The Impact of Music Downloads and P2P File-Sharing: Notes

1 referrer

In this paper, the terms "paid electronically-delivered music" and "paid electronically-delivered tracks" refer exclusively to music purchased from an Internet pay-site, delivered over the Internet and not packaged as a physical good. The largest and most popular supplier of paid electronically-delivered music tracks in Canada is iTunes, which supplies music in a proprietary format distinct from the MP3 format.

2 referrePopular P2P protocols include Gnutella and BitTorrent.

3 referrerResearch material feeding into this paper:

• Birgitte Andersen initially provided Industry Canada with the questionnaire developed for the survey. The final version was shaped in accordance with the recommendations by Industry Canada and Decima Research, and in accordance with the results of the pilot survey conducted by Decima Research.
• Birgitte Andersen developed the Methodology Report underpinning the design for the subsequent data analysis.
• Decima Research conducted 2,100 telephone interviews with Canadian households, and provided the raw data.
• Industry Canada prepared the survey database.

4 referrerAll monetary values are given in Canadian dollars.

5 referrerThe questionnaire contains two questions related to the number of electronically-delivered music tracks purchased; the first is a binary variable (1,750 respondents declared that they did not purchase any tracks); the second is a quantitative variable giving an estimate of the number of tracks purchased in an average month in 2005. With respect to the latter question 1,832 respondents estimated that on average they bought zero tracks per month. We computed the regressions omitting all those 82 observations where respondents initially reported purchasing paid electronically-delivered music tracks in 2005 and and subsequently reported zero as the number of purchases. These regressions yielded extremely similar results compared with the ones reported here.

6 referrerWhile we would have preferred to undertake Poisson or negative binomial regressions for the models explaining purchases of electronically-delivered music tracks, these were not feasible. The reason had to do with the very high proportion of zero observations (85 percent of all observations) for this specific variable. Neither the Poisson nor the negative binomial model based on the count data converged (i.e. found a solution).

6 referrerOne of the OLS specifications, as well as the Logit estimation, reported in Table 4.1 show a statistically significant and negative coefficient on the P2P variable. As noted earlier, we consider the results from the negative binomial model to be the most reliable.

8 referrerThe estimates associated with the negative binomial model should be treated with caution. This is because the estimates are likely to be inconsistent, an issue that almost always arises. Thus, the size of the coefficient may be an under- or over-estimate.

9 referrerThe estimates from the OLS and Logit models also indicate a significant and positive relationship (Table 4.3).

10 referrerThe coefficient is slightly larger than zero and statistically significant in one of our OLS regressions.

11 referrerThere is some indication of a positive and statistically significant association with the 'hear before buying' variable in the three OLS models in Table 4.4, suggesting a market creation effect.

12 referrerThe coefficient on the price variable is not significant in any of the OLS or Poisson regressions (Tables 4.1 and 4.3 and Appendix 4).