The effect of file sharing on record sales, revisited

- We discuss recent criticism of our paper on file sharing, which was published in the Journal of Political Economy in 2007. We had found that file sharing explains only a small fraction of the decline in music sales in the early days of online piracy.
- We show that our data are representative of the population of file sharers and present evidence of the validity of our main instrument, German students on vacation.
- We review what we know about the impact of file sharing on record sales today and emphasize the importance of new music formats, an important if understudied channel through which changes in technology influence the demand for entertainment.

Even as we approach the twentieth anniversary of widespread file sharing, its impact on the sale of copyrighted material remains in dispute. We contributed to this debate with an early study, “The Effect of File Sharing on Record Sales: An Empirical Analysis,” that was published in the Journal of Political Economy in 2007. Perhaps surprisingly, we found that piracy contributed to the decline in music sales but was not the main cause. In this article, we review and respond to recent criticism of our work by Stan Liebowitz in Econ Journal Watch. We show how the use of proxies for file sharing can result in misleading conclusions. We close by reviewing what we know about the impact of file sharing on record sales today. In our view, new music formats are an important if understudied channel through which changes in technology influence the demand for entertainment.