Peer-to-Peer, File-sharing and Effects

Peer-to-Peer and the impact of file-sharing upon so many delicate matters have made it long time ago into the top list of most controversial issues and, as things show, there’s no sign they will not remain there. Because it engages the boundaries and the interests of innovators, content owners and consumers it has triggered new not so easy and definitely interesting questions not least those regarding how the interests of some IP owners should affect the development of technology.

The present review does not propose to deal with these very broad questions about how copyright and technology policy can be joined together to best serve the interests of society, but rather to merely address the question at the core of the phenomenon of file-sharing which is – how does it actually influence sales and welfare.p2p connection.jpg

Of course that to such a “succulent” subject followed a no smaller research. The public interest in these matters required some answers with some degree of certainty. We have enough data reach the conclusion that although online illegal file-sharing has some negative influence on conventional sales this is rather small. However, the size of this effect is highly debated, and ranges from 0 to 100% of the sales decline over the last years, but a number between 0 and 30% would seem to be a reasonable consensus value (i.e. that file-sharing accounted for 0-30% of the decline in sales not a 0-30% decline in sales). At the same time some would even say (Oberholzer and Strumpf 2005) that there is actually no impact file-sharing can be accounted for.

Further than this basic answer a few other quite interesting facts have surfaced. First would be the degree of impact of file-sharing on an artist depending on how popular they already are. According to Blackburn who examines this matter the ‘bottom’ 3/4 of artists sell more due to file-sharing while the top 1/4 sell less. This distinction is very crucial and has been many times overlooked. Second is the first provisional estimates (by Waldfogel and Rob) of the welfare consequences of file-sharing. Waldfogel and Rob have come up with a striking result that file-sharing when you add it all together translates after all as a gain to society –three times the value of the music industry’s loss in sales. Yet, as emphasized, this result is first round and supported by limited data thus requiring further investigation of the issue