Pirates or Explorers? Analysis of Music Consumption in French Graduate Schools

This paper analyzes the impact of music file sharing on CD purchases. Traditionally , two arguments are opposed concerning the impact of the music file sharing on CD sales. On the one hand, MP3s downloads only reduces sales of legitimate. On the other hand, consumption of free MP3s could lead people to buy CD which they would never have bought otherwise (the “sampling effect”). Because the court in the Napster case and some academic researchers have dismissed this sampling effect, this article seeks to assess whether sampling does indeed occur and in the affirmative what are the relative contributions of the positive sampling and the negative competition effects of MP3 files on CD purchases. To do so, we administered an anonymous online survey in two French graduate schools from May 26 to June 3, 2004. Using answers to the questions, we analyze the factors that influence the probability to increase CD purchases after acquiring MP3 files and those that influence the probability to decrease CD consumption. First, our estimation results suggest that there exist two populations of music consumers: people who sample a lot (the explorers) and those who do not sample (the pirates). We show that MP3s consumption leads to an amplification of consumption patterns: music fans use MP3 files to discover new genres, artists and albums, which tends to increase their purchases of CDs, while students with little interest in music use Mp3 files as direct substitute to CDs. Secondly, we provide evidence that the channel of MP3 acquisition also matters: communities formed around an intranet positively impact CD consumption. JEL Classification: L82, L86