, an Internet monitoring firm, estimates that there are now up to 9 million simultaneous file sharers, up from about 4 million in early 2003. In addition, in the last two quarters, music sales increased while file sharing has become even more popular. Our study provides the first serious evidence that file sharing cannot explain the decline in music sales in the last couple of years. What are your impressions of the reactions so far?įelix Oberholzer-Gee: Two recent developments are important. Sean Silverthorne: The draft of your paper with Koleman Strumpf came out almost three months ago, and caused quite a stir both inside the entertainment industry and out.
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Instead of conducting a high-profile campaign against pirates, should the industry instead target "samplers" to encourage them to buy more music? Should the industry consider peer-to-peer services as marketing tools rather than the enemy? Should online pricing be different from in-store pricing? What happens when broadband makes it as easy to illegally download an entire CD as an individual track or two? HBS professor Feliz Oberholzer-Gee recently spoke to Working Knowledge about these issues. If in fact the research is correct, the strategic implications for the music industry are profound.
Interestingly, the first half of this year saw the release of numbers seemingly supporting this theory: The number of illegal music downloads continued to increase-but so did music sales. In fact, illegal downloading may help the industry slightly with another major segment, which Oberholzer and Strumpf call "samplers"-an older crowd who downloads a song or two and then, if they like what they hear, go out and buy the music. In that sense, the music industry can't claim those downloads as lost record sales. How could this be? The researchers believe that most downloading is done over peer-to-peer networks by teens and college kids, groups that are "money-poor but time-rich," meaning they wouldn't have bought the songs they downloaded. Oberholzer and Strumpf concluded that there was almost no relationship between the two. Convinced that illegal downloading and file sharing has robbed them of billions of dollars after four consecutive years of falling music sales, they criticized the team's methodology, which consisted of monitoring 1.75 million downloads over 17 weeks in 2002, scouring through server logs from OpenNap (an open source Napster server), and comparing the sales of almost 700 albums as reported by Nielsen SoundScan. Many recording executives were not singing "Yeah, yeah, yeah," however. Their paper, "The Effect of File Sharing on Record Sales," caused a ruckus in the music industry not seen since the British invasion of the Beatles. Those were the counterintuitive findings released in March by Harvard Business School professor Felix Oberholzer-Gee and his co-author Koleman Strumpf, of the University of North Carolina at Chapel Hill.
Internet music piracy not only doesn't hurt legitimate CD sales, it may even boost sales of some types of music.
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