John Schwartz' article in today's New York Times, A Heretical View of File Sharing, tells how the RIAA, representing the music industry, sent out three versions of a six page response to a new study by Felix Oberholzer-Gee of the Harvard Business School and Koleman S. Strumpf of the University of North Carolina at Chapel Hill.

The reason? The study de-bunks the assertion that music downloads have had a negative effect on recorded music sales.

The music industry has pointed to the correlation between file downloads and declining sales of CDs based on data compiled through surveys, while the new study uses empirical data comparing the actual number of downloads and the actual sales figures for CDs, broken out by title. Experts say that surveys like those quoted by the RIAA in rebutting the new findings are notoriously inaccurate when they deal with illegal activities, due to the reluctance of those surveyed to provide incriminating information.

Today's article described the difference between the survey methodology used to compile the RIAA research and that which led to the authors' conclusions this way:

Instead, they (Oberholzer-Gee and Strumpf) analyzed the direct data of music downloaders over a 17-week period in the fall of 2002, and compared that activity with actual music purchases during that time. Using complex mathematical formulas, they determined that spikes in downloading had almost no discernible effect on sales. Even under their worst-case example, "it would take 5,000 downloads to reduce the sales of an album by one copy," they wrote. "After annualizing, this would imply a yearly sales loss of two million albums, which is virtually rounding error" given that 803 million records were sold in 2002. Sales dropped by 139 million albums from 2000 to 2002.

The industry response pointed to file sharing as the sole cause for the decline in CD sales. Schwartz wrote:

The industry response, titled "Downloading Hurts Sales," concludes: "If file sharing has no negative impact on the purchasing patterns of the top selling records, how do you account for the fact that, according to SoundScan, the decrease of Top 10 selling albums in each of the last four years is: 2000, 60 million units; 2001, 40 million units; 2002, 34 million units; 2003, 33 million units?"

According to the article, the six pages of rebuttal information provided by the RIAA in response to this study continued to espouse the "single bullet" theory for the decline. It ignores, however, the fundamental assumption that not everyone who gets something for free would buy it if it weren't free.

The response also failed to consider the negative effects that the economy, job losses, fewer new releases and radio station ownership consolidation, resulting in limited airplay for new releases as alternate causes or contributing factors in the decrease. In addition, the decline of a market segment comprised of those purchasing of CDs to replace vinyl and cassette versions of the same title may have been a factor.

The study found that, statistically, there is zero correlation between file downloading and CD sales, although the authors had initially expected that there would be an empirical relationship between the two suggesting a causal relationship. Unlike studies conducted with an agenda in mind, this study actually disproved the authors' original theory of its outcome.

I would have expected the opposite. The study does show a correlation between the music with the highest number of downloads and the highest sales, but no evidence that says that downloading files increases sales. This correlation suggests that, rather than contributing to a decrease in CD sales, it would be interesting to test whether file sharing actually might actually drive them by word of mouth promotion.

It would also be interesting to look at the effects on music that falls outside the realm of "Top 10 Selling Albums." I wonder if there has been a different effect on the sales of lesser known artists.

The evidence, however, says there is no link either way. Too bad the Justice Department has already appointed a task force and made downloading some music a Federal offense. Aren't there more pressing issues demanding the time and attention of the US Justice Department?