The Record Industry, Lie? Y’Think?

Confusing correlation for causality, the record industry has long blamed file sharing networks like Napster and Kazaa for a drop in music sales. At last, an independent study says that whatever has caused the woes of the music business — like, for instance, that lots of contemporary music sucks, or that bands can’t build a following when they’re not allowed to release new music for years at a time — the problem isn’t file sharing.

Lot of good that does Napster, of course.

The study shows that people who download music for free were probably not going to be buying it anyway. Why? Most of them can’t afford it, not at $18 a CD.

“Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates,” write its authors, Felix Oberholzer-Gee of the Harvard Business School and Koleman S. Strumpf of the University of North Carolina at Chapel Hill….

“Say I offer you a free flight to Florida,” [Oberholzer-Gee] asks. “How likely is it that you will go to Florida? It is very likely, because the price is free.” If there were no free ticket, that trip to Florida would be much less likely, he said. Similarly, free music might draw all kinds of people, but “it doesn’t mean that these people would buy CD’s at $18,” he said.

Two questions for further study:

What’s happened to the record industry’s profitability since so many list prices were cut from $18 to $12 last year? Has the loss in revenue been replaced by an adequate increase in volume?

Do free MP3s really act as promotions for paid music the way many artists, like Janis Ian, suggest? Is there any evidence that downloaders buy more music than non-downloaders when they do get in a position to afford it?