A newly study commissioned by Industry Canada, which includes some of the most extensive surveying to date of the Canadian population on music purchasing habits, finds what many have long suspected (though CRIA has denied) – there is a positive correlation between peer-to-peer downloading and CD purchasing. The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study For Industry Canada was conducted collaboratively by two professors from the University of London, Industry Canada, and Decima Research, who surveyed over 2,000 Canadians on their music downloading and purchasing habits. The authors believe this is the first ever empirical study to employ representative microeconomic data.

The two key findings:

When assessing the P2P downloading population, there was "a strong positive relationship between P2P file sharing and CD purchasing. That is, among Canadians actually engaged in it, P2P file sharing increases CD purchases." The study estimates that 12 additional P2P downloads per month increases music purchasing by 0.44 CDs per year.

When viewed in the aggreggate (ie. the entire Canadian population), there is no direct relationship between P2P file sharing and CD purchases in Canada. According to the study authors, "the analysis of the entire Canadian population does not uncover either a positive or negative relationship between the number of files downloaded from P2P networks and CDs purchased. That is, we find no direct evidence to suggest that the net effect of P2P file sharing on CD purchasing is either positive or negative for Canada as a whole."

Bear in mind, this is not a study with a particular desired outcome or sponsor – it is the government commissioning independent research to help it make better policy decisions. The results of that research, consistent with earlier Canadian Heritage sponsored study by Shelley Stein-Sacks that refused to blame P2P for the industry's problems, is that P2P actually increases CD sales since those that download also tend to buy more music.

The study also addresses a number of other frequently discussed issues. It finds that:

there was no statistically significant relationship between P2P downloads and digital download purchases from stores such as iTunes. In other words, P2P downloads neither increase nor decrease the likelihood of such purchases.

CD prices have little impact on CD purchases, though there was some indirect evidence of pricing being factored into those that P2P file share.

people who buy digital downloads are not less likely to buy CDs

people who own MP3 players are less likely to buy CDs

people who buy large numbers of DVDs, videogames, cinema and concert tickets also buy a higher number of CDs. In other words, consumers of entertainment consume more entertainment, not less.

household income has no statistically significant effect on CD or digital download purchases

The study is a tough read for the non-economist, yet given the breadth of its data and the importance of its findings, it is a must-read. When combined with the income generated from the private copying levy, much of which is seemingly linked to P2P copying, it becomes increasingly clear that the industry has benefited from P2P and that there is no "emergency" that necessitates legislative intervention.

Update: Jack Kapica of the Globe and Mail provides additional coverage of the study and its policy implications.