P2P File-Sharing: How Does Music File-Sharing Affect Recorded Music Sales in Australia?

Like many other countries, the Australian recorded music industry has suffered a significant decline in sales over the last decade or so. While it would be naïve to dismiss digital piracy as a contributor to this decline, there is inconclusive evidence to attribute the entirety of the decline to piracy. Moreover, there are many other salient issues that need to be considered when understanding the observed sales decline. For example, these may include music pricing, changing consumption habits, live performance incomes, and demand externality (network) effects of music consumption. Following the introduction section, this chapter begins by documenting some aggregate level industry sales statistics of the Australian recorded music industry. Beyond these statistics, summary results are also presented from a recent survey on Australian consumers’ file-sharing activities in relation to music. The third section provides an extended discussion of various economic issues which are relevant to a more-rounded discussion of piracy. The fourth section discusses some recent academic studies of digital piracy related to music, while the fifth section reports on a recent econometric analysis of digital piracy in the Australian context from McKenzie (Australian Economic Papers 48(4), 296–307, 2009). The sixth and final section provides some concluding thoughts and comments.