Online Piracy Does Not Negatively Affect Digital Music Sales, May Actually Help Music Industry

Piracy has been blamed for the loss of revenue by the music and movie industry. While the music industry has lost plenty of revenue from physical sales, including from CDs, it has seen an increase in digital sales. The European Commission’s Joint Research Centre's study examined the effects of online piracy and digital music sales and found that piracy does not affect digital sales.

The researchers observed the online habits of 16,000 Europeans as they went on to various illegal or legal music downloading sites. Using Nielsen Clickstream Data, the researchers were able to monitor Internet users from five countries, including Spain, the United Kingdom, Italy, France and Germany, and their consumption of music.

The country-by-country breakdown reveals that Internet users from Spain visit the most illegal downloading sites while Italian users were the least likely to visit a legal downloading music site.

The study did not find that online piracy led to increased legal sales as the researchers explain, “individuals who like music like to consume more of it through the various channels available. This would give rise to a positive relationship between downloading (respectively streaming) and digital music purchases, regardless of whether a complementarity relationship exists.” The researchers did find that online piracy did not negatively affect music sales but there are some positive effects of illegal downloading.

During their conclusion, the researchers note, “All of these results suggest that 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.” Online piracy can act as a tool for discovery, with piracy leading to some leading sales. The researchers did not find that online piracy created a lost sale, where a user would illegally download music that they would normally purchase. According to the researchers, “If this estimate is given a causal interpretation, it means that clicks on legal purchase websites would have been 2 percent lower in the absence of illegal downloading websites.”

As TorrentFreak points out, the study also reveals the positive effects of streaming music services. The researchers point out that there would be 7 percent fewer clicks to legal music downloading sites without streaming music sites. That means streaming music acts as a very useful tool to downloading music legally.

The researchers state, “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, there is unlikely to be much harm done on digital music revenues.”

The researchers do not recommend any policies based on the data but do note that online piracy could still hurt the music industry if illegal downloading does result in the loss of physical sales. With the rise of digital media sales, the researchers conclude, “From that perspective, our findings suggest that digital music piracy should not be viewed as a growing concern for copyright holders in the digital era. In addition, our results indicate that new music consumption channels such as online streaming positively affect copyrights owners."