Study: Pirates Rejoice, Illegal Downloading Doesn’t Impact Digital Music Sales

Somewhere, there is a very sad music lobby analyst shedding a tear. “The vast majority of the music that is consumed illegally by the individuals in our sample would not have been legally purchased if illegal downloading websites were not available to them,” reads a European Commission study on the impact of music piracy. Unlike previous research studies into whether piracy cannibalizes sales of physical music, the commission’s cross-country study looked at sales of digital music (i.e. iTunes) and found that pirates have a negligible effect on the music industry.

Previous research has attempted to quantify the impact of piracy by looking at sales of physical music. For instance, the report notes, countries with higher levels of piracy have, on average, lower music sales. Of course, this sort of brute-force correlation can’t control for all the millions of reasons a country may have higher piracy and lower sales, even if there’s no causal relationship between the two.

One method economists use to tame the statistical beast of between-country studies is “exogenous shocks.” France, for instance, enacted a super-tough anti-piracy law, HADOPI, which gave economists a nice “shock” to study whether French residents are less likely to pirate music than their European peers, during the same period after authorities started using the law to threaten downloaders. Danaher et al. found the law worked, and music sales rose 22.5 percent, which is more than other European nations.

Still, the shocks method only works if there is only one shock at a time. French newspaper Le Monde rained on the HADOPI parade by arguing that the rise in music sales was actually due to the release of the new iPhone, which was concurrently released during the enforcement of the new law.

This latest research by the commission tracked individual web-browsing habits from users who had been paid to let Nielsen track their online behavior. Visiting websites for pirating music had little impact on whether users also visited websites for legal music downloads.

Visiting websites for pirating music had little impact on whether users also visited websites for legal music downloads.

“Taken at face value, our findings indicate that digital music piracy does not displace legal music purchases in digital format. This means that although there is trespassing of private property rights (copyrights), there is unlikely to be much harm done on digital music revenues,” concludes the report.

Music industry representatives offered a predictably outraged rebuttle. Buried within the counter report is a nugget of a good argument: “It is not news that some pirates are also legal buyers.” In other words, we still don’t know how many of those visits to legal music websites would have occurred had there been no illegal alternative.

We may never be able to accurately quantify the impact of music piracy. Either way, instead of attacking consumers, it might behoove the music industry to follow Apple’s lead and concentrate on finding novel ways to satisfy our appetite for high-quality and accessible legal music.