That’s the question asked by Michael Smith. He doesn’t do a very good job answering:
My colleague, Rahul Telang, and I recently finished a paper reviewing the academic research on the impact of piracy on sales. Our review finds that, when viewed as a whole, the academic literature strongly suggests that piracy harms media sales: the vast majority of academic papers — particularly those published in peer-reviewed academic journals — find evidence of harm from piracy. This conclusion is consistent with reviews of the academic literature by Stan Liebowitz in 2006 and by Felix Oberholzer-Gee and Koleman Strumpf in 2009, but includes more recent studies — and we believe these recent papers make the case of harm from piracy even stronger than what the literature suggested just a few years ago. [Emphasis added.]
Since the main complaint about music piracy is that it harms the artists, three quick questions come immediately to mind. First, why is the concern about media sales relevant when most artists don’t find media sales to be all that profitable? Second, what effect does piracy have on ticket and merchandise sales? Third, what effect do official YouTube music video releases have on media sales?
The first question is important because it highlights the fact those who are most concerned about piracy are usually either useful idiots or corporate shills. Since I hate corporations (they are a fundamental market distortion), and since most music corporations are busy ripping off the artists they claim to be acting in the best interest of, I see no reason to defend them or their interests. Incidentally, that means that media sales aren’t really that big of a deal since most artists make a pittance from music sales.
The second question is important in light of the fact that there are more active music artists than ever before. If piracy makes music so unprofitable, why do more and more people release music? Answer: either profitability is so easy to achieve that the effect of piracy is negligible, or piracy doesn’t have a net negative effect on profitability. Or, to ask it another way: are artists relying other methods of getting revenue? My bet is that the price points are different now, which renders concerns about piracy obsolete.
The third question is important because it offers a control for the studies. Watching officially released music videos on YouTube or other legitimate video hosting sites is the most obvious alternative to piracy because by watching music videos online, one avoids purchasing music while still being able to consume it. Thus, if sanctioned YouTube videos are shown to cannibalize media sales, then we can conclude one of two things: either record labels are run by complete and total morons (a distinct possibility) or even the record labels understand that digital media is simply a form of advertising for the more lucrative aspects of the music industry, like tickets an merchandise.
Really, when you think about it, anti-piracy laws only exist to ensure that record label owners have another way to rip people off.