MUSIC FILE-SHARING AND CONSUMER SPENDING: THE CONTROVERSY CONTINUES

Music file-sharing on the Internet via websites and networks such as the notorious Napster has become an extremely controversial topic in recent years. Since May 1999, when Napster began introducing millions of Internet users to the pleasures of trading music via a peer-to-peer network, music file-sharing has become ubiquitous online. 42% of the respondents in a June 2001 study of online behavior among American Internet users conducted by Jupiter Media Metrix indicated that they had downloaded music from the Internet.

There has been a great deal of public argument over the effects of this phenomenon. The recording industry views Napster-style file-sharing unambiguously as stealing and have tried to enforce its view by filing lawsuits against Napster and other similar online services. Napster itself has been effectively put out of business by legal action since July 2001, and a number of other lawsuits against most of the other major file-sharing services are currently pending. Among listeners, however, there is little agreement on whether or not file-sharing is the equivalent of theft, with many contending that they are actually led to purchase more music in physical form such as CDs because of their music downloading.

Many polls and surveys of online behavior have attempted to learn more about music fans' actual online behavior in the past few years, but with ambiguous and conflicting results. Some studies, notably those commissioned by the recording industry as represented by the RIAA (the Recording Industry Association of America) or the IFPI (the International Federation of Phonographic Industries), have found that music file-sharing contributes directly to decreased purchases of music by consumers because it allows them to easily obtain the same music free of charge from the Internet. For example, a recent statement from the market research unit of the IFPI released on 16 Apr 2002 places the blame for a reported 5% overall decline in global sales of recorded music in 2001 squarely on Internet file-sharing and other forms of high-tech music piracy:

Three of the world's top five markets - the US, Japan and Germany - attribute a significant part of their sharp drop in recorded music sales in 2001 to the proliferation of free music and piracy.

The effect was felt on CD sales, in most of the markets of North America, Europe, Latin America and Asia... The pressure from mass copying was aggravated in many markets by the global economic downturn, particular in the last quarter of the year.

Surveys in the most affected countries, notably the US and Germany, show that mass copying and internet piracy is directly replacing sales of CDs.

In the US, nearly 70% of people who downloaded music burned the songs on to a CD-R disc, while 35% of people downloading more than 20 songs per month said they now buy less music as a result.