The Herald reports that most music is bought by the very same people who illegally download a lot of tracks. It says
plans … to crack down on illegal downloaders by threatening to cut their internet connections … could harm the music industry by punishing its core customers.
Now that seems like a stretch. The key here is to figure out a plausible counterfactual to the present situation. The Herald seems to be suggesting that, if these people didn’t have access to an internet connection then they’d lose all interest in music. Which is pretty unlikely! Let’s think about what might be a more plausible counterfactual.
Suppose there are two kinds of music: paid for and illegal. If illegal becomes more expensive all of a sudden – because of the risk of your internet being cut off – then two things happen. First, you’ll probably consume less music overall, because it’s more expensive now. Secondly, you’ll switch out some of your illegally obtained music for paid music because the two are substitutes. So a first look suggests that the music industry would probably be better off if the cost of illegal downloads went up, even if everyone who buys also downloads.
Of course, there could be other effects which confound the initial analysis. It is possible that a reduction in goodwill towards the music companies would shift people towards preferring illegally downloaded music. That might offset the price effects.
It may also be that, over time, demand for artists illegal and legally distributed tracks is complementary. For example, I doubt that Britney Spears needs any exposure via free downloads to boost her record sales. However, an emerging artist may gain sales as people hear of them through costless online downloads. Of course, there’s nothing to stop that artist from distributing some tracks for free in order to gain recognition. Many musicians already do that through their own websites and MP3 blogs. Indeed, the existence of illegal downloads just prevents artists like Britney from maximising their profits without offering any new means of distribution to emerging artists.
It’s hard to say which of these effects will prevail without some empirical evidence, but it’ll definitely be interesting to look at the figures once the UK has started to crack down hard.