Pitfalls in Measuring the Impact of File-Sharing

Abstract

This paper surveys the extant literature on the impact of file-sharing. It begins by examining the theory behind the impact of file-sharing. One novelty from this analysis is the finding that the effect of 'sampling' of copyrighted materials can be expected to have a negative impact on copyright owners, quiet the opposite of the impact normally assumed. Overall, although one can create hypothetical situations where network effects might allow file-sharing to be beneficial to copyright owners, the expectation that file-sharing would harm copyright owners appears a far more realistic outcome. The analysis then turns to the empirical work that has been performed to date. The various approaches are critiqued and compared. Although much of this literature is preliminary, most of the conclusions are consistent with one another, although the results are not unanimous. I then posit some explanations for the variations in results and conclude that the evidence to date strongly suggests that file-sharing harms the sound recording industry.

Keywords: Filesharing, peer to peer, downloading, network effects, mp3

JEL Classification: K0, L0, L5, L8