Copyright 2004 International Herald Tribune  
The International Herald Tribune
April 1, 2004 Thursday
SECTION: FINANCE; Pg. 16

LENGTH: 512 words

HEADLINE: Study finds downloads don't hurt music sales ;
Majority of file-swappers are non-U.S.

BYLINE: Hiawatha Bray

SOURCE: The New York Times

BODY:
Will consumers buy the latest music recordings when they can download them for free from the Internet? A Harvard Business School associate professor says yes, in a new study that challenges the wisdom of the recording industry's worldwide campaign to halt illegal file downloading.

"When we first saw the results, we said, 'No, no, no, no, no. We must be doing something wrong,"' said Felix Oberholzer-Gee, who prepared the study with Koleman Strumpf of the University of North Carolina.

But after rechecking the figures time and again, Oberholzer-Gee and Strumpf found that downloading music had no impact on sales of compact disks.

The new study also suggests that the recording industry tactic of suing Americans who make files available for downloading will have only a limited effect. They found that more than half of all downloads came from outside the United States.

Germany was the biggest source of foreign file downloads, at 16 percent of the total, followed by Italy at 11 percent.

The recording industry seems to have reached the same conclusion.

Tuesday the International Federation of the Phonographic Industry said its members have issued warning letters, lawsuits, and criminal charges against 247 file swappers in Canada, Germany, Denmark, and Italy.

The international campaign is modeled after one begun last year by the U.S. music industry trade group, the Recording Industry Association of America. Jonathan Lamy, spokesman for the group, rejected the conclusions of the new report.

"The overwhelming weight of evidence, analysis, and surveys attest that illegal file sharing has a negative impact on CD sales," said Lamy. "The Harvard-UNC study is simply one analysis taken during an isolated snapshot in time, and it is contrary to the volumes of research and analysis by countless others."

Most studies of music downloading have surveyed people who use file-swapping services, asking them whether they buy copies of songs they download. But Oberholzer-Gee and Strumpf feared that people wouldn't provide honest answers and claim that they bought recordings when they didn't.

So in the autumn of 2002, Oberholzer-Gee and Strumpf got permission to plug into two "supernode" servers on the file-swapping network called OpenNap to track the files being downloaded. Over a 17-week period, they watched users download about 1.75 million files, of which 261,000 were downloaded by Americans.

Oberholzer-Gee and Strumpf also drew up a list of 680 popular CDs, in a variety of musical styles. They tracked the Nielsen SoundScan charts to measure U.S. sales of these albums over the 17-week period, comparing this to the number of times people downloaded songs from the albums.

Oberholzer-Gee and Strumpf figured that if music downloads were cutting into record sales, there would be a decline in sales of a CD whenever there was an increase in downloads from that disk. To their surprise, it didn't work that way. "Downloads have an effect on sales which is statistically indistinguishable from zero," the study concluded.

LOAD-DATE: April 1, 2004