It makes interesting reading for copyright geeks on all sides of the divide."1. Introduction
The advent of file-sharing technology has allowed consumers to copy music,
books, video games and other protected works on an unprecedented scale at minimal
cost. In this essay, we ask whether the new technology has undermined the incentives of
authors and entertainment companies to create, market and distribute new works. While
the empirical evidence of the effect of file sharing on sales is mixed, many studies
conclude that music piracy can perhaps explain as much as one fifth of the recent decline
in industry sales. A displacement of sales alone, however, is not sufficient to conclude
that authors have weaker incentives to create new works. File sharing also influences the
markets for concerts, electronics and communications infrastructure. For example, the
technology increased concert prices, enticing artists to tour more often and, ultimately,
raising their overall income.
Data on the supply of new works are consistent with our argument that file
sharing did not discourage authors and publishers.2 The publication of new books rose
by 66% over the 2002-2007 period. Since 2000, the annual release of new music albums
has more than doubled, and worldwide feature film production is up by more than 30% since 2003. At the same time, empirical research in file sharing documents that consumer
welfare increased substantially due to the new technology.
Over the past 200 years, most countries evolved their copyright regimes in one
direction only: lawmakers repeatedly strengthened the legal protections of authors and
publishers, raising prices for the general public and discouraging consumption.3 Seen
against this backdrop, file sharing is a unique experiment that considerably weakened
copyright protections. While file sharing disrupted some traditional business models in
the creative industries, foremost in music, in our reading of the evidence there is little to
suggest that the new technology has discouraged artistic production. Weaker copyright
protection, it seems, has benefited society.
In this essay, we discuss the currently available research that sheds light on the
effects of file sharing, particularly in music where its effects have been most pronounced.
We start by describing the new technology and how consumers are using it. Section 4
reviews the evidence that file sharing reduces the profitability of creating and selling new
works. We discuss the importance of complements to original works in Section 5 and
describe the artistic and corporate response to file sharing in section 6. The concluding
section offers policy implications."
Update: The Register has a report on the Harvard essay, Economists say P2P file-sharing fuels art Thanks to Fearghas McKay via the FIPR alerts for the pointer.
And ars technica have picked it up too. Thanks to Magnus Therning via the ORG list for that one.
Update 2: And Michael Geist whose commentary is always worth a read.