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Article published Apr 20, 2004
Online bogeyman?
Study suggests record industry exaggerates threat

Record companies like to blame declining sales of CDs on Internet piracy. So many music listeners are downloading music online and "burning" it on CDs to share with friends that fewer people are buying CDs, the companies say.

But a new study raises doubts about how much, if any, of the 30 percent decline in sales that the Recording Industry Association of America says it's suffered since 1999 can be blamed on illegal downloads.

The study by professors Felix Oberholzer of Harvard Business School and Koleman Strumpf of the University of North Carolina found that "Downloads have an effect on sales which is statistically indistinguishable from zero."
The researchers tracked online downloads of music tracks for 17 weeks in 2002 and compared those with weekly sales of the CDs that the tracks appeared on.

Using complicated mathematical formulas, they determined that the downloading had a negligible impact on sales. "Even in the most pessimistic specification, five thousand downloads are needed to displace a single album sale," they wrote.

The RIAA countered with a six-page statement saying the study was flawed, "incomprehensible to the layman," and contradicted by other academic studies.
The study's results suggest, however, that maybe the recording industry should stop looking for scapegoats and consider that the sales decline may have something to do with the overall quality of the product, and the high price of compact discs.

Music piracy is theft, pure and simple. But it's hardly responsible for all of the industry's ills.