New Study Says Stop Blaming P2P
A new study in the Journal of Political Economy by Felix Oberholzer-Gee and Koleman Strumpf which took a careful look at P2P and sales data for the dawn of the P2P era in 2002 concludes that P2P 
played only a minor role in the demise of CD sales.
"Using detailed records of transfers of digital music files, we find that file sharing has had no statistically significant effect on purchases of the average album in our sample," the study reports. "Even our most negative point estimate implies that a one-standard-deviation increase in file sharing reduces an album’s weekly sales by a mere 368 copies, an effect that is too small to be statistically distinguishable from zero."
803 million CDs were sold in 2002 representing a decrease of about 80 million from the previous year. The RIAA balmed the majority of the drop on piracy and has maintained that same argument during every year that followed as music sales plummeted. Yet according to the study, file sharing could not have accounted for more than 6 million albums total in 2002 which leaves 74 million unsold CDs left sitting on shelves.
What then is to blame? Because the recording industry focused on units shipped rather than sold, the decline could be attributed in part to reduced inventory. Best Buy and others no longer tolerated unsold stock sitting around and new automated inventory control systems enabled fast re-stocking So big retailers simply ordered fewer CDs. The study also highlighted the explosion in DVD sales during that same 2002 competing for consumer dollars and the video game explosion came shortly thereafter.
I laughed when I read Ars Technica’s theory that returned product from Best Buy was behind the sales decrease. Absolutely no way that’s the cause for the drop in the RIAA’s figures.
Think of it this way: Stores tend to do inventory far more often than once per year. Plus, there’s a constant balance in the numbers. Any unsold Christmas product from Year 1 will count against the sales in Year 2. But in Year 1, sales were already hit by the returns from Year 0 Christmas product.
Product is constantly returned, so any big uptick in returns (like due to a change in square feet alloted to music) would cause only a slight change.
hey major labels, its the BOOTLEGGERS not the downloaders stealin’ your biz
you misread what he wrote. He isn’t saying that they are returning more records, he is saying that they are ordering fewer records in the first place.
I agree with Nono. Glen, the study is not saying that they just returned more CD’s but rather that they did not order them in the first place. 2002 was also time when music retail was embracing new inventory tech and Dell’s real time ordering model was in vogue. The study suggest that this ability to track what is selling and stock only that may be part of the reason that we’ve seen the sharp sales decline. Then you add in the new competition of videos and video games and the shrining number of music retailers to spread product via and… you’ve got a sales drop.
Heady Links | Digital Music Edition
As usual, there’s a lot going on in the digital music world. Here are a few recent highlights: Last week, I briefly noted the big hullabaloo over Apple’s Steve Jobs writing an open to letter to the major labels castigating…
This study is not new. It was first published in 2004 and it, along with some newer ones and refinements, is contextualised here: http://www.thefactz.org/economics/p2p_summary.html for anyone who’s interested in a bigger view of the very complex picture.
Heady Links | Digital Music Edition
As usual, there’s a lot going on in the digital music world. Here are a few recent highlights: Last week, I briefly noted the big hullabaloo over Apple’s Steve Jobs writing an open to letter to the major labels castigating…