We mentioned back in March the Harvard-UNC study by Felix Oberholzer-Gee and Koleman Strumpf which seemed to indicate that Internet music file sharing has no negative effect on legitimate music sales.
Oberholzer-Gee discusses what the industry should do next with Harvard Business School's Working Knowledge:
- Sean Silverthorne: The draft of your paper with Koleman Strumpf came out almost three months ago, and caused quite a stir both inside the entertainment industry and out. What are your impressions of the reactions so far?
Felix Oberholzer-Gee: Two recent developments are important. Our study provides the first serious evidence that file sharing cannot explain the decline in music sales in the last couple of years. In addition, in the last two quarters, music sales increased while file sharing has become even more popular. BigChampagne.com, an Internet monitoring firm, estimates that there are now up to 9 million simultaneous file sharers, up from about 4 million in early 2003.
In view of our evidence and these new trends, even the Recording Industry Association of America (RIAA) now states that file sharing is only "one factor, along with economic conditions and competing forms of entertainment that is displacing legitimate sales." The industry is rethinking its position, although change occurs slowly.
Q: Let's talk strategy. What have been the recording companies' strategies to date for combating their loss of property rights via illegal downloading? And how effective has that strategy been? For example, is it a good thing to sue potential customers?
A: Suing potential customers is not exactly a standard entry in the book of good CRM. More importantly, the RIAA's legal strategy is hopeless and smacks of short-sighted panic.
Our research shows that only 45 percent of music files downloaded in the United States come from computers in the U.S. More than 100 countries supply files to the U.S. file-sharing community, and many of these countries do not have strong records of protecting copyrighted materials. The RIAA does not stand a chance to implement an effective legal strategy in all these countries.
Those who dream of legal solutions do not recognize the truly global nature of the peer-to-peer (P2P) phenomenon. Even worse, the RIAA's legal strategy does not even seem to work here in the United States. Despite the lawsuits - the RIAA has sued about 2,000 individuals to date - file sharing is more popular than ever.
Q: Assuming your conclusion is right - that there is no evidence that illegal music downloads erode CD sales - and in fact might help top-selling record sales - what are the implications for the recording industry in terms of strategy?
Article comments
1 - Julio Paulini
I think that the RIAA should get in some kind of a partnership with the P2P networks and clients. They should make use of the fact that by USing P2p technology they are saving bandwidth and server costs!
2 - Thomas Mak
If they could do that i think they would've done that by now. It is very hard to monitor and control activity over P2P networks and virtually impossible to sell downloads via file sharing!