WILL MP3 DOWNLOADS ANNIHILATE THE RECORD INDUSTRY? THE EVIDENCE SO FAR

Abstract

This paper investigates the impact of peer-to-peer networks that promote the unauthorized downloading of MP3 files exert on the recording industry. Although Napster was the most famous of these systems, its progeny have continued to allow millions of music listeners to download music (and other) files without remuneration to the copyright owners. Economic theory does not allow us to determine what the impact of such downloading will be. Using data on the historical sales of prerecorded music I examine in detail the recent decline in record sales and attempt to gauge the importance of various factors that have been put forward to explain this decline. My conclusion is that the evidence is most consistent with a claim that MP3 downloads decrease sales. Nevertheless, it is unclear whether the damage to the industry will be fatal.

Citation

Liebowitz, S.J. (2004), "WILL MP3 DOWNLOADS ANNIHILATE THE RECORD INDUSTRY? THE EVIDENCE SO FAR", Libecap, G.D. (Ed.) Intellectual Property and Entrepreneurship (Advances in the Study of Entrepreneurship, Innovation and Economic Growth, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 229-260. https://doi.org/10.1016/S1048-4736(04)01507-3