Critique of Effect of File Sharing

The most recent encounter with the illegal downloading community was the federal court case in New York against LimeWire, a popular peer-to-peer file sharing website. The statement was “LimeWire has cost the music industry hundreds of millions of dollars in revenue.” Although this is the opinion of many within the music industry, Harvard Business School professor Felix Oberholzer-Gee and co-author Koleman Strumpf had contradicting findings. It was believed by researchers the majority of those who download over peer-to-peer networks are teens and college kids that do not have a major contribution to record sales, “money- poor but time-rich” is how the article put it. So even if the songs were not downloaded by file sharing within this particular group, the songs probably would not be purchased. Instead of file sharing being considered a substitute in the music industry, it could be considered a compliment. This is because research states the people who actually buy CD albums “sample” music from file sharing networks and become encourage to actually purchase the music. The radio is also considered a compliment because it provides a free sample for the consumer, but differs for the producer. Another positive attribute of peer-to-peer services is free advertising, while radio stations may charge high fees which decrease competition by pricing competitors out of the market file sharing networks eliminate the barrier and increase competition.
In the previous blog titled Effect of File Sharing on Record Sales a major point is brought up as to why record sales have seem to decrease in the music industry. Because specific songs can be purchased instead of the entire album, the overall profit of the album would be a lesser amount. A solution to this issue could be providing a cheaper total amount for the album then that of each individual song. Also, developing compliments to new technological advances instead of combatting them would benefit the music industry. The highly competitiveness within the music industry makes it necessary to develop strategies to compete with the online file sharing networks, but in agreement with the preceding blog efforts should be made to feed off these newer developments which the firm might benefit more by producing a larger profit.