[FoRK] Grand Unified Theory of File Sharing
Contempt for Meatheads
jbone at place.org
Mon Apr 12 07:30:52 PDT 2004
This is a pretty cogent overview but it misses identifying a third
constituency involved in the decline of sales besides "Free-riders" and
"Samplers" --- namely the "Pissed-Off Customer." I think the
"Pissed-Off Customer" actually goes a long way to explaining the drop
in CD sales over the last few years. And, IMHO, this GUTFS + POC
(Grand Unified Theory of File Sharing with Pissed-Off Customers) does
indeed make strong predictions for the future: as long as the lawsuits
continue, CD sales will continue to decline irrespective of filesharing
I'm a pissed-off customer. I used to consume a tremendous amount of
recorded music and related media products. As the recording industry
initiated and escalated its war on its on customers --- between the
labels saying "no" to the collective request for technological and
business model change to a growing emphasis on making the music world a
marketing-driven monoculture --- I resolved to NOT BE A CUSTOMER
ANYMORE. Goodwill depleted, replaced by ill-will. I'm not giving the
fuckers another bloody cent. Period. IMHO, it's our RESPONSIBILITY as
participants in a free society to NOT reward (and, indeed, punish) the
capitalist equivalent of antisocial behavior that the labels are
engaging in with their customers these days.
I don't have a problem with the idea that labels have a right to profit
from their efforts. I think their perception of the threat from
filesharing is --- as pointed out --- misguided; and I think their
approach to new technology and a new market landscape has failed
utterly. Their traditional business model rested on assumptions that
are no longer valid. Subscription, ala carte, and more, less-heavily
promoted artists serving narrow micromarkets and subcultures are going
to be required for the "music industry" (aside from artists themselves)
to remain relevant.
From Freedom to Tinker. Drill for links to the mentioned studies:
A Grand Unified Theory of Filesharing
Recently we've seen several studies of the impact of filesharing on CD
sales. We have enough data now to draw some (very) preliminary
conclusions, assuming the studies are correct. Despite the apparent
contradictions between the various studies, I think there is a
plausible theory that can explain them all – a Grand Unified Theory of
First, let's review the three main results that have to be explained.
* Survey-based studies, which ask people whether they use the
Internet, whether (and how much) they use filesharing, and how many CDs
they buy, find that people who fileshare buy fewer CDs.
* The recent econometric study by Oberholzer and Strumpf, based on
per-album time-series data on filesharing activity, CD sales, and other
factors, found that filesharing has little or no effect on CD sales.
* Eric Boorstin's study found, controlling for differences in
personal income, that there is a strong positive correlation between
Internet usage and CD purchasing. This held true for all age groups,
except the 15-24 group, for whom Internet usage correlates negatively
with CD purchasing.
(It's undisputed that CD sales have dropped sharply in recent years,
but there are several plausible causes for that drop. That's a topic
for another day. Here, I’ll assume only that filesharing is not the
only cause of the sales drop, so that we don’t need filesharing to
explain the drop.)
The Grand Unified Theory explains the study results by breaking down
the users of filesharing into two subpopulations, which I will call
Free-riders and Samplers.
Free-riders are generally young. They have few if any moral qualms
about filesharing, and they tend to assume that others feel the same
way. They use filesharing to accumulate libraries of music, as an
alternative to buying CDs.
Samplers are generally older and more risk-averse. They are highly
engaged with cultural products of all sorts. They are morally
conflicted about filesharing, and use it mostly to download songs that
either aren't for sale, or that they don't value enough to pay for.
They buy music that they really like, and filesharing causes them to
find more music they like, so it tends to increase their CD purchases.
Now let's look at how the theory explains the studies' results.
In survey-based studies, Free-riders admit to filesharing and to buying
fewer CDs because of their filesharing. But Samplers are reluctant to
confess their filesharing to a stranger, being more risk-averse and
more attuned to the dubious moral status of filesharing (not to mention
its illegality). The result is that Free-riders are overcounted in
survey-based studies, and Samplers are undercounted, so survey-based
studies find that filesharing depresses CD sales.
The Oberholzer and Strumpf study measured the actual impact of both
Free-riders and Samplers, and found that the lost sales caused by
Free-riders are balanced by the increased sales due to Samplers.
The Boorstin study had different results for different age groups. His
15-24 age group was mostly Free-riders, who buy fewer CDs when they
have Internet access, because their filesharing substitutes for
purchases. His older age groups were mostly Samplers, who buy more CDs
because of filesharing, and who are also, because of their high level
of cultural engagement, predisposed to both Internet usage and CD
purchasing. Therefore he found that young Internet users buy fewer CDs,
while older Internet users buy a lot more.
So there you have it: a theory that explains the study results, and
that seems plausible (to me, at least). Of course, there are lots of
caveats here. One or more of the studies might be wrong; or the studies
might be right but the theory wrong. But bear with me for a bit longer
as I explore the possible consequences of the theory.
The theory says that the net effect of filesharing on CD sales is
roughly zero, because of a balance between the negative impact of the
Free-riders and the positive impact of the Samplers. But what happens
in the future? It all depends on what happens to today's Free-riders.
Perhaps today's Free-riders will mature into Samplers, to be replaced
by a new generation of Free-riders, so that the effects of the two
groups continue in a rough balance. Or perhaps today's Free-riders,
never having known anything else, will keep Free-riding as they get
older, and the balance will tip toward Free-riders.
It's also worth noting that the theory does not predict whether
(illegal, free) filesharing will reduce online sales of music. Probably
the answer depends on what the online alternatives look like, and how
convenient they are to use.
So the theory can explain the present situation, but it doesn't make
strong predictions about the future; or, if you prefer, the theory
comes in several flavors, which differ in their future predictions. If
we had a better handle on what makes one person a Free-rider and
another a Sampler, we could make better predictions.
[Thanks to Eric Boorstin and Andrew Appel for helping me develop and
refine these ideas.]
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