A report on why music piracy should not concern copyright holders has been released by two European researchers – Luis Aguiar and Bertin Martens, both working with the EU’s Information Society Union.
The report’s bottom line is 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.”
The two Spanish authors wrote a 40-page report (which was published this month), showing that:
“Although there is trespassing of private property rights (copyrights), there is unlikely to be much harm done on digital music revenues.”
“This result, however, must be interpreted in the context of a still evolving music industry. It is in particular important to note that music consumption in physical format has until recently accounted for the lion’s share of total music revenues. If piracy leads to substantial sales displacement of music in physical format, then its effect on the overall music industry revenues may well still be negative,” the two authors explain.
In their effort to put up together this report, Luis and Bertin used an internet audience service called Nielsen NetView, and managed to look over the habits of 5.000 internet users from Europe’s most developed countries – France, Germany, Italy, Spain, and the UK.
“The most striking differences appear when looking at the determinants of download. Compared to Germany, Spain show 230 percent more clicks on illegal downloading websites. Italy presents an important difference of 134 percent while the UK and France have 43 percent and 35 percent more clicks respectively. France stands out when it comes to streaming, with 150 percent more clicks than Germany. Spaniards have 20 percent more clicks than the Germans, while Italians have 25 percent less. The UK presents a small difference with Germany in terms of streaming, with only nine percent more clicks.
There are various possible explanations for these country differences. First, unobservable cultural characteristics could explain the use of different types of music consumption channels. Second, market forces, and in particular the limited access to legal digital purchasing websites, could influence the illegal downloading activity of consumers.”
If you take a look over their study, you will notice that its foundation is built on two individual formulas, which, according to the authors, makes the report more accurate than similar ones.
Furthermore, Luis and Bertin confirm that the lack of legal alternatives for content that is otherwise unavailable in some parts of the world (for example, the iTunes Store in Austria, Spain, and Denmark is missing certain content, while Latvia’s, Belgium’s, and Germany’s iTunes Store does not) may be strongly connected with online piracy.
“After using several approaches to deal with the endogeneity of downloading and streaming, our results show no evidence of sales displacement. Overall, our different estimates show relatively stable, positive, and low elasticities of legal purchases with respect to both illegal downloading and legal streaming. Across specifications, the estimates of δ suggest elasticities of about 0.02 between clicks on illegal downloading websites and legal purchases websites. If this estimate is given a causal interpretation, it means that clicks on legal purchase websites would have been two percent lower in the absence of illegal downloading websites. Specific country estimates show that for Spain and Italy the elasticity is zero, while it is close to 0.04 for France and the UK. 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,” the two authors concluded.
Not too much of a surprise was IFPI’s response to the report, who called it “flawed, misleading and disconnected from commercial reality.”