Online music piracy is without question ranked among the top reasons for the decline of music industry in recent years. Many musicians and prominent business figures have blamed the illegal downloads for the difficulties they are facing, even going far enough to say piracy will mark the end of entire industry.
But according to the latest study published by the European Commission Joint Research Centre, piracy is not to blame. Using Nielsen clickstream data on a panel of over 16,000 European consumers, Luis Aguiar and Bertin Martins reached the conclusion that illegal downloads have no essential effect on the number of legal purchases.
"Perhaps surprisingly, our results present no evidence of digital music sales displacement. While we find important cross country differences in the effects of downloading on music purchases, our findings suggest a rather small complementarity between these two music consumption channels. It seems that the majority of the music that is consumed illegally by the individuals in our sample would not have been purchased if illegal downloading websites were not available to them. The complementarity effect of online streaming is found to be somewhat larger, suggesting a stimulating effect of this activity on the sales of digital music."
But in the most interesting part, the findings even suggest that illegal downloads are boosting the legal sales for 2%, saying that "Internet users do not view illegal downloading as a substitute for legal digital music." Interestingly enough, the study also claims that illegal downloaders are twice as active as the legal ones, meaning that more passionate listeners tend to check multiple sources prior to making the purchase, boosting both illegal and legal downloads.
"Although positive and significant, our estimated elasticities are essentially zero: a 10% increase in clicks on illegal downloading websites leads to a 0.2% increase in clicks on legal purchase websites. Online music streaming services are found to have a somewhat larger (but still small) effect on the purchases of digital sound recordings, suggesting complementarities between these two modes of music consumption. According to our results, a 10% increase in clicks on legal streaming websites leads to up to a 0.7% increase in clicks on legal digital purchase websites. We find important cross country differences in these effects."
The subject of music downloads is definitely a complicated topic, as it is hard to reach any concrete evidence on either of the sides. What this study surely goes to show is that things are by no means black and white and that access to free music can have its advantages, if approached properly. The impact it will have on the music industry yet remains to be seen and further innovations are likely to be required.