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Music downloads do not hurt CD sales
A KU professor says technology is not to blame for years of declining album sales.
Contradicting anti-Napster claims from Metallica and music executives, Koleman Strumpf, Koch Professor of Economics, argues that downloaded songs do not automatically lead to lost sales. In an article published in the Feb. 14 issue of the Journal of Political Economy, Strumpf and co-author Felix Oberholzer-Gee of Harvard University analyzed millions of downloads in late 2002 and compared them to album sales.
"We match an extensive sample of downloads to U.S. sales for a large number of albums," the authors wrote. "While file sharers downloaded billions of files in 2002, the consequences for the industry amounted to no more than 0.7 percent of sales … Downloads have an effect on sales that is statistically indistinguishable from zero. Our estimates are inconsistent with claims that file-sharing is the primary reason for the decline in music sales during our study period."
In their analysis of downloads and record sales during the four-month period, Strumpf and Oberholzer-Gee found that downloads and sales of songs and albums were both proportionally high when the work was popular.
"We did not find examples of songs that were downloaded frequently but failed to sell," Strumpf said.
A number of other factors are often overlooked as potential causes of declining sales, he added. Radio conglomerate Clear Channel rose to prominence about the same time, limiting the variety of music played on commercial airwaves. Retail giants such as Best Buy and Wal-Mart also increased their presence in the music market, changing the way people bought music.
Strumpf said the record industry's lack of creativity might have also contributed to declining sales. There has not been a truly new musical genre since the rise of boy bands and teen-oriented pop in the late '90s, he said. The subsequent years of homogenous music could have contributed to consumer apathy.
Strumpf said he became interested in the subject in 1999 when the popular file-sharing network Napster gained prominence. The subsequent lawsuits and attempts to fight the practice of downloading by the record industry caught his attention; claims that downloading directly affected albums sales often struck him as faulty in economic logic.
The two researchers are now analyzing the effects of downloading movies on box office revenue. They are collecting statistics for movie downloads from around the world for a two-year period.
