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File-sharing is here to stay

File-sharing is here to stay

Maastricht research on illegal music downloads

Prosecuting illegal music downloaders is unwise. It would harm prosperity in the Netherlands considerably. This is one of the conclusions that Maastricht economist Michael Yang reaches in the PhD thesis that he will defend next week.

It all started with Napster in 1999, the first web service that made it possible to share music. The music industry was up in arms. And rightly so, says Yang. “In the United States, 900 million CDs were sold that year, by 2008 the number dropped to 375 million. The fact that the music industry has suffered heavy losses, is without a doubt, but what does file-sharing mean for the consumer’s prosperity?”

Since 1999 it has more than doubled, a conclusion that Yang bases on decision theory models. Millions of Dutch people now have products in their homes that they could not afford before. From a macroeconomic point of view, the losses of the music industry and to a lesser degree of the artists, do not weigh up against the advantages for the consumer.

“This conclusion was to be expected,” says Yang. “What is more remarkable, is the fact that the government policies seem to have a great impact. The study shows that the more restrictive the laws are, the more miserable society is. Overall prosperity decreases rapidly.”

That is why the Dutch government would do well, unlike the authorities in England and France, not to prohibit file-sharing, Yang maintains. “It is forbidden to distribute files on a large scale here. That is right, because these ‘dealers’ make money from music that they did not produce themselves. But in the case of the consumer, the ethics are more subtle. If you take a car without paying for it, the garage owner can no longer sell it to anyone else. This is what we call stealing. But what is the damage for the music industry if I download - without paying for it - a CD that I would otherwise never have bought?”

The industry has at any rate failed to innovate its business model. “It is a disgrace that Apple managed to do so with its iTunes Store, even though this company had nothing to do with the music industry. Record companies will have to come up with something, because file-sharing is here to stay. It is part of the Internet culture in which sharing is the most common thing in the world. What complicates matters for the industry is that those who download the most are also the ones who buy most CDs, as a recent TNO report has shown.”

There are, by the way, economists who challenge the idea that illegal downloading is the cause of decreasing CD sales. “They argue that there is no scientific evidence whatsoever for this assumption. They believe that it is one of a series causes, along with the recession and the new entertainment industry, in which games and films have claimed an important role.”

 

Maurice Timmermans

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