Stan J. Liebowitz; Testing File-Sharing’s Impact
Management Science;April 2008
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Research Note: Testing File-Sharing’s Impact on Music Album Sales
in Cities
Stan J. Liebowitz
School of Management, University of Texas at Dallas, Richardson, TX 75083, liebowit@utdallas.edu
Using a data set including album sales, Internet penetration and various demographic measures for 99
American cities over the period 1998- 2003 this paper empirically examines the extent to which file-sharing
has caused the US decline in sound recording sales over that period. Also examined is the impact of the
Internet on entertainment activities so as to help cleanse the Internet penetration coefficient of that impact.
The conclusion from this analysis is that file-sharing appears to have caused the entire decline in record
sales and appears to have vitiated what otherwise would have been growth in the industry.
Key words: File Sharing, Peer-to-Peer, Copying, Internet, Sound Recordings, Television, Radio
History: This paper was first submitted September 2005.
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I. Introduction
File-sharing is merely the most recent example in a long line of technologies (e.g., photocopying, audio
and video taping) that have lowered the cost of unauthorized copying by individuals. Although each of
the previous copying technologies engendered cries of alarm from the industries owning the endangered
copyrights, there was no sustained decline in sales to support the rhetoric coming from these industries.
Unlike prior copying technologies, however, the growth in file-sharing has been accompanied by a large
drop in sales of sound recordings. Managers and policy-makers are still nervously trying to determine the
best strategies to deal with file-sharing.
Organized file-sharing began with Napster in late 1999. Although Napster was effectively shut down
within two years of its birth, its progeny live on and the repercussions on music listening and the m