WILL MP3 DOWNLOADS ANNIHILATE THE RECORD INDUSTRY? THE EVIDENCE SO FAR

ADVANCES IN THE STUDY OF ENTREi'RENEURSHIP.INNOVATION AND ECONOMICGROWfJl VOLUME 15

INTELLECTUALPROPERTY AND

ENTREPRENEURSHIP

EDITED BY

GARY D. L1BECAPThe Un;wrsiry ofAr;:Olla. USA

2004

ELSEVIER

'"Amsterdam _ go,;lOn _ Hei<lell>erg_ London _ Ne.... York _Oxford - f>ari'

San Diego _ Son Fl1Ioc;<C<)- Sin&aport _ Syd....y _ Tokyo

WILL MP3 DOWNLOADS ANNIHILATE

THE RECORD INDUSTRY? THE

EVIDENCE SO FAR

Stan J. Liebowitz

ABSTRACT

This JXlPfr jm...tigat<J Ih~ 'mpact of pUMo_pur """",,-0 ,/wt promol'th, UNJu,hQri"d do~"loadmg of MP1 fil'. ""u' on th, "COm/aM indu",>'."'/lhwgh Nul''''' "0' ,Il, moil fwn,,,,, <if ,II.!" 'J""'u. lu prosmy Ira,,,,cOIllinut<! w ullo"" m;//;"", oj",,,,,I," liJ"""slO d,,"'Mlood ","sk (and atM'!fiJr. "'itn"''' "'",""U","'" It' Ih' cUf'y.igh, ,,",,'nU,. EroMttlk /IiMry JJ,,,""'0110... lIS 10M'"'''''''' ..hal ,'''' i"'f"J'" ornu:h J".,,,iowliog ,"'ill 1><-. V'iogJaI6 on '", "."ark,,!>ai,.o{p""mmkdmo'u: I '"01'';''' in <kti,i! ,he"",m<1«11., 0'0 "mro ,,,I,,'andW/emptIO g,,08< 1M imp<J'lOn..., ofmT;"'"fi.',,,,slhal 11m.. b"" put/onmrd /0 ,,,,,k,;o Ihi' dulw. M)' c""c1",i"" is 'hallh'." ..id<","" i. ""''' CO.IS."'"' ...ith 0 claim 'Iul'MPJ do,,"nloads !koros, j()lu}Iew.,h",,,, i' iJ """I'or "/ulll" 'he d<muJ/¢ 10 IN ind.,,,,y "'ill k ["'01,

1. INTRODUCTION

After Nar>',r cxJ>lodc<l inlo !he publi,-', con";""'''''' in 1999. <onc<m, "';,hMP3 t!ownloa,h, their ;mpa<' on the r«xJ<\lint indu,try. and ,he ind\l>try', ottemplto !hI""" ,urn download.. baYo<n ;n ,he """'" a1mos' <onlin"""s.Jy. The

,_......... "'-rtf i:no lp.'d_ l. 'ht _, ,,' , • ..,..,........ '-"--i< G"""~.

'·........ 1!.2~C__ ."MI.. b, ._LId.

.,M~_ ........""'_....,' ..............l<;S.~, IMlI-<1JIIId.Uo.ltl <IS ,....,...1J/IIGt'" l.wl.J

m

STAN I. LIEBOWITZ

N.r<l"' ca", "'a, ""Iy tile """1 public frool '0 ...ide ,anglng banlt I><''''oon ll1ee.""ui."",., Ind,,"rie, (movie<.nd """'lds).rod the mill,on, of ind,..idu.l, ..'110...re .,iog ,he 101eme' '" 00",01000:1. wi,,,,,",, ."t",,",",loo. COI'Yriglll«1 "wk<.bu, who othe,wi« ,,'ere 'boogh' '" he ,he pu""ve eo"o"""" of ,hose ,rod."rie,

Thi, fight ha, .plll<d ovef io," ,he J>OIi, 1.,.eo•. n.. manif.'Latio", we", ""enIn I b11l1'f'Ol'O'"'J h)' Rep",,,,nla<;"e Ilo d Berm.n from CIl<fOlTli, III 2002lila< ",,,,,kl h»'e allOwN Cop~righl ","'"",, 'I> e.g.g. with iml'Jnily in Olhe.... i",illog.l ""ivi,i« "di<abling, io,.lfering wi,h. blocling. diverting. 0.- Olhe""'i~

,mf':Iirinf' <he ''IJolulboriud- di"ril>Jlion of eopyrigh'N ilCm,.' TIle bill did""emp' '" ,..o<rie' <hese: oll",",,'ise: illtg.1 ",-,i,'ili., w tbo<t. lha< do noI ".1 ..,.delele. 01 otherwise: implli, ,be in,egrily of any compul.' file 0.- WI' 'e'>ding"" ,i>c comp"te, <>f. file <tade," bul i, "ill omuuolro ,I> 'uLhOIiting "h,d,inS"beh"'iOl <hat i. disallowed in otbe, ' ..nue,

Thi. is only ••mall part in. fto"Y of O<1i"i,'" Lakeo by <he cop,'righl·ba<edindu,lri., 'u prolec, <he:m;ei¥<s ag.in« ..'h" !hoy ....oonline pilfrnng of lbei,produclS, Th< n"", ,,,,,e.t ",,,,'egy anu,-",oced by <he: r«OI'ding induSlry is 10prose.o" lhose ","~ing ,bel, files ",''';Iahle 10 otbers 0'''' P""-lo-pet" sY'lCn".As Ihi, ."id. is being "',iu.o. the RIAA i, ,uwoscdly collecllng II>< o.moe, ofouodreds 01 Ih"",..>oJ, of us,"s io orde, 10 bliog sum .g.io" '!>em in It>< n.. ' fewrnonlM, How Ihi. ,,'ill pllly""l i. ,'ellO be \«0,

Al the ,.olt' of the cu""u, conlIO.·...y i, ,I>< f.ar hy II>< ...",diog indu>lry,hat great d.m_g•• peth>p< ....n mortal d..n.ge. "'ill he done 10 <hem if lheydo noI ''''I' onli"" ''lrading'' of "'u,.. fil<>.• fe.. I ,of"'o .. the "anuihilOlionh),l"~he,"." Th< mo,'i. ind",'ry i, lakiog • ba<:~,.,., 10 ,I>< ,,,,,,,,d ;odu,lry fo, themom<n' hec,,,,,, '!>e ,i,. of ,I>< (,k,....,.kd '" .';.w Ok""i,,, "'"~. onlin< mo.;.lrading prohibili.cl)' ,i"", con,uming '" CUlTenl connection .peed, ,nd bc<:.n",,nosl u'"'.. do noI yrt l",¥. th< "Guip"",., 10 wrile DVDs,

A, Ill's i, .11 "Mning 10' bilil. r.Iri<"" I"I>\;bililio., .re'"""rgiug as fK~mlial ,''',_come." One """,,"'" wookl he fOl ,he recOl'ding indu>tTY '0 he" h.d lhe .h"'al ofp<.'-Io-p"" ,yst.m, by eng.ging ,uffic.. ndy '" """"",foll"-'h1" 1'fT""C"''''u, ofu"'" mOl the f.ar of I"-'nishme"' .nd, th" >/Ion lernJ .,perimen' in "",-"ive COflJlrighl inl,inge,""nl. A s«ond I"'"',ihili')' is 10.' pet""o-p<er downloading prm"s,ml"'"',ible '0 p,,,,,.m by lhre." of punlshme01.•nd In .I'emali¥. 10 m,rk'l ba<ed"opyrighl sy'lems an.It:<. StICh. syok'" migb! incl"de .131 on .ncillary prodocls,,ueh ll' hlonl CD'. CD burner,. or ",,,eo "'loip"",nl. wilh lhe pmc~s or lhe flu'0 be di,lribu.ed ho""d on II>< numbe, of download' of indi¥id",,1 IIlI"".' A Illi,d,Il<mali.". "'ould he <he Ii", of dig;"1 ri&ills m_n.g.meol 'j"".m,. which wouldI>< ,n adnO«'<! lot1ll of COPJ' prot",,'ion .. h..h .llow,,""'ying <l<grees of"", of ,heprodUCl <l<p<nding on Ill< price paid by lhe ""',. In onJe, for .hi, '0 wor~, hm<'......the copy protec.ion "'OUld Deed 10 be ,ufli. ienl Iy diftku I' 10 hre,k Iha< p"" "o_p«'

file, shoring .yslem, would~ tile;" appeal. Finally, 000l1le. altem",i,'" ,",widbe fo< thing, 10 root;n,", dov.'a the tn>ck that they an: 00, ",it~ pee'-l<>-peer file"""in8 pro,..iag to I>< an uni""v.m,blc ""t "'hklo rod""", the ,",'ca,.,,. of tl><rococdiog indu,try but 001 ,uffici,ntly"" to de>troy or 01,•• the indu,try ia aoym<an;ngfol ""y_

Ccntralto ,ny di",u"ion "f these hYp""he~ ,bould be empiric,I""minoti"",of 1M industry. Vel the", ha'-. """a few <tadie< 0«emplin8 to "..mine doe impactof MPl dowolood•. In the Nopsterc,<c the fl"Con!i08 indn"'y I"""'0t«l evKle,"",purponin~ to ocmon"'atc ,hm MPl dov.nloads w""' haImfolto .""on! <.oles ODdNapst•• preseoted e,'ide""e I"'""",ing to ""mon.....1e thm onli"" file-'h.ring w'a,beneficial to the rcc<lO"d rompanies.'

A' 11i,,'e explained el«whe"" the C"i"","", provided by the fl"Con!,ng industryio the Napstcr c.... in my opinKJo. failed to "'pporl ""y claim of h....-n. to <.oytIOIhing of supporting the a"nihil.ti"" hypolhe,is, aJthough the Judg. ne'''ttliel."ruled again,t Na;><I".' r also "'ltued thOI olthougb there w.. IlOl yel good .vide,"",1<> SUPl"'" ,nch honn, ,lie", "',,", good """"om;" ",oSo," to beli""" tliat ""Ii"" filesharing ""QUId be harmful to ,he indu'try.' At ,hat Ii"", ,he", "'as littl••videflC<of any decli ... in record sal.., and I pro_ided rationo"" a, to why the ""ide""" to,"ppo<1 tI1i, claim had tIOI }'ot surf",,<d.·

P<-<'-lO--peet fil. 'haring, although an3lhe"", 10 tilt rcc<lO"ding industry. i,prm-iding I wond.rful n3lu,.1 ,,-,perime"1 to «anon,i", '" anyo"" cI« "I>::>might be inl.""ted in the i"",",," of onlu,hori.oo ropyin.-:. 111< long", il .-:oe, on,the more "'i"","", thai can be ""cumul"ed t>II the impact of tl>< copyillJ "" themarkel for luthoriz.d "'ork,. Th" f""'th" 'I><", "l'P<a, 10 be ""toIl mea'u.-.ment,of ,he number of files oo,.-nloaded pro,'ides" metric 00 the ,i,.. of tbe copying"'ti.ily ,h.t hod """., .>JSlN ",llh "ny prior ropyi"~ t""hoologie<.' T1>e na'ural,,-,perimen, i, >till o"going and "',"Its '"" "ill corning in. v"th all the ....'lly ODdh<ot be;ng g l1ltcd on 'hese ',,!,ics. OO"'..·.r. thi • ...,m, lik. a g",Kl time to Lake.".ock ."d mine "'ho, "-,, <uncntly know oOOuttIH: impocl of Mf>3 <Jr:w,'nl~illg

"" "",on! 10"My conelo,ioI", in a nU"hell, art thot ,\1P3 dov.'IlloaJing docs appear til be

cau,ing hatm. No "'her e,planatio", ,hat Ita'" heen pot f""",ard seem to be .bleto nploin the dc<:lille in ..I.. ,h>! hI" lJCConed Slnee 1999, S'ill,;1 i, '"" d.arthat the ha.m will be fOIaI,

2. DACKGROUND

R<:eon!' a", ju,t a panicular category ofCQ<I,ume. goods, and 001 I tenibly largcooc: in t.rms of ",'"n,",,- Ev.n..,. li'ten;ng 10 mo,k i, 0... "f.he major daily

STAN J 1J£IIO'lIoTT'Z

.,.,,'It.... fOf many Au.."ca"s. E!tJ......,. ill<licale lMI .Ioc ...... Amrncan<pt'IId< ~5 ....nuocJ • doy I"'cnon! 10 fftOfdr:d """'" Md ....-. ftcc -.h_•• 10 'he..too _ ..hen: _oor .. ""'.....,.,. ......,••1....C",.,.,"""",cYCM ,f .< of GVI' .......'L 'IS _ of doe roIltmw~ .-bcho>''''' 01 ( _,. IS 'err larJc. II IS >ko poo.<lllfc ....... "-10 u=wo_•...,.. "" 1Iottt- .....~ by.....u. "'" ,... II .. Of ........... •_" .......,. IwiI. >'CI)' _. If -.y. _ ..,••__...

A. to ,do ..... cc__ ~ ... UfleC1 ohc <km..:I doe _10 he....,.et«l by _ r -to .. ..-.. ... _ pn<ft af__ and n ,. do:D_~"_ .-,... _ af ....

...,...,.. lot») af lhc<c ...,... OR <iii< d 1M s.c- 3.1 "The f...- _ n '"

....-..- ..~ ,......-u. io ""';q-o '"COJI)'''.The :onaI)"IIS ..,II~ lhet'Cforc. '" ..~ a>n'IIMlIlIoc of -

... UY'IIJ 10""'-'" ... f.......~ for~ ..,.. We canohen f""'" 'n tho 1>1.0 frw~ iI'" "'"' II doe pcnod iIII .."""h MP3__ bqaw...........·bether dod,....... other<l.... UIIC1JIIaiIloOd"""...... '" "bether ohey f.aillO iDc..aoe ""gill have ....pt<1<d ihc", lO.

J. TlU: CURRENT NUMBEIlS

Oa'" "" 4111nli,ic> or record' sold in 'ho Un;led SUI.. "" 1Y"iW"ly ha,IS are availalll. Irnm I"" ll«ordinglndu,"Y A"""'i"'ioon <Jl A,tlCl"ica (1lIAA).""'" da,~ "".....n".>, 1hc da'> 'm ICvenlJ<:.S are <stim.I., l>a><.'" "" the Ie" r>ri«<>1',eroroinis.,".....1..... """i()n pn«, arc nOl "".,I.ble, '" Ahhoog~ I!>;:K num,,",..,., for i""tl>< Uniled 5ta"" rnar\;<1 e (~n presume Ihal .ny nega'," 1mI*'!' <>1' MPJoo..'nl<OO'"1 woold he I' lilcly In """'" up ,n Ille U.S. m ~<1 .......y other.due 10 llle Iouif' numbc1 of ,,""1""..... lnlrm<l """""",;,;",0 CD butn<n ....lObu lu llle r..., lhal ....... of"'" populOlion affunloo pti«""'" COS leai I,ll'll'" Iy.

The 1lO ..pune rcc<>n!inllD«liu.... <<.1. Co.. ....oo Ie<:-;I '10)'1 """"",,I.....-.11 .. dle ' J<1O<l'IIl«I by .,....11 of """"" m<di~,,". II olsi> CUllaf"" I~n of by pII)".... 'ime - si.,~ .. albu......

1"._11). "'" RlAA r.:JId '" """ Ib<>C IIIIItlIbrn in I "'a)' IhIl i CfJftSisoaIl..... dw< ...,.... they .-..II 10 p;wmoy ""'" of 1IIdInuy. AI ib<

JW'CIIl hmc!he eo-!ioo.they ..i<IIlO p;wmoy is ,,'lim dw< ,1idI>stry II .....~.f...... ihc l"'l*IofMPJ _,.-."

Bef ' ~sis of dw< dXI n ........-.. it .. oncful 10~ t'idcna ..,.. b>oor .....,L Tbis. _ ••••• mjUUa ,.,..,..

~"_""'''''''''''''of'''''''''is ''''''''''' coof

2Jl

,,~,,-------------------,

·'0.0..

lUll' ,_ '(100 2000 <'00,Foot V......·, ol v...Iy a...go;.

"""Ie,,' can I...d to "'''''''''h'' d1ft..."O' V""". ofille ind""ry en\'iroomenl •• i• ...."infi,. L

Figu'" I p""',,nts Y"my chaog.. in '".,. from 1m 10 2002. mea'ure.! .....h.,<liang.. in ",v.""",.nd., chang« in "nit•. A rnnller cI."ifica';oo bre,xrl<>wncornr=' ju" C[).M<td album, ,..cluJ<, CD ,in,gl..) In .11 item,. whieh wouldinclLld< ,inglt'S and .Ibum' 'og",IIe, for" .11 """"dtng medias (CDs., c."elte.and viOl'll.

llee,use of. '<:'Y lenglhy and <eYe'" declme of ,ingle, (documenled below).as well as • "<1)' pronounced d<cli... in c"""«. the ",II it<m," ....g""'"sllow wea"'" sale, growth numbe" thon til< c"e~orie< ha<ed ooly 00 Co..~·"rtber. unit sal.. performed wor>c than ""'cnoe, ,i~ pric", rose ",me..'h..during thi. period.

In 2001. for "x,mpl<. sal"" f,,11 by 2. 4. 7, or II)\{, depending 00 ..'hlChcI."lficouoo one .hoose. a. the ...i, for compari"'n•. CD n,,'ennt'S fell ,heI...., lOlal units fell the tlIO'OL It i'l)(~ ,urpoi,ing thai ,he RIAA cho6e 'otal unitsas the nlta<Uremenltl\lmpet<d in i" headline,. "'1,eTi"ncin,g ,bou' a 10% drop insal.. tII.t Y"ar. line" that i. a far more impre"i", 0 drop thon the 2% fall in CD""'<TI"t>. 11>0 fact til., the RIAA choos" thi, particular number. how",'''', doesno! nec"""'ly mal" it wnmg n.- ",,,n mi,leading.

Dct<mtining ,he proper unit of mea,u", i, IIOl W'aigll1[orv.'ard, AllbOllgh the

tOla! indu'try mig/It setm to he be« reprt..nt<d by the ".11 i«m," c"egory.that ov,,"11 foc", can be mi'leading ..'ben tllere i,. chang" !liking place in til<irtdi.idual>e"'on. For"xarnpk. sal.. .oould be artificially inflated durin,g • period

..·ben a ...... medi. is rolling ""t and cor""",",, are repl"ni,hing the" mu,icroIloction< in the n<W media. AI"'ma,j,~ly. "'hen single, are ""lOg ehmin.tedf",," the marht the "all i",",," eat<g<Jt)' ...ill ,how. ,,,,,,lIer g"""h rate thon til<""".'inglo cOI.gorio'... w.. til< case .bo\'e.

STAN J. L1El\OWrr;;

The dedi"" in ,ing"" ap",,"" in lhe dal> beginninjl in It>< 1970. alllw>ujlh It><decline was notl1lOl>Olonic, Cle""ly. IJIOcline h.. _hinjl 10 do withMPJ downl<><od<; Ihu. 1 10';11 tr..llb< """lin< in s.in~I.... an e.~""'" e,-.:nl andrem,""' il from It>< .naly""."

There ar. many po<,ihl. inftuenc.. on lhe quanli'y of rec<>rd' ",Id, The prime,..,hook candida.., f..- far'"" likdj'ln atler ,he quan'''y of "",<>rd, «lId wouldnormally be chang<' in la,"". ,,,,."ord price" inc".....,. flOPUl.lio". ,I>c price.of ,u!Ni'n,., and "omplement<. and any ooh<:T (ar"'" Ih.. mijlhl he <kemed

,mporlatll. There ....."eral majo< f""l(>lS on thi, markelihJl eoold be eJI,mioed:

Iii The price and qua"'ily of""",do: Ac'ual Il1n"""ion poke> f..- record ",Ie<"'" 001. to my k""", ledge, ,,·ail.ble, In"eoo. one mu" rely on RIAA <>li·malo> of li>l prier> and a!oo for ..lim".. on tho number of uni.. >old, I'

liil 1 am"", ."0"'" "fony good data Oft ye..ly prodlK1ion .",lS,(iii) r..,.- mosl pn><!uo". income <hang« ... expocl<d to be reJ.l<d to <on'umpl;.x,

,inc••, income g<>r' up "",,,ump/i,,,, is likely to rile. l-(ivi Chan~<> in recOl'ding fornlab - RlAA pru'lidc' d>l. ,he nnmbe-< of units in

differenl f"""at, (i,e. '"""', vinyl di,b, CO.) ><>Id in eltCh year and 0IlC c'nuy to i~'l< ,hi, into ,he an.ly'i•.

(, I Change> in ,he "qualily"' of mu,ie 0'1 in ,,,u,ie.1 "la,..'" "-oold be diftkull'o.>C<'I'ta,,, but d ... ly ,,'OOld h.". In imp","' O\llhe markel. II is "f1.n >laIc<!.•lthoo~ .,".lIy in • form <hal is not «<Iable. that some yean; are Ilen..than Olh<" in lenTIS of mu,i<:al im'O\"lion. Il Ilry 1000",rol for lhis ,,,ri,Neby inclnding infoollaliOft Oft concert ,.Ie<"'. ""'...'" of inlt""t in mu,ic.Thi, is r"ull<l in S""lion ~.3 totl..,.,.

I,'i) Changes in the Si1-" llfld di"rib."ion of the poptJl'lion pol,n'i.l users e"im'le' in ,I>< ~i.1ribuliO\l of "loom Inlleh.<crs ill" availahle from theRIAA and lhe.<e will plny. role in IPIe .n.ly.;.. ,n sedion ~,..,

Ivii) A change in llK"tli8 ponallilily ean eh3nge tl>< n,tu", of ,he demand, "",ningup or d<:>sinjl mane". When LP record! bc<:ame lhe dominanl r""" ofm:orde-d mu,ic ,he", ...... 00 ponabl. form of =orded mu,k. LI' record•....e'" lhe domlIln uf lbc oome ",ereo .ine< they ...·cr. "'" bulky 10 be pl.yedin ,.,omobile. 0.- Olbcr mollik: ,·enue.," With lb< oo"enl of g·....,k '"""•• new mark' """DOd "p 10 =O<d prodncers "'110 "'cre lbcn .b'" 10 selll,pe' for ,he au,,,,nobil... ",.11 as 'inyl records r...- the I"""., ""'=<>rJeda\>dio <....lles ....en: anolhcr nc:w mart.:el.0IIC: thalalkN-"'] liSl.ning '0 mu,ic

,,"!IiI<~i,,", orJU" .....k,"1 .."...,... a1 _II ..e>.pandm, lhe 1tIIOmObil<martel. Thi. importan' (..,..". ~ ditno..... in S«<1OIl S.l.

("i,) O>anll'"' '" lbe pn<'C ofe<>mp~"lU,".OUCh •• ~Ievtooon.~ndio. .~&ftCl... r""h." I ofally -major"" clwoF In

lbe.......,..nes ",-a lbe period i•. The let••Wstanlial """""""!hal did ocalr .. uamlllof(l 'n S«<_ S-".

rn) F"......y. oaIn lllishlite ,.ftucnoccd by lbe _",oflbe &>IribonJ_ c...........A. -...riud diJllal dO'oo-uo.k play .. ,"""' "1 ......., of lb. II>IOka-lbe ...... c( ......._- ~uly '" P-'"",lMty ,f pncinJI: is.......... "'per _,.. "'" ....., of lbe "'per _" -.ety. On •

..... pn..- _I. ,rdi;.cn""'_ n. r""".-.I_ '" "'"""'"""""''''_ .... web .. WaI.tobn ... Ikol 8"y••' _ID _ hom Ihr c_ ill!he laM deo:le• ...., salts ""p __ bo<.ausemail ",",u ...

cll"cnn.. pn<'C ODe] It larJ. rocail doa ablo "'..,.......,1Doo-a ...-... pnce> ......,. "...., _ "'"~ tro"1h...., lila pnce>"""*' "'" ...-lliald> """*'i., -...y."

4. SO;\tE UNDJ:RU'ING TR~DS

Tho __ iacIawy __ ...... _ ........--. IS r.rty ~ .,l!>.-y r..,.... o-cc..~ -.$ "' "' "'" anaI).......-.. AI _ "*"" ...., Ionc """' 1hIt , ,-..uy_doapp<ld 2001 2OOl.a1.iO&Ih...,. ..- 1M. N.,......·.fin< y<aJ "' P"" ..."'" rewIb ..... WOO _ ...".,.........J........."'" , «ll try __ IC> perfomI • _ ...-., ...,......

To do ... I will h_ do< marta '" fioI....--. oqI "'... n:dia_..._ • __ ..-. fin<. lIoa .., ",II ouonn<" ......t.el b""""'" _ ....t. .... he lcl't OUI of ,.... lh.aI """"""" _ 11I-.

Or>t of of ........._ in .........J !;des " "'" <1«;1,... of ........ 1haI to..~ _ "& for ""'" -.. u..... n.. caa 1>0...", i. fi, 2.

'TheR ..~ I,.... -' ,_ ...me.I Fit- 2. 011 IcfI "-I ...... .... doIbr~ , man ,..,. I,,,. p __'..."""'Il; ............... .mIl.. "' ror nctI yn6. "'-"" ""adju<uDrnIfur: ,._.~ for <""Ie> ,,,,,,,,'*""II fmm 19l1 '" 1991. lIIl ..hoctIlIrnc:they ...po:,.. au:d I 1"""''''''''' Ilrop. A ....., d,fHftnI ...,.,- ;. ooId by .... line ...,1tI

,~ STAN J. LIEBOWITZ

'00 ,.0. ,.- "-I = " ••

0 ~ ~, ,0 ,.!

00 ,'00 0

00 •, '" -'00 _N_""U'_. 00

....... R...~_..

• ~~ .~, "0.'

o o

'G0Me mark", rcprc""ming ,he "umber or ,inglc> 1"" capil' (read off 1.. righthand .,i".'" In the carll" 1970> the 'yrical con'umer purcl'l>.scJ appro.,rnatelyJ.~ ,"\gl., per y By (he n\ld·l990s Ibal""" dmpred '0 O.~ ,iogk, aDd by!1XJ1 ,h., number further drow<d to 0.1 .ingle' pcr person per y....

11>0 line" ilh circle. "'rr,,,.,,,,,, ;nfl.,;on a<JjU>lro (,.,.11 revcn"". in lhe ,ingle'm.rk.,. and" 'ell•• ""'Y qui,. ,imilar 10 Ih< ,ingk,_per-.:ap'la,1lanl but mu<h I"",'", le,'.1 unlil 1997••, which pointi' began a ""ep <lc.sccn'. This. of COO"". fits with <)<II und"",tanding "fthi' marketVinyl ,,"gb ,,'cre popIIlar in Ih. 1960;. boll "hen '-;nyl rec'mh I"" l"'I'ulorily, '"did .ingk•. \\,lh the advent of CD .ingb lbc masl<' was .bk l(' "'''I' its ",:dine,.Itbough it dId 001 rc<OV<l it> previous height>. In 1998 the boItorn fell out,

AltOough the decline in .in81<. hal; been 0 long time: in the m,x;ng. the~

i. Iit~r doub< tOa! 1998 m",ked 0 major ottderalion of that trend, 'The boItomIIeg,n to f.1I out of the .ingle" mmot • ,..,... before N'p<le, ",,,.. into ."iSl.t>e<,And from Rg, I we know that 1998 ".... 0 good year for the ,ecord indn"f)' 0$

o wOol<, Or>< po><iblr «pIOn"l;"" i' thOl MP], ""ere t.e<oming populo, prior '0lhei' •••ilabili'y ""lin<. Sit>e< MP]. ore individWlI ""'g., th<y ",,,,,Id be do«,sut»t""'e' '" ,insle. 'han '0 entire CD<. Fn,d"". if ,lie pure"'« of .iogb ...,..m.inly In 'f)' out indi.id",,1 ",)OS' with the ",peelOlion of I..or pur.:h.,ing 0 CD.then MP] might ""hie,,", that "'m< fn""tion, Thi' argume:nt """ lhe ....""" ofthe Nap"" <lrkn« - tMI !<-IP), ",ere being o«d 10 "",mpl." ""'8' 0<><1 that

m

CD Yln .'ould nol be hun by """h ..mpIinl. AlIOlher I""'ibilily. "'lilt<! "' •....azino "';<1., illhal -.l """'pan~d«oded ..... ""Iles did no! pay"

FoJ:oII i ........ ""'"~ .i",1c1- ""' .-. p.a<to<1lll'J 1IOOHJ.J>led1." 1,_"""",ble """ MP}• .., rnp>Mibl< for killi". elf !he " ...Ieo mwket. 0Wtl if ,".,,",..'ti left .... tile 0NrUI .... .....,. n (on 1991 " ~ fur ~I'J 3_~of,.""....j teYmUtS) ~lt. ,he ...,..·n'-li"I MPlo ...... <learly"" thrI"'i..-y b<Ior in .... (:all ....""l~ a/thoOla:h .. rnip have '-" 1hc ~aaI ~I ,"

.""".From Iho. pol" on r ...,11 r...............,.. ... ":tIlu...~ .. hicb 11I<_"',pIoy"'S 'i"l'l I'K<Inls. ,0oס1 play"" ro, II.... npo. tra<L and lion lenphCD<. S"n dot lIIlrlct 'Of ..... '- b<cn ' ' Imcd>Y docl......eM.......... louly 10 1"""_MIllb lou'"~_ ...,..... be f.- ...... -..nc:.for >I, r...,.. .... ........J> as I)'pICaIly reponed by Iht RIAA.

""album nJ<II<DI1y.colka_oI....,...·odI.,.,l''''.._.......~ ....lifty~ I ...U..., ...............~ '" 1 ribc .0...... ...,pbyq vilO)'ll'<Olfth.fIID ImJd> CDoIll r.u .""...cm_ no ftny 'fG6 _II >ilia'" \UIIdol ..!&Irt.~"' ....~~ to*s ....r...-kD&dI e. lot.1ft" do fie. l. 'nft_~~-.rod>n.-nll Of JlO" ..-lipif....-1'1 dofttclll< pcriocI. A........-......, m.. 54 bill 10..-. S7 1101_-.-q-,.. for~ and pel' apII oala ..... r... S2tI "' ....... SAO-:l

A-.u w-r 01 JC>tIl....... fiIldloop .. 10 IIIol ~ io<>o.- •_ we:. ....... 1m lUnO periool_ ilIIn8wd .. MJ. ~. T -. ...... __

------

.~

I::'•I::"=.•

~!!i;i!'!!!!II!II~!!!!II!II~i~

.,·1,,0.1••

STAN J. UEJlOwrrL

1

!j

,J ~"". •

•

~••

r='~'- c ,.....-.n.... ..,... ,

0 0

---------------------------Fit,4 Album Uni' S....

by. f""w of 2.5. fmm.1.QO million to app«),;mOlol)' one bill"", units, \·....Iy<al., of .Ibu,n, per '''Pl'a (defi..d <wer the p"p"1 .. ion I><:,w'«:n ag.' 10 and 601in"".se<! .11""" as m""n. from 2.7 .Ibum; in 1973 I<) "'"eT Sduri!\,ll muo:;n nf ih<1'190<. Sioce til< p"p"lllIion (a, defil>N1) onl)' iocre....><1 ny 37% mw thi, period.tOl.l and per capita m,,,.,ure, can"'" ~",a'ly differ.

'The second featUf, of in"""" is tl>< """.Ii.....it)" of the pi"" TIlor••'" 1lI lea<lfoor dip; in ...Ie< prio< to llle ,urton, dip" h;"h is underwa)'. 'These dip; oox.mJin 1978-19~2. 19114-1986. 1991. and 199-1-1997 with ,lie c"mon' dip h.vingbegun .ftcr 1999. TIlo f"", th'" ,.le, .re <UfTCn'l)' f.llin8. by it... lf, would n<>I

.ppe... 'o oc. c.u'" fo< .I>mI. ,ioc< 'hi, ...., happet>ed ",veral'"n,,, in the p....ooly '0 be followed by fu"ber sak, ioc",..",..

'The fin,l importan' fc.'ure of ,hi, pi'" i, the re.li,atinn 'hat ,lie gre.' ""'jnntyoflhe i""re.... in per c.pila sab 'ook pi"". w'iilli" • n row inten'.l. from 1982 to1993, hr tapi'" ,"k' Worc largely~", hefo« and oft this period, One 4ues1ionIhal w'e "",>< "agnaliOfl during 1973-1982 and Im-2001 W"J, "nU,ual.Tbe'" wer. ,Ii"", lech""logic.1 clionge> lhat 1OO~ pi"". pri<>r 10 MP3 down·

loading 'IIlIt mlglit infl""oc< tbe We, of .I\>um" FiN. tbe recnnling me..llumchanged _ fmm vin)"1 "" ..setl<. '" CD>. Sewnd. ,he ad",n' of , ..selle re,o'de"all",,'e<! the taping uf p"e·recurdcd mal.rial. 8i"in8 «"","","" the first [>OI.nlially",riws abili')' 10 replat. the I"'rehaso; of .ibums wi'h .-opie<, Thin!. (",-<eKe,piaj"" (and shonJy an.r CD playe,,) allow,.d lhe ~r:sl portable u>e <>fpo,..,curdedmedia .ince there w'ero 00 rlUly purI.hle l..P device•.

An ...ammali"" of the sIIifts in record;nll medi. w'HI rompl.to 'hi' section 00tlie badgroond of the indu;"Y.

I~ ynrl) ... for _ .... ditJ<.m. --. l)-pes ,. fi., SF""" .... Nr!y 19700-.. .... _ 199(1<...... for' =~""~

M lew "'0 .."......u.~ •• 'I M • 0. _. -.I b • few years .........",.. 19lICli ....... ~Ihtft fumIatJ"'u _ ........ -"".-n. w ___ .. _ (or _ cI .... pcnod...,. 1971. ..'hea~llrpa ""~

....,.. -..... '" , ........ tllould ~~ ......... "" 'q~io rlitIr.... III • _ '*'1M ror-. n.. ill"" pcnod '" _.c. p';"" a........_. lby"'J3113~....)tal""":l.o

Fi&- S obo faU"odn _ co""'" "'"'-v liemoad .....~..~dtmMd for .......... I.P *'>nb I&ks .' (or 1h< _ .-....,. ..".., 100~

.. lil .. ....,.... pla) hoIa> I-uxt ~~. of _ c""....rly.(or .... _ • .:.i" I ..-6-191'00 mo• .....u.I-. p<r apu.~ ..~ 2 _ for 1KJmo u"" ond .... I'or'" I'" _ bow<YicI<o<c .......~ '" ._t _u Ill oIJboaP I~Ih<y .'<1"< __ -..'_ .. -.:nobile> .. c.....ae> ud. CD pb}'<n __,

..,... ...holl~(or_..~Ie>...."he~b)lheocnha.~ .. ....,.. ....po II< lhooIp 0;) It_ '"~ III <IeouoId due 10 •

"1ibo-.)""r ...... IhM ""IIIrId COlIMol '" """.-.Juab .'b!uD. '" "I'd- ..,.." '"Ilo<or r..uil< rttonlIop 10 .... _ m<diu.... """"",,brly ,f'" ....... _urn bo>c.....,. >0lIl< or orhn 1IlLliuNn ""......,.,.. 'The: "",1I;I1b or lim liba'Ji•• 1IIo<lOiw.... empri<oI .......... _cY<1'

~"'AN I. L1E1JOWll'l

The empirical 'uf'PO'\ for lbt librarying hyf">llx';i. i> mi«d, howe-o.u WlI<nca,""tc. Ii'" "art~ 10 "PI'nr in <.ignilicanl numbrr>. from 1977 on"'lUd. LP(and g.lno<k, ..Ie, fell by alxMJl .. moch a, prel<'Cordcd CO'><11< oaks gre....pred""ing a '.mlX'f'lfY up"'ord blip. ''''i, rna}' br 1"'"ly due to 'Ile imJ'"tC' ofcopying. di",u,..,j brlow, I' "'''"'1 u",,1 lbe 1"'1 half of lhe 19&00. "'he" CDsbegan!U be ..,Id in larze numbers. Ibal 0VfflI1I soles of album' began ,lieu fairlydum."o ris<. from 3.2 in 198610~,6 in 1994.

B"I.,'o" in Ihi, decade. lhe "'I'P"" fOf lbt libnrying h}·pothe.i, i, m,~Aocording to lih..in market re...ren. " bronch of lhe Coo,u""" EI"'lrOI1i..A'<ociaiioo. lhe rapid p""lh i" pone'''''i'''' of CD pl"l''''' ~ndr.d aftor 199~. y..r""ord ...Ie> did not begin 10 foil in " ..riou. ",an",r unlil aft... 1999.1'

If ,he I}'pical o""",mer r<pl~ni.hinghi. hl>f2ry for ,he new forma' ,001; ~ ycars0< more to achi".. Ihi, goal, lbe" ,he C\I"..al ,lo..-nlum i" ",Ie, migh, be attributedI" the libr"I)'ing ",,,,i.,c. One mighl ,,<' "'~re of relaliv~lyold "-"Cording. aft.. 2000 ""'n ..-..lhe e".. bef""" Thi. "'[)Old be" particul..-ly s1Jarp test .ioce i' i. d.imcd Ih'l"I"'l!<r "Umber of"old-- ""'g' at< >vailable h downl<>ad IlIan con b< f""nd in lbelypic.1 r«ord s.IOrC. iridicaling Ibal if MP3 download' "'<'" re,ponsible 11'101 the",WOlJld be f""·.... old ""'onls berng purcha<ed afler 2000.

Altlloogh r have not perf<Jtrned 'uch" t,,~ r <u,pect tha' libr.uying i< noIlbel:ey f""lo< "I wori< bec"u", 'here i' lIule e"ide""" 'hal the ,wilek from LP, 10,."',0,,,,<, ca"",d much of on increase i" ..Ies. Still, lbt impact of un".thoriuJ'''I'yin~ "",sibl....ith ca,,..,I., mi!hll'lo'" doudetJ thai finding .. ",.Il.

Altl>.>i.lgh Ille peak of casselt. sale' ""a, only slightly higher Ih.n lhe puk ofLP ..I••. II><: I"'.k of CD '01•• ""., much h;gher thon .ilher of ,he oliler f()l'Tflat•.Why did CD sal., PO"" at a level so ntltCh higher thon lbt previou, recordingfo:>rm>ts" r ",ill ,<tum to thi, questi",,;n Scc1i"" S,3

5. OTHER FACTORS AH'EeTING SALES

A' lefX"'ed. ,he d... pr<},'ided by the RlAA do not Ii" ""Iual price' bul only aderi"ed li,t price. It i' uncle.. Iiow seriou'°probl.m the "se of list. ." opposed to'''''''''''lion price,. ,,"ould be ia !hi' c"se.'" &oncinali,., of the"" price, illdkalesthai the inn.lion odju'led tiS! price has rernaincd largely """hanged fur theI." lI<'cnly yean..•lllIoogh then: ",.", ......... significonl price changes duri"ll'h< 1970s, as seen in H~. 6, Altlloogh lbtre "'0'. fairly ,ignificanl f.1l in lheintl'li.., adju"e lime of highly "ariable

•,•,,

•,!!!,,!!l!!!!!!!!!!!!!!!!!!!!!

Of "('.US<, "''PY;ng ."og ca,,,,,'I<, requIre, h,,-il\J On original handy_ 1llatm,.n. either bormwing one 0< purchasing. legitim.", ""Pl'- "The difficul'yof borrowing might h,,>< b«n ""lIic,,,,,,I)' great that mo,' mpi<••,ould h..,c!x<" mod< from orill;.....' pu","">Cd by thaI jn<!i.id",L 0"" of the importan'diffe",,,,,,,.l:>e1,.,'••:n ,hi, e!>isOOc and tl>< curren! MP3 cOII,ro'''''y is ll>e .... wilbwbid' uoc "an "bon",,"" m"';,; from Olller>.

Why .huuld the ex;>!."". of ""''''",, ha", incml>Cd 'Ix ..1« of .Ibwm,h., hOO been ",1";,-<ly fl., before ,'.S'cel<C> ,-."'" 00 ,he >rene? 11l< ability '0p<l>CtIal< DCW martel> i, the key. Copying may b"" dimini>bcd tbe need '<>pureh.", a >e<ond original for II><- new locali"", lMJ' the C);IU rna,ie.li'len;ng tim<:from h...ing 11<... mu,ic li"cning Io<:ati"", available appc.,.., '0 tu,-< tnlJl,Ja'ro

iUlo the pure"'" of m<><e origj""I" '" <~plained in ,he """I ""'Iioo.

5.3. 710, I",pact of Pof1"l>ility "" i'I<",h<,,~ofMbu""

W" lui"" 1ttTI that olmost all of IlK: i""rea Ie in ,ole<of .1l>.J m' during the 1973-200Iperiod com< about durin~ the yoar< 1981_1993. What might b< '"'pon'ihlo foo thi'i"CT<a.«1

s.les ""ill inc...... ""0 co,,,umers w"h to spend mon: time (.nd money)]i,toning '0 rttOI'lI<d ","<.ic. l1>e Iod" 'fry WOO Id tit!l<'r D<td '0 impro-t tht mu<ic.l..~ ",Iati,'o 10 oth<r form< of on[<IUi""",nt,"'- t"y would !>ted to c..at,"",",' m,unmp,;"" ''I'I'''''unitit<. 1 I><lit". tl1at it it lbe I.u.. path tlJ.. thty ba,"'lK'Co>sfnlly l'lon in lbe la>l few dtta<les. TIl< optning of .,w ',nuCS I'or mus;"li.lo"ing do< '" lIlt<li. change< ....t>uld sOOw up os an ioc",.1t in <ale,. o....l)'thing01« con",,,,L Th,' would I>< ponieul..-Iy lru< if tbe ...,,,.-dcd medium. n>Cd m tbe",

STM;), LlEBOWrrL

TlCW ,'eo"". (ou'omohiles 0< ponable devkesl ....ere illromp<llible wi,h lhe devicesu>e<l ;" home Ole,...,.... was tile ea", w;,E g-lnC~ ,opes.•iTlC. 'lten i, ""oold _f'OS'ibl< '0 p"fCl>os< 0si"8ie pre-re".-.rdcd item 'Eal "oold be used in both ,he hon-.:000 ""Jl

I" part"'ul". musi" li>lene.... during ,he 1980<. were .bk. in in"reo,ing ""mber>.«> It,..." '0 lhei, lo""ri'e olbums in au«>n,ol:"le>, 0< ,,'lule ",.!king .... e""",i,ing. Ii"'iI' tile 8-"..ck e",;ell. II.., firs, opened up ,he au'O "'..~., lU pre=onkd mu,ie.

C....u•.,. unlil:c g-lnK:L>, were used io more than .ut....oollik•. however, lbcywere .1", used in lb< home •• wdl .s in ponobk de,'ice.'. Some iocrea>< in••I<~ due lU. more ",.mpl<'o pcne'''''i"" of "'-""'H>bile> ui>dol>b'edly occurred.• lLhough I do 001 ha"e de,.iled inform.,ion 00 ".,,,,,no pcnel"'ion in ,u,omobil<>.

We do have de,ailed inform.lion.rout lhc port_ble rnorke'. oo..=el, Allboughi, w'" ,be c••","e th"' fi"" 011",,-«1 li."ening k) portable prerecorded musk. ,beportoble e.,sene ployer ,,'., ""'" followed aoo ""Iipsed b)' ,he portoble CD ployer,

Figure g iIIu,mues ,he I"",,"ra..oo rate, of portablec.,,,,... players o.nd ponobleCD players. Co,se"e pl.}'e" beg.n IlIei, penctra,iOll in 1983. abo<l, ..".n }'ear,an•• ron-port.ble o"''''lle pia)'." be;an '0 EO". all impac1. ,,'hereas portable CDpla;-." t>c;an ,heir mafl;e, penc"atioo in 1988,

I:;gure 9 coleubl.s }'e••I)' "hanges in lhe ,umrned penetra'ion ",.s fOf ponableeas..!!e,.oo CD plJj'e",. Thi, ma;- be a -'Om.what more informall"" melhod ofd".noioinglhe mewem.m 'oward thi, new port.bie marLeI

lbc peaK in 'Oe increas< in pene,r:alion r:al< or port.bl< playors c'me dUring1990-1995, lbc per c.pi ... >ales of album, .1", increased fmm ~ '0 5,5 during,hI< perin,! '" reach i" all t;rne high. This;s "oos;,,,,o' ,,'i,h ,he vie.... ,hat ,he'one.sed <al< of .Ibum. "'., dUo< '0 the openong of "",",' m"ke1< 111>, coold useprerecordrd music io ,i'u.'"m, whore portablli')' ,,'.s importan'

~_c........._]__c:o__

':~/~~~~=-:-=d~!!I!;!~;~ i~ ;~!I~~~~

fj8. So Thi: I'<>fUbIe M.......

-JI

! ! ! ! ! ! ! !! ! ! ! ! ! !! ! Ii i

Running. regre»;,," that iocludo•• ,,,,jab.. for the ca..go in porI.bl<(><ncualion (both c=ttc and CD) yi<ld. th< ",...Its fooM in Table 2.

Although we <J>ould noo make too much of a d.ua oct that con,i... of If.J011""",..."" (in fir" difference.), ,t>c ",.nl" indi,,,,. ""1 portable ""n<:ln!lion i••dOled to...to (a, We I:ncw from "i.ual i.sped;"").

11>< impact of portable «juipment poen<u,..ion ,..,>Uk! appear [0 be fairly large,ince the penetratIOn ,",'cn, from zero 10 over ooc huodred (1he summed sh",,,of c•...,ltc' and CDs), which is c'apablc of explaining an incTCOSC: of 3.2 al""""pcr capi .... 'Iighdy larger "'an Ihc: inm,,,,,, tha' :>cloolly occurrW during "'.1 I~year period. \J l1>c imp",,' of income """m, '0 be Ie.. important Although 1""capi,. incon.. ros.o from apj>l'oxim'lely lOA lhousand to 14.5 thousatld 0\..,. ,hecnlirrp<riod, from 1982 00,,11995 it iocrra<ed from II 10 13.). TIl< coeffocient00 inromc "'oold predict on iocrea", of 1.6 noilS during Ihi, pen<>d.

AllbOlJgb thc dal. indicalos a rocco' dodi"" in the pene,rauoo of portabled<>'i~ (due to feweT portabl< <,,-<>eIt. ria}"",). tho .ire i. too .mall to !Ia".

~-a...,., .. .-- ........."'"~ jo .... fA'« of "lou"..... « ..... """" On;_

raM. 2.

-O.moml

--<).l.l

0-Ao;"t<dR.,.....

~.~ Sil'

0"' _2.0l3 O.~j

0.01l l,n' 0,021

"'" _I.)t O.t44QOOJlI Hll om

'-"'1'<0<1.", ,-.riobI<' <11>0.. ;" >1_~-

STAN J. L1E8OWITZ

any oot a mi",," impact on "'" sa"', of album' Wc can coochxlc. !herefore. Ihatr",i~",r iDeo""I<. prie<. "'" f"r",al change> Gill explain the d.dine in sales Ih..h.,'e """urrcd du,ing It><: I... few 1'.......

5.4. Th~ Impa'" ofSubsr;tu"•. ,uch "' ,he DVD Morkel

One <Iaim lhal i, .n<:oonle,ed if one I"'ru..5dilC~..ion, of the docline in CD salo••i< Itle c1.im thaI rt<:ord salo••re <!<N'n bee.u", "~.mc,are up. mo"io vie'o-'.r'hip (Itle.ukal relo"",) i' up. and the [}VD m..~el;' up. II is frequenlly poinre<lour. for o,"",ple. Ihal DVPs <051 aboollt>c ",me as CD5. yel conlain both piclure'.nd soond.lli>i~ them an ad'anl.ge lhal explain, !he shift ."'ay from CD saJo..

K""p in "'ind ll>al there arc ,wo way' in ,,'hich!he« prod""" could ",,!>sliluE<f(W' co.. Fi'" is ,t>c fin"""i.1 ~ide - money 51"'nl 00 OVDs can"", be sponl onanyth'ng 01«. indu<ling Clk. Of <OIl"". borh arc only ,m.1I portion' of bo<!ge"and Itley m,gIlI not h.... any impacl on ooc anorh,,,, If consumers tond 10 oo"gel a<..lain amflllnl for en",n.inmenl. !>ow"'..,. each mighl lhen be<ome an imporlanr"""lninl npoll the nthe,. 1l>e """"nd way in whichltley might impinge upoll oneaoother i' if they' borh use rt>c ",me lime budgeled for eme""inmen1. Either thefinaneial or tin,. ron",..in" might playa rol•.

Fi"t. we can c.amine ch'ng" in 1>0, "Ilicr re,'cnue< "'ith Change< in albumrevon""". I find • p<><iti"c<OITClaiioo (0,24) ClW' It>< I"'riod 1972_1999. indk3ling• tendency f()f lhe Iw" I" """,e togClhcr."" Thi< rewlt i, inmmp"ihle "'ith!he<Iaim th.. "",,'ie< arc <uh"ilUI« f()f Clh

A <imil", re,,,lt bold. f", chang« in vidcnll"me «>f1w.re ""Ie< and changes'n It>c safe of .Ibum,. UnfonnnaEely, dau for >ideogame, ""Iy 8" Mck '0 1990If "'c limit """"Iv« to Ihc perloJ bef"'" 2000. before any impacts of Mp3do",nl(""". thc,., i, • "",iIi"" <OITCbti"" of 0.16, wltich indi...... ""'I the twomo<'e t08etbe, and noI ""panlCly. Th;< "I..ion,hip al"" fail, to ,nppon the claimIhal >ideogame, 're panicnla,ly "lo<c ,u\>slilut... f"" CDs."

Finally. It>< ..me "0<)' holds for~ """.... (VllSl, From 1990 10im lbere i~ a sligltl "",iti"" COITCI..ion !:>el"'«n ~.,iy <:h.n~, in pe' capitaun" por<h.,", in lhe 1"'0 ma'kets (0.12).'" Again, lhefe i' lillie e>ide""" lhal VIIStap<" aoo CDs "'cr<: 'ubSlitu..s. and titus thrrc i' lillie re''''n 10 belK:"~ th.. DVDsand CDs are ,,,b,,ilu",

Admiltedly. there i' presnm'bly son,. r<>mmoo factor a1 work ,"u,ing ""I..of Co., prcrt<:ordw "\OVies. 1>0, office "",oil'''. and vidwgamesw aliletld 10<h"ng~ in It>< ..me dirttli""," Bot ;1 does not "f'PC'" 10 be ovcrly Slrong.

1l>e ""''''''' <",,"'ainl in ong.ging in any of the," a<1<>;li... i, one <>f time!\Ibli'lled e"i",.te, indk.te Ih.. li<Eenin8 to re«><ded m~,ic look- "l'P"",imatcly

'"45 minu'.. of " pc""""' tim< PC' cia)', wile..", gOIng to m,,,,i,, t<>ol 2miou,0•.....'dtin;; prct<cordcd m,,,ie. tool< 9"';0""". and playing videog."'.. took7 miouk"'" r do no< belie,,, it "QUid be ...»on.ble to "'ll"'. at ,.... 10\" ,i"",·level<of u>age 'Of' Ihc!<: """-OIu,ic "",iviti... that cb.nge. in movie .lleooanc<. DVDu.ago. 0.- ,'i<leoj>;.mo, o..ge. fo< ,he populati"n a. a ",oole. could be ....ponsiblerOt """" Ihan • sm.1I """iOll of l!Ie cbOllge, in alt..lm ..Ie' clisc",<ed bcl"",.

Allhoogh ,....n: are "'.,,,,,, to '"'P«' !he >crocity of those linIC-n"" numbers.I '01 001 '''''are of an)' Olh<r eSl;"""" ,bo, could be ">Cd in their place_"

5,5. 110. 'he Mn,k C1.an~'

Wben the =<JJd iDdn'''Y ...,. <leeli...,. critic. <if tb< indo",.,. will often claim l!la,..I« foil bee.","" tho mn,ie "'-.. no< iu",,,,,,ing. Thu •. it i. "'" ....",n"oll that thi,.... em<'lled., on an,w", to'be que"i"n: "if MP3' .... nOlI.,,"ing tile industry.what ;,""

Clearly. ,h;, hypotbe,i. could be lJUe. It ...oold no< be .urplisinll if ,lle,. "'erepeak. and ,..lIcy. in th< .reat;Ye ""'pu' of til< record bu,i ..... 'Tho: ...OO1<m wilhthe hypoth<,i" """,,"',. i, delennining ~ w.y 10 lest it

'Tho: dear." mart01 "'..,ure of til< vib..""y of Ill< indu"ry i, ..1.. of re<o<d•.BUI ,i"". ,h,l stOll5lic i, ""'" lami,b«l by lhe po"ibili!y of MP3 downloading,aoo "," ",i.h 10 teSl!he hypo'h",i. thai MP] download. hurt ••k>. >om< "'hern"".n'~mark.. valu.'"," of ,II< ",u.ic i, oocd<d.

On< sourtt uf d.'. ,hal I h."" OOcn abk to ocr<» i, ,he finlUlCiaJ ,nee<., of.,-,",,<rt,. l'oHs<ar M.gozin< pro.i<k~d.u. on rune"rt 'our re'o1:nn<" Conc.rt 'UIIt>,uff<r frum 011< imporun' def«, _ many <>f the :oct> .re w<li PO" thei. r«<Jf1!ing

prim< although they "ill draw '-cry w.1I in cone'" "'''''''' (e.g. lhe Rollinl5100<'). Ne.erthele". ther. i, a posili•• c"""llI,i"" bel"'""n coocen re",nueschang« arid change> in re<uttl ...I<s (0,37 frum 1991 '0 1999) although i, is 001•• high'" would be I""l'crr<d.

In'~reSlingl)'. the ye:!Jl 7000.rId 2001 had the IlI/1lc.. real incre.,." in co"",,1'1re"<nt>C< _ ,Il< '""'" lim< the ....:ocd industry "'" ..",,';"!\Cing unnsu.lll' 11Ig.drrrea«:' in ",,'.n",,", Although thiS is 001 ",ffiei.n,ly "rong '0 soy tha, inter...in mu,k i""re.sed aflCf WOO. il is e<Mainly inc"",i"ent witll til< c1.im ,h.tint.."" in mu,ic f.ll .f'er 1999,

A strond po«nlial >OIl,..,,, of da,-" would Il< ,im< .""n' li'tening k, nodi", OfCOLt""". radio eoo,i", of non_mu,k >eti.i,ies and listening '0 radio is. fu,"",ionof Olll<r ooli.i,i", "'C" as ,im< '!'On' in au'omobil.... Nc,,,rthele.s. <lat••""i1.l>lefrom Arbi,run all",,' u, '" focu, 0" ,he use of nodio rn 11>< O<>rn<. wher••ompeli'i"nfrom alltma,i'o1: S<JurtCS of "ntertainm<n' ,.-ould be mo,;( p",.."o",-'«I

T;zj,k J. hll 1991! ,,, F.II 20m,

STAI; I, LIEBOWITZ

Pn"... "+_':l--11_11_-'"_~J.<

P<...-J'M_., '., uo

'"1.41,.6...

D.la from !he 1." 5 years reveals a rai,ly ",rioo, docli"" in lislening - 8%.[);) we fin.lly r..a"e SOl"" ,uppurl h<rr for lbe daim ,ha[ musi" has "", itsinileren, inle,.,,' Digging ,,'mewhal deefl"T. w'e find I;nle ,upport f()f Ihi. daim;u T,hle 3.

FiN. [hi, <le<li.,.;u li"en;ug i, a<ros, tho board -11 e.iSl' f.... all age group"I! " unlikely ,hal 'flme nver ,ile.ge of b.~ "'(HJld fi"" their .Ul'll<tion '0 I;"eniogradio d;m;ni,hed bee.u« eootemporary mu,ie.! <omf'O'i';oo, ,,'ere not ,,, lI>eirli!:mg. no, .ge 8""'P' ",""I likely '0 be .ff""ted hy' de<li.,. in mu,ie quali')'

should be t""'" ,,'110 Ii,ren '0 ""'" <OO1posl'>oo', "fIIost "oold mos' likel)' ilehe."il)' ,f<e\o.<:d I<>ward 1",,'e, age groups. Allboogh ,litre i, """" ~idence lha[)'oo[hful li.lel'l<'r'S """e IUII<'d out """",,·h.. IrlOR Ihan othte .ge g......p'. ,hediff«ence i. nol w:ry ,,"bslanli.l (appro.imately 4%).

Funher e."ing doubl 00 !he elaim 'Mt radio ,.,..1II, • deelioing ;n,"re" ineUlTen' mu,ie, ean be foo"" by eum;ning lI>e li""ning 'rood, for differeOl [W'"(fom"''') of mu,;'. If ""","mpoeary mu,ie i, in ,he doldrum" lhan ,he listeningtrend. IMt ,hould """'" tl>e large" deeli"". ore foe lhe OO!1ternpornry fom"',", Vel,,he I..-gCSl tledi". in li'teniog ,,'a' in ..... "11 ,l.ndaed,·· (40%) which hartlly seem',,, he • IOTTOat ,hat re~ects eu,",n' mu,ieal qulll"y. r....nller. of ,he 'wo (OTTO." [M'I'<[=><n' <ootem[>Of'il!)" mu,ic. "Adull COO1empotaJy" h:>d • mel'< 4% decline ond''Comempornry 1Ii,," h... on I 1% incre.... UrNo mu<ie.•ooll,.r o.tego!)" whiohCOl13I1" rontempo<"'J O1U,k. had. 12% i",,,,",,,. It i, 'rue ih>l "ooon,')'·· mu,khaJ. 13% IJe<,li.,.. bu, ...hen CUlTen' C,ilk. ,uggest. currenl ,I.,. of mus<c.1rnal"i"" lbe)' do lI<ll u,ually seem 10 be talking aboul ooo"try mu,ic,

A'M~h.,r I',"'ibk """,sure of ill\<=>1 in mu,ie migh' be lI>e .udirntt silt' foelile leb'i;ion ",,-,w "beee a".,,1> "'" given lIU' for hest ""-,,rd (Gr.ml!n~).

Unfortun"el)'. I ha"e !>eoo ""ahle ,n put 'OJlethe,. ,ime «rie. of .udience .itef.... the G",mm,... hen ,f "loCh d". "ere rel"Jlly .",il>\>1e. however, ,he ."dience,i,e fo.- the Oramm;.. """"Id likely be imp.>c1ed oy «hee 'e!e>'l,ioo"pe<;ificf...Of'. ,neh "' the increa<ed """fl"Tilion from reillti"ely ,,",,' ne,wo<k, a"" o.hle",tvie.,. "eakenins i15 ,".1 ... " • me",ure of ,.... raw 'flI'<.1 of [.... mu,ie.

TaM. ~. Di"ribol;oo of Consumers.

~-,m ,"'

1(1--10 ",

1S-19 2U 11.1lO-lO 19,1 '"1S-~ l.JJ 1'"". ", '"

"IJ,J

'":XU41,2

lhi' e,';dtoce a, I ,.ad it allhullgh odm;tle4ly ,..•• k. f.il, 1(1 'upporl It><'U8~..,"i<>n th.1 tll< eumnl decllll<;n re<ord ....1.. i' due 10 """'" di,,,,'i,factionwith 111< ".1. of mu,k i~lf.

111<", has been. n.ltening of I!>< og. di>trioolion of purrhascrs during ,be la.1fe,.. decades. n.. booad<ning , frum ,he ""iOO "l!< di.lt;oou"" "f r«<>nl

purrh."""..•• reponed ;0 ,urvey Th;. _ning "f lhe .'On'""'" mortelmight be I!>< re",l",f. genonnion tha'!IJC"" up with LPreC<Jnh (I!>< baby boomers)and "'hkh cnnlinucd I" pur<h.", aloom,., lhe~ .ged. ,,·here.. p"',i"", mi<kll.·"<'Cd g."""'lion, did ,101 pur<ha'" alborn,. lhi, <an be """n in Tabl. 4 ,,'hi<h !I>!,the age di'tribo'i"" of ,.,.oro purrhase". (IlOl. lila! lIli' is ",Ort llIan .1bu",,).'1

In 1987,43.3% of pur<h..., ....rt mad< b~ ",.,no,,,,, I:>el,..""nlll< a~., ofI~ and 24. lJ1 2001 thIS pankul.. a8' 8""'1' "'OS re,pomible fOf. fa' ,n",II.,,1Iart of 0",,,<11 ,,,,oN ,.le,. 24.8%, furtlle'. con'UllI<rs al the .'lremili., of

the di\lribut~m. """'" aged 1ll-14...-tho« "ldt, lIlan 4~, i ...:tta-.d their """"jllJr<ha>e,.'l Much of Ihi' chan~ is d"" rntrely 10 the change in size of the'"<""""". """'ev.,. "hieh I addres' in Thbie ~.

Tnb~5. l'\Jr<ha"" Inten'ily of Ag. GrollI'.

]'lOl1 l'l) 1""11"1 l'MI'l' ) 1001 I'll-)

10-10 l(Ji.oo IIU~ , I 1.'2 rr.l.9llS-lU jD." 2lL<rI ""'.SI ,"~

~" 1:9 19 ",. 11H' I"'.",S-:9 )60.10 '<rim '"" 16'-01~ 110'0 ,,~ '''" I".~

"" 100.11 lll.!l m,JO IXI,60~ ".ll "" "." ..~O. J... 1 ". ...." ""

STAN J. LJf.BOWITl

11>< ditfm,",-",~ in pur<h.>.se beh."i,,,, by llgo lImup. arM! tbn nalt<tlioll Ih.uhas ,,,-"Currnd. <an bn morn doarly >Cen in T.ble 3. He,e I mmput. Ibn r.,i" of• lImup'••han: "f pur<h"",s "'ilb """ lImup', sh"", <>f Ibn "venoIl popul",ioo, "r.,i" I den.. o. "p"r<:ha>e inten.ity:· A gro<Ip ,,'nh. p""'ha..-inlen,i'y o( ,,,..,...""Id "",on "'., the 'y'p,cal ""'mber pure"'>cd I....i«: a' many =0,,1< •• a lypicalmnmbn, of the populati"" 's ....ool<,

\\'bal T.bk S ,db u, i, til., in 1991 ,ho<c be,,,,",," '11"' 10 and 14 purchased""ord, at • 'aI' th......, 19.54% hi~r ,h." Ibn 'ypi••1 p""'....,,, from ,bn""Cf.1l popnl..i"". 11><>0< aged 13-19 p"",h.<ed ,,,"onh al. '"'" tho, wos 132%hig/>e' th.n tho, of the ",'crall popul.""". 1110", .ged 4S .rM! "l' p"",ha>ed

""ord. al a ra'c thal was only 3R% of the overall populati"" ra'•.ff ...e ,,,,umo ,hal .om Ii".""". defined as ,h""" ag«l (mOl 13 '0 24, c""unn.

'0 rorch.", recor<ls .,I,h a c"",lan' inlen,ioy "'..". ,imn. then ,be roc' tho, """',..gmen" of '!>e pop"l"i"" h.", incre.std l!>ell" p"rcha!eS "'oold imply 'hat pe',·.pita ",I.. ,hould ha,'e been i""",,,,ing.

Of C"""", lhen i, " morn .ini'let inlorprel";"" to 'hi, natloning 01 lbe"80 Ji>tnbution o(pureh"",rs, It could be. ,,00 in fa<1 il probably i, l!>e c.... that"S<: of MP), i, '00-" p""'alen' ."",ng '!>e younge' age grours. 1-... RIAA ",'ide""e"80,n'l N'pste, (uo"..n a, Ibn Fine "pori) focused on rollege "",len.. w"h ,be"'1'""1"i"" Ihm tbcse "sons "'""Id be nIOSllil:tly 10 uS<: MP),," I. il pos,ible to0,;0 the« <!ala '0 'e" Ibn hHKJlhn>i. th:sl MP3 d<:w.lll00ding i~ re~ponsibl< for thi,n.tlening? 1h< 'n,"'.' i. y"". Ilut J caOli"" lbe rea<k, 10 .mid pl",."ing tOO Oll>Chwe'gh' "" ,hi. ,n.ly'" ,"nc. the.., dOl. are h.std "" ,urv<y,< which~(~kn qoi ..unreliable.

T.ble 6 I",,,.'n" dala for ,hi, pu'J'O'e. Thble 6 lak.. ,be in"'n'(ly <>r purchaseeSilmat... as foond in Thbl. S. and caleol".. the change In the", inten,i,i«ow, time" " ...mining chang.. in purch... inten,ities for the emire 1995 to2001 period tlhe >e<'ooo ""umn) provide. ",'ide","c thm "wid Sttm 10 .upport

Tabl,6. Change in Purchase Inlcnsily by Age Group.

Ar(~ l~:'OO1 ,<0., 1'i'lS-I9'lll',,",

10-1' H' 11.1l11--19 _ll" _ll.9'I

~"-,. -19-8\1

ll--~ _•.1l _,m~. -l.Jl .~

11--:>!I ~, II..J- IU6 ,m"- 11'00 ,~

19'4--2001 r11

10.1-1~19.f>1

~....._Lll~l.:'"

_Il.~

1(1.•2".S1

"'t.... RIAA cbarg.: tha! MP3 "'-""nloading j, injurious (0 it' .....Ilh. Coo,umersin {,,"'n age c...gories hd\"e disprufXJI1i<H1aldy laJ);c <kchnc; - coo",m"", inage ~roups 15-19 aoo 20-24, Their inten,;ty of pIOIChasc drop> 35.tId 27%<e.pe<;l;vely, The'" .... d • .,ly l!le two group' Ihal would h.." ~" (hough' ""'"!ltd)' to use M1'3 do.mloadin&. It is .........'11.. ,urprising, however, nt>de< thl,reading of (he rlal•• lhal Iltose under (he ~. of 14 h••• no! also .,periel~ •decline in purch."" ;o"n,i,y 'it>tt lbty (00 ,"oold I.... betn 1.......g1U (0 t>avedowlIloa<lcd MP3,;

Yo, Nap.leT and O!hoT In' l file >llaring .y'lem. did ..... ,'OI'rIt ""Ii"" u",ill!J< ",,'-"Id half of 1999. "" i, imp'.:' could 001 hlI,'. been fell unhl .. 10."lato'in 1999.111< rn:" lwo column' in ,!Ie ,able anow", '" adJrt,. IlIc ;mpOClof MPJ Jooo<-nlwd, """" di,,,,,ly. In lllO>C ''''0 <olllmo, I break (he change imo• I"".N'psl.r 199~1998 I""rioo and • N'r".' i"""""oo 1998--1001 period. The""oil' are "'" ronsi"."t willi the ~tP3 damage hypo'h<\iS.

I" the p"'.N.p1>lcr 19'95-1998 pcriod sal.. fell among lI>o 1~19 ..... 19-24;roop, by 13 artd 20% ...,pe<'i"el~:·l n.e posl·Nap'l.r period h'" a ,mailerdecline. S.ko, in1.nsil~ f.lIl»' 20% fo< the 1~19 group. bul we... do,",'n ""I~ 6~

in the 20-24 group. MP3 downloading. if it had .n impoct. ,hould h,,', mod< thede"line larger io lhe scrood lime period. yel it did 001. N,.. do indi"idu.1> io lIIcirI.te 20s 'ppear to have been impocted the ,",'o~ one mighl h"" .",pe<:tcd if MP3,,",'e... imp;o;ting their hJb<I'.

NO!<' al"" thai SOme pari of lIIis ""ul1 may be driv.n by til< decline in singles... opposed to ""Ie, of alb..""" If lhe <CN'""n''''' of 'ingles. "hi"h we know f.1Iduring Ihis period. con,i'l.d mainl~ of individuals in lhe I~-24 age groups. thenthai could occounl for at I~a'i SCM"" of lbese ...,ull'.

In 'Uo1. lh< .yi<!enc. frotll purchase inlm;iljes ...m, COO,;'l<cnl willi 0 claimthat MPJ< hun ...""rd ""k" bul the e,jdenre is mud ",.a1:er for lbe "I,im Ibatlhe ability to dowoload MP3, o""r the Int.mel horm, ""Ie,. Yel it i< difficuiliobeli",', lhal Inteme1 doownkod;ng ,",'ookJ 001 d",m'lic.lI~ inc...... lhe number ofMPJ, rel'live to person.1 e,,,hange', Thu, lhese res"ll< are "'" "00"'1"1 .ooughI" ,",'arrant m""h confidence,

6. THl: CURRENT SITUATION

Thi' ming,", up 10 d... p"'..n~ ""'eh i, lhe lime "f lhe '""riting of the onide,die Spring "f 2003. Wid,oul a doubl soles haye fail.n from 19991020:12. as wel>ave ..en. Yet tilt 2002 v.llI< of 4.3J albums i' 'Iill reloli""ly high b~ hi""rk"I.rms, Th< questmn, IholI Ihink Vie would nee<ltobe 01:>1. lOaoswer. if .... ore tn1'""";4: useful glJ,d.nc.1O public pol;"}', ;ncl""" ,lit f"ll{)Wing:

!.lZ STAN I. L1EBOWrr~

(~) I< tl>o carRn! dttli"" in record ""k> duo ", MI'3 d"'mload<. MI'3 u>e. orOOtl>o,"

tb) If tl>o caneut dedine i, due to MPl,. ,bould ,",'0 ""'asu.., tbe impaet ., tbedttliue from 1999 iovd. or from higl>or level, that might have heen o'pcetro'" r.,Cur if IIOl for MP3 downlood<'

1<) I, ,I>< <arrent dc<:Ii"" juSl the tip of tbe i<d",'ll?Id) If!ho curren! dedi.. we.., due '0 .\11'3,. <wId we ge".,., .. 0 meln< indicating

,be numbe, of"losl s.le,·· for each MP3 oloom "'l"h..l<nt1

Wh.t I b<iie>.. IIIe Ie"glhy "amin.,ion of I.... ifldustry lha' I hOI', juS! imposed"roo tile "'a<l<' <an acromplish. """'<ve', is 10 aliow us 10 rna'" some <dOC'Ie<!gues"'" .bout how lbe te«lfd'ng itlduSl'Y "'oold h."" .vol.'ro wilboot MP],. otld",", to betl", g"uge lhe impacl of MPl dow"IOO<I, from !ha' i"form.lion,

Wh.. ,",'ould I",,,. heen ,be 1",-,~noSlit""lion, fo, alwm> sales if MP3, didn',<xi'" I hdieve that ,be mowmen' in tl>o markot to hu'. ,ingle ""'ording format.and lbe maturot;on of ,1>0 pn<table and au!<>mObile """kels imply lhat saie. would.. 10." h..·" ICI'ekd olf. with or ,",'i'hotlt .\tP3,. Wbetbe' ihcy woold h..'C fall<nio Ie" dear. hut ,ineo put<ha"" of duai recording f"rmal> ,",wid no lungO' h..·oocen """e,,,,'Y. 'be", i, ,orr", po>,ibilit), of a <l«:ii"" in sale,

What. Ihe~ i' ,be imp"", of MPl downl_ling> Given ,he "tIOfm;'y of ,be,",'hole MPl 00..... ,,1'-"'<1 enterpti"" il should be easy to =og"i", tI5 imp;.et 00allMlm ....1es ,f irs impan i. largo. What Ju I mean by "larger If ea<·h MP3 ,.,IIg,ul»ti'ut«! for a f"Jrcha><d ""'g.•• ha. oftcn been claimed by the rcconI indu"',,in tl>o co", of b1.nk tape,. wo wooid elearl)' ha,'c alar!!" iml"""'''' If cach '1"0MP3. ,ob.lituted for """ f"Jrcha"'d ""'g. 'ha' would be large. Ihcn if each fourMP3. ,ub>ti'a'od for one pat'Ch"""d _g. tha' '00 ,bould prob.>bly be con,iJc:ro:Ia impa<t iargo, If, on the o<bc' hand. ca<;h huoot'Cd M1'3, ,ubSiitul<d for """f"Jrc~.S<d ""'s. that ,",'QUId 110<. in my "Piniou, q.altfy., a "I",ge" ,mpact_oJi' would be mO" dimeui, '0 "leO,.re, given all ,1>0 fo<'or< inOucoci"g the ",,1<,of .Ioon", 11I<re i •. of COO"", a ...ague '"in_between" r.rnge that i, ""i'be, l"'f<''''' ,,,,,,II

It is usefui to "'call 'hat tl>o emergence of N_p'tor occurred in tl>o foll of 19991l>e Jeeli"" in alhum> <.ales beginning in 2000 would seem '0 fi' tl>o 'iming ofNapste", bit1h quite ,",'ell, lhe grow'" in ..Ie, from 1997 to 1999 would ><'Col toa'S....gain" • dain' 'har MI'3 use. independen, of lntC1J\t"t J,u....."IoaJ,. damagedrecord ..Ics. Thi, i, coo""'Y to th< finding> in tl>o material in and around Tabl< 6on the alt<r..i"" oftbe di<triootion of "",rs. wl>ore on indcpenden' impact of MP3do-.'nl<><>o:Jing os <lI'JIOS<'I to M P3 U!C. ,",'", no< di....rnable. Still. 'ho ""i<knee. inmy opinion. eurren,ly ,upport,. claim of domaS" although the c"'" i, fa' from.irtight.

Tablc 7.- = c.,,..,,

.m 1.1.09 Ul< "M'- HII a'l omm. <,11< <,~l n,:!.\)m, ", ',092 n.m~m i,", n..8} om

1lledecline in album' from 1999 u, 2002 i, ~I< Iartle>l dedine IIIal has uecurredo"cr the lu," 30 yean, BOL we need IU UPJ't ,11<<< res"11> 10 """",whu, ~'~"'f

",ru"ny1lIC dedine in prcm::<Jrdcd C"''''I{c ..1e< would =ro 10 havc lillie 10 do wilh

MP" download., n.e dc<line in a/bunt ..Ie. per <api,a ,i"". 1999. as illUSlralcJin Table ~, i, 1.41 on,". bul lhe decline in lhe album .ubo::"~g"'Y of "c><<c'I<<"i, 0.50, leaJing 10" dc<hne in al"m,. ""I of ..'''''lies. of 0.91 oni"." A ,h=)'eM decline 100ahng 0.91 aloom, per person e"lU<linK ca,,,,,lte,- would <lill belhe large" and "eep"" on record. bu' nO! e.."",mm"rily 50, Si""" Ihcr<o .... noOlher poIcnllal cou<c, nf ,hi, deeli ... ,h., beld up under cnmiQali"". "'c m",lconclndc tha' .~lP" dovinl"",I, are hurm'ng ,he ,ndu"ry (T.ble 7).

H.r", i, no< the laflle .. falul ha"". 1\<w.'C"or Wh.l can we u}' .hou, II",

NOve"i"" "'{C of Mp3 11<...."103<1' "' "'place"len" for p"r<h.>e' Ce"OInly. i,doe< not appear IU b< zern, an' ncitbcr doe, il appear '0 be "1"'1!c," Gi"en ,heenormoo< "umbeT of Mpl downlwd. (if the "n",be" ean bc laken lCnou,ly,which are dlem,.lve, an incomplcle ponioo of the enlire MpJ pho"""..non.;'""em, ufo 10 uy ,ha' die CD eqni"akn' of ),,\1'3 do,,'nlo.><l, i, 01 leo" "'loaJ to lheem;re ",los mor• ., for COS'! IfMP], dow"loods replaced ..Ie,", 0 I '0 I rolin.there ,,'oold be no CD markel 10 .peak of, In th.. eo", "'e ",-.:.uld be 'alking .bon,• drop in CDs of 5 on;lS. no< 0.89 unil" If MP3 ""'-'oJ""', eOQ"ened at 4:1 ,he.Ioom market would ha", dropped hy 25%, Removing Ihc impllCl of ,he declinein e.,>elte" which ..em. appropri.le. it " .... Id appcar'hat the eon,'<"ioo ""e al,he n"",,,,nt i,,,,, II.. ",der of S:l or 6:1 N(~ large 00' not.mall.

l1>c more importan' 40e"io" i. ,,'hether the decline i, >ale, will e""lin"".Dne po;.ibili'y i, 'hal MPJ d,""nlo<>ili ,,'ill ""n,inur: to iocrea><:. If IIIi,;, lbe

ea><. <"ell ,f lhe eoove"iOl1 rale rcm.m, COII""nl... 6: I say. ,he damago to ,heindustry will ,,,,,,inIl< '0 ;ocrca«. Obv;ou,ly. ,he degree 10 wrueh ;ooi,'ido,l,""gog< in Mp3 downloading depcnd<. ","""g olheT 'hing'. on poIenti,1 deI<rreoeeffects of leg.1 pcnahie, .nd pcrhap" more importan,ly. un any soci.1 opprobrium",socialeJ ,,'i,1t ,hil ""'i"i'y, II i, dilli<nll,o jodge "'helhcr or how the>e factorswill change in Ihc nc.t, few year<. ahhough Ilw:« are Ilw: dim<:n,;on, "'here the

STAN /. L1EIIO\\TTL

RIAA ha. focu«1l i" pm«ripli.'~""'tivi,;",." A O<rond ",.",n MP3 downloo.dingmight grow mor~ i, tho p"',lbility u/. gr<"or bro:odIw>d """.... rrnking tho<Iownloodlng of I"'l!' fik> 10.. burd<n"""",.

EvCTI if tbe artlvitr of MP3 dov.'nloadlng ",maincd romtant, I>owevn. tho"'ill an odditioo,,1 ",,,-,on th.1 ,be i",!",,-·t of MP3 download, mighl h",'o hocomeI""",,,-,ingly .....'" o.'or tbe la.' fow },..". Thi, """'" is tho spread in CDbtl"...", W;lhoot burning a CD, M P3, can not 'O!>stiTote fCO' lhe purcha>e ofCLIs IIIlhe l1WIy <le-',ce, thai "'ere ma<le to u>e CDs. such ., .uIOO>Obiles, I>omt "ereo<.,nd ponaNe <!evt<ts.'" If M P3, are ,,"Iy used on ooml'"le" Ihc~ are DOl li~ely 10"'r1aco lhe ""Ie of CDs. To thn ex«n' lha, the "e..:j~ ..... "'are of CD burners has""'-yet""n ",,,,he<!, """'.,.'e" thn measored con"e",,,,, ",Ie w;1I be uo>de",.t....

A ,urvry by the KIM in Ao~U" of 2000 ,oUes,'" that 10% of mu,iccoo;ome" onder the "f;e of ~ had CD blJmers." As [am wriling !hi, pope-r. inthe I.te spring of :!fIOJ. I' >eom. r.."",.ble 'bat tl>< pcn,"""ioo M CD burnet"!mo" be qui'e larg. si~ the}' have been qoite inupen,i,,, and standard"" most""w compute," fCO' .."eral }"a" oow, Alti>ough the number of housebold, wilhcomf'll,e" i, usua;I}' f'IIl at aboul6O%. ,his number i, ple,umably hi:her fCO' mo,kusers uo>der lhe age of 54. me.n;ng !hat helw""n 30 and 50" of ",o,ic u'"" ..itheomf'llte", jX>SIie>se<! CD bumcrs in 2(0). Asa goo"" by 2002, ,,'itb 'P!"'J.i"'atclyt..,o j'e... h.-iug p",,;ed si~ thi, ""'''''Y. it ..wid seem rca'iOllable to belic,'eth..the .hore of mn,k n'<t' ",ith CD burning cap;tbjlity could easily h.vc been .1 75%CO' more of it> ;hol1·tcn-n pt~rnli"1 """,imum." Further. ";1I<'e "'e migh' "'J'C<'Ilhat ,hi. OJIli"" wonld havc been use<! firs, by tlx... mo" inte"'sted in burningCDs. the lO<lditi<l<l.1 impact from pro,-idlng CD burniug capobili'y to tha' comf'llter""'....... I-.::> did "'~ ye' h.... i, would be ."",lIer !han the ,lure u/. '''''h owners.

1llc <ledinc in ..Ie, doo '0 the incrca>cd peIlClnI'i..n of CD bum<'" woold bek"lle1y compl.te. ifthi. rcaSOlling _rc corr«:t. If lhe decli .. in album. conlinu..unabaled in 20m, r"",,"ing ono!h<'r decli .. in the vicinity of 0.4 olbutffi perc.P;ta. thi, hypotoc.i ....111 be largely di.ueditcd. em the other blind, if the declinedrops to below 0.25 .Ibum,..... can l"">ome the dedi"" in ",I.. i, largely 0"'"

7. CONCLUSIONS

Iflhe ,nolysis in Ihi, paper is oon<:ct. MI'3 downloads arc can,ing .ignific.nt harm

'0 thn rncord indu"!)', It is nOl de.... hou.'evc•. "hethc-r 'UCh ool'.-nloo<\;ng in OW'

<otT~nt Icg.lenvironmcnt ""ill Caose • ...",.1 blow to the indu,lI)'. I ,o'pc« thai theW(,'" d:unagc to thn indu"!)' i, behind 0•• but we ,"'ill know ""'" enoug!J" newd... ore madn ,,'ail.bk. It is impon...t loon<krslond loc imf'llCt ofMP3 _'nload,if we. as a ",,:;"y. arc 10 dctennine appropri.t< "'-'po.",." to allow thn record

companies 10 lake in defending !he;r rronomic po-;iriOll from !he encroachmenl'broughl .boul b)' MP3 <J<:..·nlrod.

Il i, .1", und<"tand.blc lhal rhe ,eron:I compani.. may IKIt be willingparticipanlS in <hi' latxltalory fOJ economic anaI)"i'. Wh~ should!he~ ri,~ [heirrh~nu", in an e'pel'imen,l/la{ may rod badly for them? How many of u' would

",Iun'cer '" unde!JlO 'urgeI)' withou' ones"'",i. '0 1<"" lheory lhlll claimed i'"'.,n·' rcally ncc<ss.vy~ I 'hin~ il is imporlam 10 Uodersl..... 'ha' • <kelt"" of20-25% i•• co"'iderable number.'J

Ne,....theless. 00'" far shoold .... be willing '0 ~o '" 1JfOle<" ,he J«<>fd ioJu>Uyfrom a 2ti--25% decline in bu>ine..' An: "",en, Pf'J'IlOIi"],. such a, lhe Ilenlliln bill~oi,,~ lno far? My o"'n _Ie'" i' 'ha' such p<<JI)O>lIl, are wing too raI. Sboold ...~,wilCh to. lIOIl-markel .ll<mati_. as ....gg.sted by Les,ig. N.l<nal, "",i Romer"!-ptr," Allowing t«ord cump.>'nics '0 prot«' thoU- ware, u,jng digital righ' managen",n' 'eclmnlngy 5«"'" to be• far"",", ...",,,,,,able all<mati,...56 If. "" 111e other hondo fu'u... e"idcnc. i....icate.

'hal in foe' the ""'nnl indu"ry would"'" ",,,"'i,,,, MP3•. we miglu oeed '0 ""hin~

the an,wers '0 tho", questi"".Thi, paF"'" Ita> 00< talon • p.1f1icular posi'ion OIl ,he", i"ue,. lhc goal of lIti'

pope..- was 10 pm_ide ",me empirical amly,i, '0 replace wha' has oflOn been

lint< """" ,han .motion.1 rangling .nd har,nguing Of' both 'ides. An'.... rstu difficuh p"licy qu.,"on, 00< hket~ '0 be " .. II informed "'il00tl{ .""h anund<rstanding of 11M: empiric.1 bMkdrop '0 the iss......

NOTF..5

'- TIl< I<x' oS the l>ill 01014 with it, JU"lfi,.,iOlI <all be fouOO .t http://www.house.• .,...lbernrortl".m2502,h'""

1. Such. 'f".m has been l'f<II'O'<d;o _, by N.il ".,....."><k N..."", "lmpos<. NOlI_,onuner<ial Use Lc:''j' '" AII<tw r'fCC P1P h'e-S..·.,..,;nll 0I>.l kenll>.iJlj;" <lrofl. 2OO1• .,w,Jff'lt'otinnOO by te..iJ (200 ') io 0;, _ Tho- £"'~" ujtJro>. p. 20' ,ano:I ill ''''' rec... 1'"1"""Raj''''''''<l K•. -rb< Cr-<"';,~ ne"tuc'''''' 0( Cop)'r;gO" N..........00 the Ne,.. ~£<>nom;c,of 1Ji1lltlfi TechoolullY:'1I9 U, Chi L, R"". 263 ...... ..-nr1J"" paper OJ' M..k S, NMI"Que>""";01l The Eo_ J.,"Iic.boo r..,. l!lcwj Th" C"""';mtionalil)' Of) CopynpltLo...•• Probibifioo Api." U...IOOri,ro C_i..: ~106" droll,No- I 1. 2001. r"" ~'ri'ing.

p>p<T ""'i'kJ "AI"'....... ;<o C"P)'oW" S~.."n>: 11>; Probk.,. ~·i'h. CQoltpIflsor~ lOcen"'''_trDI tIW lbc>< I'"P"" .... for too optimistic 01>00, the rei.''''''''' .l>ili'y to .mula..the "",rl:,;"lP' of a ..-...I:c,

l Noplt<f and it> .apert. claimed lhaO Me->lrumg III<J<ly 011""'«1 the ,u-..rn ofrecotJ c","J"II'"' '0 "....pl.~ Q< "try oot" """&' iII aodvaoc< of purch.... Il.'lh ,he be"et;of""""1[OII J"rI";- '*' _" ""'lfIImll. ,.""""",,....--.u1J he "" ... ';'<')'. OCC<Jfd;nlllO

STA.'1 J, Uf.llO"'''rrz

~.....~ II>1*"_.., __ """ Ib<y ....,. Iil<d. n..-.-,...... ..,..... _It..-I. <buIIr<l_ll< ~...........,roo ....__............ _ _ ...........MPJo__U<l_..__"'_

o. So< 0rI0p00< 7 • Ill' booL" C I.... Ncl-t.~- :!OCt! ....,_........, ...._,C_C~o-....~_ Fx<

..NoorC""'.. T""-o!oI......n..E ar~ll..-ll< II

... -"... by-,.O"-' b:_"' w......o,.p IC I 2Olll.u,.... s.- .., Dwo" T-.. ~ H.olL............._-.__ _ _m. __ ...-.._..... i<.. ~_......T- __ ..:M---.~'._...._e. ' I' !e., __... n.,l__: • _ilIo<I """"" ..,.. ill Urt -... .. II _ _ t! h"'l. doo .......~..... _. Soc S. J.~ 110< .......... Itt........, .. doc c.,r.....S_-~te---. _arc.".p........-..o-. 1 1....... _ ......... ~..,... .....- • .,.,~ pop«~ ........~y."""""",,",or--.-_or_.x-.,.~ 1m.pp 1I4S--957 _~'l'<M«<I)' ...... ,•• --.M........-. 0..-.... I: \.eYI...(""Thee-....-I-..a~.-~e.->t ,It !O')-!l.!. May !001) 100...._l' pol ro.-....., •.-iIof ........,_ .. .,. , .........u._ar~"' ..·..<ri:I1io _.4Soc 110«_1»' 11<8,..... KIrioo. A"'*'" V t-cKnioo M~ .. "1__1 I"mpeo<y Do .....e "'-I1<' The B:'oooonIi<> .. ClfI)ripI 'fllf Uw' ...__ ....."'Iil.- AM<",- &R".....,. ;ll)l)-2l)ll, May :!On,1

t, A' """ 'i 1_ qoot<d '" ,.....,.., .....-.;,.. U'"t'" "'" """'""" mig.be ""•.on. "' ,""""' e"'""'"'' ,,"'" I _.." WIulol ho l><i"" ", ... Iwm:..-.I) "'< ,"i y. Si"", tl><o til< ....ilt". f""" .... rc<<It\!i.. lnihI>I'1," I<Ii to< 1_. hi"" prov th< <,:';o!<n« to "'PI"'" .... "'Pro"""'" tl\.lt MPl__inJ..·""Id be ....,..,1'"1 In tbe i_<t'1

), AllI"KjV! it i..... d".. jll>t 00... ",-"or." the "i, , So< ,"",,'8 fa-...,..il. "" '" of to... p''''.N..,.... ...",...., The _. i'"""' IhoI IIl>opoICf'. 1"<' __......... the _,"'.... <>f 00 m;I,-CI).p..- ,,",,"to ·"'ld~'>d<~

_"'110 RIAA -wr.. U.S. _.-I<s oppro,_I~ 110 nul_ Co" p..-"""""- So the~ ialpo<t" M!'l<kwo_ , "-ld bq<, So<-M""" l)o<oo....... Sou." Rcv>m. S<pIrnII>« 6. ZOOI, ...ait.l:>lc II' "1 ._<IO-lllO'-ZOO-7IlllOI7'J'-.

•. .s..:TM:>l<N<>.909-Mc.IioU..,_C...-...Sp<odioJ 1991"':lOOJ- ...... ZOOOU.s._A_

, IfclI .... _"' <>f.. _ ....,.....b«-.<>f._by r.I __ ....... ill """'PfuI __, ;p.-. "'" _ -~__ Hc 110<-... ..... too............ .. _........ "' -.<m:o"""_GOI'<>f_m _...-.. _t <GUI~ _ poIi<JiI .... " So<............ _ c. \Joe __~ RJP.. .-.,....~ ...... M>.~.

:DU.lIJ-21...10. _ _~toe eiolY1l ""' ..... _OSII) ....-,.--.......

II AlltIooWi no! Iokely an i...., with tI>e h,,,otkaJ daLa, """" """,em al>o<lt '"" lei!>jmoey of "'" ,"mon' ono.l fo'o", oom""" On"" ,;..ce tI>e inJu",y ;, lryinl to m>ke • c...of MPl -"ll" _"POfl tI>e", tlOmbcn, Til< RI...... lOr""",", ,1Iao ,.. oomt>er, 0'",-ompiW by Priee-..."otoouse<:""""". bo, """""''"'' 3""" oooc""o ""'.. be in ..ide...."'hen t"'" h SO 0"'" dq>eoding "" t.....""''''''''

12. E""o if MPl fik traditql ..",<mat<d tI>e <leeh.. io ,he ,ingle. "'e""""<1 "ill heoble [0 gel an "b1><od i.>p>o<1 of MPl oo..'oIo.IId. hy li'"it"f ow '''0'''''''' to f.11 lenJlh~,tql"

IJ. The", i, .. ''''''nuti",,'' """ le, rot ,"",00 ttw op....'e;"""ideof """"->I di,tri ...,"'","""""I, and ofle. ')<""0" 0'" 1>0,,<:><1<, "" CD<. If thi, "tem"~" nutke! _."", ", growto b<com< • 'il"itic_ """'"" of cu.. then th< ollk,.1 "",i""" "" C\) ,.Ie< """Id heoode_<d. Unf""""",,ly. I "'" ...... of ""y ,,,i,,,,,,,,, "" <he ,i", ofthi, tIUli«t.

14 In "'"" ~',>n\<.."""" 1',00," to ,he rn"J"'.'h< liogo of ",,,,,omi,,,1:5. The,,;' '" ""00"' .. Siale by M:lJl< I,okim that ma,,,, thi, oI,;m. So< "II;' Cha

node; The mOl", i.do",n ..1f_inniLteday. Aug"" 20. 2002 ....il..... athttp~I.I m,0.romr!I<J3lfJ697l2, He"",e",m" _e.... ,h.. en [rices ",e""'~in"",i """n"". inc"",i,,".. ~'i,h my Iy.i,.

Ih. Son>< 1tlOmbc, of .",omobik, "' lIy di4 h"" ~ ploy"" ,so I leamed i.J,,;n! ,hi, "'''' h' bot 'hey "",'et ><h,,",'«1 any ",t>;unt..1k ....1of f1C""a1ion.

11 10 this rqaru;,,, i,,,=,i~ to n<lI< thal.~ <leeli.. i. """",d <ak, ",cun«l.. ,,,,lio~ popul"';ty t" the ••riy 1920>, Re<o<d ..... f<ll by 01>:>0, holf from 1~20

to 1'I1~. Tho, to""" to ",fu" <he oommon IlUSCOOOCpl;OO ,,",I poyol. -~ COIIlp;in>e<poyin.c "-' ie' "'PI"y - rev<.J, '" I""'tive imp;i<t of cadi" '" ""-">td ..I<>. I.,,,od payola>I>ookl be Ihoughl <>f as ,odJ<"i.. of rompelj,,"" het"'«n e,,",po"'" "'ithin the.....--l,.-.t",ry, lmaai",. f... ",.mplo, 'h.. ltJ<., w., "" rodio. The Oftly ,,~y 10 I,,,,,,, 10 ",mein .u[omobile, would be '0 1""'0 to pn·n.'OOrded mu,"'. ~'h",h "'""Id ml"mly i"'.....~ ...... ''''''8 ltJ< Ii.., .ugge"<d I"... io to. M'<r. See "Off the R«X>rd" by o.,'idMooOft. R"'ll"" Uo,'let>ity I'rc>o. :WOO. for odd;,oonol <vHJ<r.:e 00 t" impo<l ()( o"IOdkl.r".. hi,,"'}' of ""yoU S« Rc.oaId e"",. "'Pilyol. i. R,,"io and T<!<>'i,ion ~roodc>";OI:'

I"""'" of t.... ond E<"""",00'. 0',,,,,", 1979. ,(>9-),818. I Ihaok ernl New"...k for lio; 1!1i< "'-""' 10 m<.19. The ""."'"' of popul"'ion 0 h<r< i, "'" <he .0W'< population ,i.... i, ..c1ud<.

,od,vidI.I.l'.....~,thon 10 ......11 as illdi,ldual._, ,h."60,lOTh. ooosumet price ITIdI:, ,,,t.: mea,".. ()( i.nation .«<1 '" odjus' "'~"."11. S« Eric Ilo<hRrt in S.lou<on "Why <he """",d inJw,y ;, lilli"1I "'" "n

Rle" llo«mbtr 19, 2001 .. htlp}/Ji,."I,...<Qm!<otlmo'iclfo""",l2OOIII2I19Imosic_,odu'lfy..oidebarhlldexJ"m1.

21. They Of< in to. ,i<i'i'l' uf''',.."y million I'" y... in the US, M..k video< <OIl he1""'1'" of ••• ,,,,,,,itot< fur ,in&'" ,ince they do"", <""",i. '"" mu,i< from on oM"••1""",. The RI...A proo_ do.. COl m'lli< ,idroo b,n ltJ<i, >ale> uumbeT, .'" ..~n "",..,.Ih., 1"""= of 1"'"' mu,i< ,iOJ;1e>-

!l. These "'1""",~"I..p«_ io 1991dollan,24. I am r<~atin~ tI>e l-track IIIp< phenomenoo 10 • le.,.,. ""LO' ,ioco it> ..Ie, ~'",e

..ve, any"'''''' ., larg< .. <he ....,.,.. media f""""", and g·lnoCk, ~'e", popular for little0'00""..... ,00 <lee"'" of ltJ< 1970s,

1:5. The l"''''th io marko, prn<Ir.>tioo. b<li"n;"~ with 1'llI>;o: O,:l(}. 1.'0. 2.m. 3.90.~A(I. S.lO. ~.oo. Mil. 6.SO. 9.00. 6.00. 6.00. l.lO. 1.90.2.00. I ,00, 2,~

'" !>TAN J. LIEROWrrl

26. If ,j;""",.., """" ",1.....1, e<><><l>" r""" l_1O year, Ii..~ """,Id" roodI""u" fot ocn....~_ On II>< _ !>and. ifdio<oonlS "oritd ,""'.....bly from Y"'" 10yO"' ..he V""'lh '" WoJ_M...~ be;"" on< """'" to ""'1'«1 "'.. di>eoo ........... no<"")'<'<n !he .'" of lIS' pn<e> oould <01.11< m"leadiol ....l"

27. In 2OOJ. per co~". iocoo., f<ll by S40. bo, " ....11> $.!41 Ili~he' ~ "'" 1999 ".hl<.2S. I ..y ,hi, fully ."'_ til.. dun"llhe <I<~"", ..I<, d«>pp<d from 14,~ m,m"" in

im '0 S.S mill"", in 1932. There Ill'<,.,oo "'ason, ...., Ole <>1<. _.tum ..... so >lronfly",I.L«I ,,_j'" the f.1I i. """''''' .. Lhal Ii,.,." """,<>=;t ,. lor """" s<=< «On<>OI;';

_ """". r..wo haJ h." """""..le, """idcr>bly, ....0 <he tio,,, 1>«. f. I<M'... 11I<n:fOf<. lhe «tim< """".i ,,,,,Id h...., ho,,, bornmoo: ,mportaDt ,han the Urn< """"'"1M dlJrin., .... <l<p«..ioo,

19. Son>< Cll and DVD pL>y.... h_ """nlly "'"",~ tho pl.yinl of MPl Me. 00 CD>..... 100"'" k_ ,he pen«t..i<oo of Ih«< """hi"",...,t '"'I'<"-' II i, no< )'<1 'b.. I.,...,S,mil..,y. .,..,...ok MP} p1.y... or. r<f"J'l<Xl1O ",",-c <>U<ID<ly omall ....~et ......,•• i. Ihe.ingl< dil'"

30. "AI ""OS,,'" . 'CV<n: o:,,,M-.,, <l.o~ h' b<'"1 ......... ,10 ,,,. I""I'<'1Y ri"'... of""'ro:" of,~'ri!h" in ",..00 ,OCOIdiol' and m."">J ,"''''''''''..... .tld<, pre"''' aOOOffiCIII"1 CQftO.iir""'~ ,t.: '''',rry "",~Iy Iw no ",", .. Unl<>. _"I rJl<>,I.,ful;,don< '0 "''f'O''d to tII<. ",,"''''m. II>< ind""'Y ;,..If I, ,,' ri,t: Ftool 0-.....,.', ""i·"""'y '" I'ffl3 "" rh< H",,,,, ~",;<).,I;nl At<. It,.,;"10' befon: rh< 5,b<vmrni11« '"' """,,,~C"I'!'TII"" ,r<! TllO<l<m••h, 0<0000- 2S. 19S1.

31 '"fonll>l"'" on rh< oumoc. 0( """t u,"'"'" Ib<g,,,m~ ",ilh 19~11, os ,,~II '".. r,,.,,..,.,,, 1><""" ,.. th< p<~"," "'" 0( I".ubl< l«hnt>IoJ-'<' >II ","u, frum r~,".

Mart" ~,,.=t>. ".ieh IS ••.""" of ,0< C"""....., Ii~i<e A""";..IOO. Th< bl ...t..,«It< ,...... ror 19J8 <Om<S from tb< tell' 01' 'Il< 1_ F.<llhon of·'F..,<rtIU","",,' Indu,tryF..."OOOillIC" IHuokl \bg<1,~"Un,,"""y J'r",.j .a". rho, ill 1971 _o"m••dy150 ..11I... l>IIuot ..!'" ~..,. 00>1<I.

32. ">lm,l.. ,mpiiC' 00 ..~ "'lOkl """ur ,I <....,te, w<u"", oon5i<l<mJ of <G .....q""I;,y to lh or Co.. rJrLLl ",I<,"i", dl<m to """.Il'inJ """" ....0'

J}. n.:~""lllr<""ffi<;,-n'mlglllb<""'~_""que>I_~,kdi...in ~I"y """'."."'" thlO! coonciokd ~·,t. "" dodl"" '" .Ibom ..." To oonrrol 10< ,hi,_'!>i1 C<,;nc.....w ",I"ioo>hip. I ran thi, "'I"'''''''. e.\c1l1<bng <1a1.I beyond y.... 2lXXl.'111< I""!abol"y«><!ocio.' rJrowed by one "'iJd.""" " "'" "",",ieO] ,iJlliocVlC< (t .. 1.4)

:14, n", ,,,,,,,1_ drop> 10 om If ,I><: pori<xI;, .,tend«.! '" lOO2. The <Irop i. th<<Off.I"li""",,'ur., ""'"'...... bocau", ft<Of\ll<"<'llll<> ILi<"O~ badly .inee 2000 buI """,io;

00, ollie" ~'''''''' ha,'< don< ,,~II. 11M, ....Jd<n "'verg"";" """Id I>< 1><,.., upl.o;fI<d hyM~J _'n"""" ...." by • <U<ll<. "I.....k>n of til< ",I..i"" OOOl(lI<-mc,tan"., of to< I"'''

fI«>'l""".J$, 5,,,,,,, 2000. vW;\oog>m< ... ha,~ ",..,inu«l1O I""""", "he",,,, CD """",..e, ha""

f.I!<n. The rotT<l>t"", for ll1< <IlIi", ""nod iL "'Ph'" (-U, 16),36, ?'!>e" ll1< y<:.... WOO-WOl_ 1""lod<d. Ih,,,,,,,,,,,,,• ., """""... ""~';\" (-03~).

The,. iil>< J y..... r«ordcd """icularly f&rJ< in<rea>es I<r OltO grow'" illHI II", ""gat;""o....~ in CD ..1«, Bu' ll1< """"" farKe I.....""" m~ """."" """" ""'.., la'll'., to I>< ...,irely ""1""''''''''«1

37, ], would.', .~... to I>< inromo:. Th< """,I.."", of income mon,.. ond ""'" ,.....abI« il 0.20 for 110, <>fIiu chanJ<'. U.24 fo< .ideopme """....ch~ """ -O.W 10<p<ff<',>nI«I "."."

)l.~ M oo ... u.s.•.,....... -.On,- -... .. -.. s.- 01:,-)9 ""Won .....-...,._.....__..__.1__.,......" _b«w<a... _ of_......_ .

.. _ _.. .. _W r..._ _

... a.....r_.I1' _--. 'p I "' _~""_ ...........l_ p ... _,.,;", _~of-_._----..._~ .."'""- .._-1060;. ....._._...... 100_·1 ' .. • __.... Mf'}_lot.. 5 AM. .._I ,II_"I"'O__~__...-.,......._-_........__ ...-,......,._ r_oo • .. _ • __ 1, 104-._.....,._ I__ c of__-- _~of_,.. _

-_••_----... ttoq ...-,.--...... I _do",

............... ....,.. ..--__I_...... ..-.,.,...1Olool4__-'-"1'....,. ...,. I oo Wut _lb<.dio.--...of i dl<~ ·-beoooo __..." ............ .,....~ _ ..__.. 1011 .........~ """" _-""_

.1 on;, ........... ..-. _ ... IUAA _I> _"" """.. _11,-"-' KonR-II. ~'- iofGo. '_ io..- .... RIM _ .........noo.cooo. I __.........._._..__ ....;._"'I.. _r""" ..__......hl.cly _.~ IVo _ ~ "" """",o<ioo. 01 ... """Ito ill hold .........~~~_ i. "'" *""""I .......... _ ".... " .

~·l. "'lI!IoolI~ 1..,.. I .... jj+ .. "'"_. _ "'"'_ I98J dol. iO!'I'<'d'""" JH. """" """0' <loIo """'Odes oi!N In"" lui .,+ ., ....oWe>< COOOJ"'Y. 1'noo """" of po",,,-:> .....x by io 'N' ...,.r 11oo i.......ocdoip'iico"l~ 10 ,hoi"" do;:od<. from 11.8 .. ~.7..

• J. Tho t,,,,, "pUrl roMopaoro>l1<... «<wJ...- "".. coI1<lI" <"or""'" ..1111 ..1<> •.."" 'YJ>I<oI r<a)fd _. I, f""od 'hIO ...." r.1l i. -.. «>I .... <_>CO. "'" <!Ii>..... ,.... ror .... )'t"1rior '" Nor-r·' ..i~ .. 10'<1I .. fot YW 100....·i'" ., 11","1di",." ,hi> JqIUI1(-J ) io d<tail 1M 0I0p. 7cf R"I"o~"" Nco.....n. 6r0rt0m~.

.. II IU\"fII)' loIc rotio cf d>e eo<l)' oI>u ......"y ity ond..._" .........._1~,. Tho"",·N_ f.oII ill fI""dIuo~ iI.-.. ,"',<!I 1\noI"'P roull io ....

I'll"'<" "",,', r_ R"""" maikn ................... ........, -.,-"CMt"I"" ptb< .... iooli,l 1''' ''''''''MPJ6I<o___-. _<If_o_ ,.. -...., _"'--. - ..__ • Io)p;JobcoiI ""fII- .,- to._ ........__• ' cn.CIOIio<_<lf,. _.__

bri<t.d , 011I 011I.................. (00 ....,..... -r_101 b<"'fUIIJ __ oo a. O<nnaI.

.................... -,..... of.._r-..."....__-~--"' _ -..-" "'.cat cr_

~1 ""' .......CVOio 1IooI .... _ ..__._'--<lf"-)1I .I"'al.. __

STAN 1.1.IEBOWITL

".l "" it5 peak. No",,<, dow.Jood>..,= """,,,le<! to be in ,be ,'idni'y <Jf 2,8 billionhie, I"" "",",'0. It •.-., .1", d.imed ,.... tho four ,__ Nop,,<, "',"""""",nt>. " ..,T,od.AudIosol.,y, iM••h ."', Gnotell.. W<,< t'«pon.11>Ie for l~ billion d<••.-nload<d ~Ie>.

mooth '" AOroSl <Jf !OJI, a1'OOuj;k .... all of """" ....'" ""'p. The data rome fromWe""'';«.' «onpat»' "'" "",k, I,",,,,,,, ""SO" "'J"-"'l<d by & ..Ie, P""'e lOG N"",'.SeO'k< \ B",'OII Bo",,", S<:f'lemb<rll7. 200 I in '''S''"-'!': I.<>ol- "'" Ial:>d>: Ii Ie ,wappOnum...;"8·- .'><e bI'P1"'·"'·". idl-1M.'tIidin>J200 1.oJ>Ml]!:Studl'1.orJl<00U..ab<1'F1IeSul'I'inpNm1A...",in~ len ""'1;' p<f CD. <hi. wwk! iqrly JOO million CD> p<f """"" .·orth of ""'~.M<onIing '0 RIAA "OmM>: U.S. J'>lI';OI'IlII ..Ie, ,.... """"'.i.......ly 80 mill .... CD< f"""mooth, 1<>, ,han ,_ thin:! ,be CD «/"i,...,," n,mI:o« of """."_•. Tho> the poI<OI'>J;mflOCl of Jo..-nloaJin~shook! ""'~ h«:n laIl<. Accordm. to the IFPI. 0JUl ..1e> of CD>""..",wid< ..., ....,!luIo n", and .lIaIfbimon. "hi<h i'It....... d>e ell "10;,-' ofMPJ

00--" """",~9. The RIAA ha> ><fit OOIll11f<" oon-.l>", of Ie"er, thr<o,cnjn~ 1t.,1 "'101I If. roo- e,·

""'J'Ie. ",booI, "'" bu~"",-"" 00 not ")' 10 ",»rid d>e oo.,·.loaIbtlf of <ong> Ihtooy, I!l<;r......·m'.They hav<: ~I<llal IndI,'''''I, ,,1>0 kiyo mod< ,j lable Iarv< oomher< of""'8'" f'«'-"~P«'n,"~orb. They h>,', "-'\ad"""",,,",,"" i"; pe«-IO-pe<-' oo..'nloood"."I,h_.~. Not< Ihallreoti">l MP3. as • "",' form>< .. po<.!;ble. bt... !ha,;t ha, Ie.., Ihtoolb

2001 .• ,ny;" 1m!"",' i" "'" l"J'1"l>I< ,,,,,,toe 'O'ilh fe_·ft ,..... Ihr« mill ,,, in uO<II, It ..... '''" or' "mi!,v >tOe. "'1"J"<d in USA Thd,y i. 1OO2 bul"", diu<d or

al,ri""'ed to tllo RIAA, 'M' "'" <U'l'f'Cl 'M' p«h.r» MPl <lo..'nloodillll "IIV" "'"<."'" ;'d' kin" Iu th< r<'e<..d indu,")'. AfIe, all. th< RIAA ,,"mbo.'fi f.... ,001 ,,~,e OOIj-el00' ond "",<I"d,,.. in 2000 ~q""< "",n I"''''' tho ....'1 p<>&Ii<i,ede"em of MPl .,,!<.Il\od ,oo.glu th.. ,I>< ,ad: of CD bum", ",.. .lot"'oJ "pl.nation for "'hy Iwm '-ad not j-"""""'n up •• !<'Ole .imll.. to ,I>< MP3 ]lbeT><>m<non. bull!l< '<pori of lO"l' CD .,.,.....-..tlip>«n><d 10 ....,..te. "", «planlOtion. SI>otIIy oft" thK.•'110" "'" 2001 00"'""" ''''''' OU'.t"" <Io<h"" in CD <>.Ie' 1>0<..... r..- "'"'" 'f!f>"""'I.~ my i.lrn<-;"w i. s"kln MoS"i,.. ..htIp:/"""''''',!-4Ioo.oomIt«M<",ulel2OO:w6I13ll'''"''''"i''fllltlc:<.hlmll"

g N.. emy "'OSO< rlS<T Iw .""",,"tN, "'''''' """,,,nO"' !'<""lNtion i,le.. m.n l~.5J. n., ro:;onJini i_n,y i, li~dy<" romp"i. tho> ;f=-<..... r.11 ">' 1l.l'l'. !hal pn>Il ..

,,'i)l h>,~ 10 f,lI ral more. Whil< 'hi"" j, 00IIlC truth '0 <hi,;n tho -_ run:' til< "",onJin~

i_,,,), OPP<'" to I>:: qoil< ""I.ble. ,,·ill> .... minimum df><""", 1<.1e <N< """Id '<'J"W<gi_ p«Jd"""" i" 0«1<, to I>:: obI< to '0"';' ''''"'ket. The<efote........ "Iuilibrium U1uuJd",~,,"Ially I>:: ""hl<"'<d ,,·..11 norm:II profilS bu, ......" =""11<> 2O'ilr ""'<1'.

5-1. I..""""",, L<"i~."J"" Cor"I"."';"'" Coop'''' """'Id hdp ""i,1> 1<1 po;.! "i"""',II<li""'"1 .... Inlmw:l i..o "'" "..... of "'" hi~ ''''''I,." n., Stood""- AfW 06 lOO', Ne;1W"""ocl N,,,",,' -1_ .Non-rornm<",w U", I.,,")' IOAliow f"", Plf file·S,,-.pp1o(.nd Rem;,ini- W"'~;"i I"-per. Rom<>- '" ""'" 9

55. St",d L;,ix>wil<,''11>< I'ro<IocrionofMu,,,, m ''''' fll«of I"<.-""[>«'tlownl""',o;lJoe, ""'..<"" """,,1101"11>::''''' tIwl d>e ......".'f". ,,00.;". popel.

5<\. I di",u" <hi, lOt Imgtl1 in my 0&... poii<)' """I)·,i. 000 in my 000l "Rnhinlini IhoNnwort Eeonomy.·

WILL MP3 DOWNLOADS ANNIHILATE THE RECORD INDUSTRY? THE EVIDENCE SO FAR

Documents

Transcript of WILL MP3 DOWNLOADS ANNIHILATE THE RECORD INDUSTRY? THE EVIDENCE SO FAR