Pitfalls in Measuring the Impact of File -sharing on the Sound Recording Market

This paper surveys the extant literature on the impact of file-sharing on the recording industry. It begins by examining the theory behind the impact of file-sharing. One novelty from this analysis is the finding that the effect of ‘sampling’ of copyrighted materials can be expected to have a negative impact on copyright owners, quite the opposite of the impact normally assumed. Overall, although one can create hypothetical situations where network effects might allow file-sharing to be beneficial to copyright owners, the expectation that file-sharing would harm copyright owners appears a far more realistic outcome. The analysis then turns to the empirical work that has been performed up to the time this paper was written. The various approaches are critiqued and compared. I posit some explanations for the variations in results and conclude that the evidence strongly suggests that file-sharing harms the sound recording industry. (JEL K0, L0, L5, L8)