IFPI responds to new UK music downloading study

Illegal file-sharing has an overwhelmingly negative impact on music sales

4th November 2009

Demos, the UK political think-tank, has released a widely-reported survey on music downloading which may be misinterpreted as suggesting that illegal file-sharing stimulates rather than reduces legitimate music sales.

That inference would be completely wrong. The research behind the Demos project, by Ipsos, shows the obvious fact that many illegal downloaders are music fans who buy more music than the average consumer. It does not prove that illegal downloading promotes legitimate sales. On the contrary, the net effect of file-sharing on music purchasing is overwhelmingly negative as evidenced by numerous third party studies around the world.

The research, conducted by Ipsos, shows that a proportion (26%) of illegal file-sharers claim to purchase more music as a result of their activity (this compares with 66% who claim they purchase either the same amount or less music). It also reflects the unsurprising fact that fans who buy music are also prepared to acquire it from other sources, such as illegal services. Eight out of 10 illegal downloaders claim to have bought music in the past 12 months.

These findings do not prove that illegal file-sharing boosts music sales. They only reflect that there is an overlap between those people who download music illegally and those who purchase music. This is not an original finding and it is consistent with the typical profile of many music fans who today acquire music from different sources, some legitimate and some not.

Ipsos themselves acknowledge that the research results do not suggest illegal downloading encourages sales: "Ipsos MORI stress that we cannot infer from this that illegal downloading actually encourages legal sales - the illegal downloaders are likely to be more interested in music generally (and without piracy may have spent more than £77 each). However, it does show that piracy and legal purchasing are by no means mutually exclusive."

Even allowing for this overlap, the comparison between the buying habits of file-sharers, on one hand, and all other internet users on the other is skewed. The latter group are obviously buyers of less music overall as they include people who do not consume music at all. A fairer comparison would be between the buying habits of illegal downloaders and those who only acquire music legitimately.

The net effect of illegal file-sharing in the UK and elsewhere has been to reduce legitimate sales. This is why spending on recorded music has fallen every year since illegal file-sharing began to become widespread.

This is reflected in the decline of the average spend per buyer in the UK and in the overall decline in music sales in the recent years. Average spending on music in the UK fell from £75 in 2004 to £61 in 2008 (albums, TNS Worldpanel Entertainment). In the same period, music sales fell from £1.25 billion to £1.01 billion.

The damaging impact of illegal file-sharing is borne out by nearly all other third party research. A study by Jupiter Research in 2007 found that "online music piracy is the single largest factor impacting lost music spend." Online music piracy will cost the UK music industry £1.6 billion between 2001 and 2012. According to the research by Jupiter, by the end of 2006, online music piracy resulted in a total of £375.8 million of foregone spend. A further £1.2 billion will be foregone by 2012.

Other academic studies conclude file-sharing has a negative impact on sales including Norbert Michael (2006), Rob & Waldfogel (2006) and Alejandro Zenter (2003, 2005, 2006). Most studies conclude that the impact of file-sharing on music sales has been significant.

A 2006 study by Professor Stan Liebowitz, "File-Sharing: Creative Destruction or Just Plain Destruction?", concludes: "The papers that have examined the impact of file-sharing can be categorised by result and by methodology. By results the classification is quite simple. There is one study (Oberholzer and Strumpf, 2004) that claims to find a zero impact. All the other studies find some degree of negative relationship between file-sharing and sales of sound recordings."

Further evidence of the impact of file-sharing comes in a study in five European countries by Jupiter Research in 2009. This found that, although there is an overlap, most music sharers "do not buy music and are nearly half as likely as music buyers to buy CDs in a high-street shop or from an online store."

The Jupiter survey also finds that the net effect of illegal file-sharing is negative. "Although it is possible that file-sharing functions as some sort of discovery tool for those digital music buyers that also file-share, it is reasonable to assume that their spend would be higher if they were not file-sharing. The overall impact of file sharing on music spending is negative."