Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 854: Piracy, Music and Movies: A Natural Experiment

Adrian Adermon () and Che-Yuan Liang ()
Additional contact information
Adrian Adermon: Uppsala University, Postal: Department of Economics, P.O. Box 513, SE-751 20 Uppsala, Sweden
Che-Yuan Liang: Uppsala University, Postal: Department of Economics, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper investigates the effects of illegal file sharing (piracy) on music and movie sales. The Swedish implementation of the European Union directive IPRED on April 1, 2009 suddenly increased the risk of being caught and prosecuted for file sharing. We investigate the subsequent drop in piracy as approximated by the drop in Swedish Internet traffic and the effects on music and movie sales in Sweden. We find that the reform decreased Internet traffic by 18 percent during the subsequent six months. It also increased sales of physical music by 27 percent and digital music by 48 percent. Furthermore, it had no significant effects on the sales of theater tickets or DVD movies. The results indicate that pirated music is a strong substitute for legal music whereas the substitutability is less for movies.

Keywords: Copyright protection; Piracy; File sharing; Music; Movies; IPRED; Natural experiment

JEL-codes: D12; D40; K11; K42; M48

23 pages, October 28, 2010

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