Has file-sharing helped society? Looked at from the narrow perspective of existing record labels, the question must seem absurd; profits have dropped sharply in the years since tools like Napster first appeared. But a pair of well-known academics argue peer-to-peer file sharing has weakened copyright in the US... and managed to benefit all of us at the same time.

"Consumer welfare increased substantially due to new technology," write Felix Oberholzer-Gee of Harvard and Koleman Strumpf of the University of Kansas. "Weaker copyright protection, it seems, has benefited society."

Weaker is stronger?



Peer-to-peer file-sharing on the Internet has certainly weakened copyright, but that's not necessarily a bad thing unless one equates "stronger copyright" with "better copyright." According to the US Constitution, copyright is about promoting "the Progress of Science and useful Arts"; it's not about enriching authors, except as a means of promoting said "Progress."

When we think about copyright, the most pertinent question to ask is not whether some change would produce less money for rightsholders, but whether some change would remove incentives to create. Has file-sharing reduced creators' incentives?

Felix Oberholzer-Gee

Oberholzer-Gee and Strumpf presented a recent paper at a music business conference in Vienna that tried to answer this question empirically. By charting the production of new books, new music albums, and new feature films over the last decade, the authors tried to see whether creative output went up or down in correlation with file-sharing.

“Data on the supply of new works are consistent with our argument that file sharing did not discourage authors and publishers,” they write in their paper, “File-sharing and Copyright" (PDF).

"The publication of new books rose by 66 percent over the 2002-2007 period. Since 2000, the annual release of new music albums has more than doubled, and worldwide feature film production is up by more than 30 percent since 2003... In our reading of the evidence there is little to suggest that the new technology has discouraged artistic production. Weaker copyright protection, it seems, has benefited society.”

The authors don't claim (anymore) that file-sharing has no effect on industries like recorded music. Though both authors also collaborated on a now-famous paper from 2007 which argued that file-sharing had no appreciable impact on music sales, they are willing to concede now that it might be a small part of the industry's problems.

Indeed, they round up a host of studies from the past few years suggesting that, on average, one-fifth of declining music sales might be chalked up to piracy. (The rise of new entertainment options like video game has also hurt the business, and consumers finally stopped "re-buying" old albums on CD by the mid-2000s.)

But looking at such declines provides only a narrow view. Looked at more broadly, the music industry "has grown considerably" in the last few years. When concert revenue is added to recorded music revenue, the authors note that the overall industry grew more than 5 percent between 1997 and 2007.

Koleman Strumpf

That's in large part because consumers' willingness to pay for "complements" like concerts and merchandise goes up as the price of music and movies falls, and because consumers are exposed to many more artists when prices are low or nonexistent.

Even if the music industry was shrinking, though, the authors point out that creativity has not declined—which suggests that weaker copyright can still promote the "Progress" sought by the Founders.

“We do not yet have a full understanding of the mechanisms by which file-sharing may have altered the incentives to produce entertainment,” conclude the authors. “However, in the industry with the largest purported impact—music—consumer access to recordings has vastly improved since the advent of file-sharing. Since 2000, the number of recordings produced has more than doubled. In our view, this makes it difficult to argue that weaker copyright protection has had a negative impact on artists' incentives to be creative.”

Unconvinced



The music industry doesn't buy the argument. According to international trade group IFPI, "Live performance earnings are generally more to the benefit of veteran, established acts, while it is the younger developing acts, without lucrative live careers, who do not have the chance to develop their reputation through recorded music sales." Thus, recorded music sales remain important.

And IFPI's 2010 "Digital Music Report" (PDF) makes the case that artists are producing less in states with high piracy rates. "In France, there has been a striking fall in the number of local repertoire albums released in recent years," says the report. "In the first half of 2009, 107 French-repertoire albums were released, 60 per cent down on the 271 in the same period of 2003." (This number appears to involve only major labels, however, and cheap digital tools mean that much of the music production today is done without a major label.)

Even Oberholzer-Gee and Strumpf admit that their findings aren't clear. It could be that, thanks to all these cheap digital tools, even more recordings would have been produced in the US were it not for file-sharing. But when the same trend holds true among book publishers, filmmakers, and musicians—the 2000s were about ever-increasing content—perhaps P2P isn't "disincentivizing" anyone at all.

And if it's not, the entire paper asks by implication, why don't politicians even consider weakening US copyright law?