Has "piracy" hurt the music business?

Has so-called piracy really hurt the music business as much the RIAA claims?

Well, not according to economist Joel Waldfogel, who believes music has actually been “democratized” in past years with the balance of power shifting from within the hands of major music corporations, to smaller, independent labels.

Since the advent of music piracy, researchers have tried to figure out its affect on major music label revenue. Some found there was no adverse effect on sales, whereas others argue that piracy has killed record label sales.

Beyond sales, the other argument is that music piracy affects the creation of new music, preventing musicians from creating new songs. According to the author of the report, this is entirely false and that there is no evidence to support this theory.

“The legal monopoly created by copyright is justified by its encouragement of the creation of new works, but there is little evidence on this relationship,” Waldfogel states in the report.

“The supply of recorded music appears not to have fallen off much since Napster, and there is at least suggestive evidence that independent music labels, which operate with lower break even thresholds, are playing an increased role in bringing new works to market,” he later concludes.

Aside from the democratization of music and profits, Waldfogel touches upon the changes in music distribution. He says, “Bringing music successfully to market has three component activities – creation, promotion, and distribution – and new technologies have changed each of these substantially.”

Music sharing and discover sites like Napster and Grooveshark have helped small bands record and share their music with limited budgets. Similarly, YouTube, Facebook, and other music services like Pandora and last.fm have helped bands self-promote.

Perhaps it’s time for the major music labels to adapt to changes in the music industry. Instead of focusing on piracy, maybe it’s time to renegotiate how these companies share and license music.

The report concludes that the supply of new music has not decreased because of piracy, but rather the entire music industry has changed and democratized, giving more power to smaller labels. Although the shift of power is perhaps hurting huge labels, piracy is not to blame and the music industry is more alive than ever.

(Via TorrentFreak)