Music Piracy: Bad for Record Sales but Good for the iPod?

Leung, Tin Cheuk (2012): Music Piracy: Bad for Record Sales but Good for the iPod?

Abstract

Music piracy is a double-edged sword for the music industry. On the one hand, it hurts record sales. On the other hand, it increases sales of its complements. To quantify the effect of music piracy, I construct a unique survey data set and use a Bayesian method to estimate the demand for music and iPods, and find three things. First, music piracy decreases music sales by 24% to 42%. Second, music piracy contributes 12% to iPod sales. Finally, counterfactual experiments show that Apple's revenue could increase by $36 per student if music were free.

• Item Type: MPRA Paper
• Language: English
• Keywords: demand estimation, iPod, music piracy
• Subjects: K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks; L - Industrial Organization > L8 - Industry Studies: Services > L82 - Entertainment ; Media; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital

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