• Ars Technica, Thursday, August 23, 2007 11 AM

A new study that says music piracy will cost the U.S. economy more than $12.5 billion this year takes a shortsighted view of pee-to-peer file sharing technology. The Institute for Policy Innovation study, like many that measure the negative effects of P2P networks, assumes most illegal downloads should be considered lost sales. To its credit, the study substitutes a weighted average that says 65.7%t of illegal downloads would have been CD sales. Still, it's a somewhat arbitrary, if educated guess.

One important factor not considered by the study is that P2P users also buy a lot of music. File-sharing networks can be marketing vehicles for popular music. A Canadian Record Industry Association study found that 21% of P2P users bought previously downloaded music on more than 10 occasions. Yet another study, published in the Journal of Political Economy, argued that the effect of P2P sharing on legal sales "is not statistically distinguishable from zero." The IPI study makes no mention of digital downloads, measuring only CDs.

The study also contends that piracy hinders job growth, resulting in the loss of some 71,060 jobs, 38% of which come from the recording industry, as well as $422 million in lost tax revenue.

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