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CONTRARY TO MANY industry and economic experts, a Harvard Business School professor does not believe that music piracy is the culprit for a recent downturn in record sales.
During a discussion on the consequences of file sharing sponsored by the Penn Program in Intellectual Property and Technology Law, the Institute for Law & Economics, and Penn Intellectual Property Interest Group, Harvard Associate Professor Felix Oberholzer said that the effect of music downloads on record sales is "indistinguishable from zero" and may even boost the sales of some types of music. According to Oberholzer, most downloads are done by students who are "money poor but time rich." Since they would never actually purchase the music they download, the record industry cannot claim those downloads as lost sales. In addition, he said, many downloaders use file sharing to sample new types of music before making a purchase.
The Recording Industry of America (RIAA), however, believes that file sharing is the main reason for the economic woes of its industry. In an attempt to stop the practice, the RIAA has filed more than 5,000 lawsuits against file sharing networks and individual users. Despite these actions, file sharing continues unabated, and some research shows that more people than ever are downloading music. Panelists Joel Waldfogel, professor of Business and Public Policy at the Wharton School, and Alejandro Zentner, of the University of Chicago, sided with the music industry, providing evidence that downloading has hurt record sales. Waldfogel said his research shows that two CD sales are lost for every 10 music downloads, while Zentner found that file sharing may reduce the probability of legitimate purchases by an average of 30 percent.
Penn Law professors Gideon Parchomovsky and R. Polk Wagner served as commentators.
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