for frequently downloaded CDs should be observed (Tanaka 2004: 4).

Since CD sales and the number of downloads are simultaneously determined, an instrumental variable has to be introduced. Tanaka used Japanese traditional songs, family songs, and Korean TV songs, since listeners of these genres are middle aged and not frequent users of file sharing networks. Another instrument variable was a dummy for anime and video game songs, since computer gamers are also heavy file sharers. Finally, listeners to music of western origin were expected that they did not tend to be computer intensive users. Since the regression results showed in all cases examined a significantly positive value of downloads on CD sales. Therefore, the author concluded that “(…) downloads do not reduce CD sales” (Tanaka 2004: 6).

This result was support by a survey among 501 students from an undergraduate course at Keio University in 2003 and 2004. They were asked to profile their history of CD purchases, file sharing behavior and CD copying activity from first grade of high school to the current university grade. Ths results indicated that file sharing even increases CD purchases, since there is a considerable sampling effect of file sharing due do a changing demand pattern for music. To sum up, Tanaka “(…) did not find any negative effect of file sharing on CD sales” (Tanaka 2004: 8).

References

Tanaka, Tatsuo, 2004, Does File Sharing Reduce Music CD Sales? A case of Japan. IIR Working Paper WP#05-08. Institute of Innovation Research, Hitotsubashi University Tokyo.

In part 20 of the series “How Bad is Music File Sharing” an article published in Management Science by Bhattacharjee et al. is discussed, in which the authors came to the conclusion that file sharing “(…) has no statistically significant effect on[chart] survival.”