The theoretical methodology of comparing online music sales with downloads is legitimate enough. Having that data furthers the understanding of behavior of the aggregate of individuals who are continually faced with the choice between either buying a song or downloading it. When those individuals choose to download, CD sales decline, and vice-versa. In reality, however, it is nearly impossible to collect this data accurately. The main problem is that there are too many file sharing systems, with uncertain levels of market share. In order to assemble a representative data set, each of the largest file sharing systems would need to be monitored using sources correcting for geographic biases, and the resulting data weighted according to share. In addition, the majority of these systems are very difficult to monitor accurately. The study only collected data from two OpenNap servers, at a time (Fall 2002) when KaZaA was the leading file sharing network. While they address this issue of assembling a representative data set, their defense -- comparing their OpenNap data with P2P activity from Expand Networks and finding they correlate -- is not very convincing, since the geographic distribution of traffic running through each of these systems is never documented. So the validity of the data collected is dubious.
But suppose that the data which could be collected using this method was, in fact, good enough. What would we know then? This would only provide the number of tracks downloaded on the Internet. The number of tracks which are downloaded once, and then burned onto CDs (which are copied) or passed around through private networks, is not captured in this metric at all. As a greater proportion of the world's back catalog is downloaded into the private collections of file sharers, the less likely the overall file sharing population is to download those particular tracks.
Of course, this would tend to indicate an underreporting of music piracy rates, which would make any resulting sales even more impressive. This seems paradoxical, as file sharing activity and sales would, prima facie, seem to be inversely proportionate. In this, the study agrees with other similar studies which found that users who download more often buy more music as well. The idea here is that file sharing stimulates societal interest in music, and thereby increases demand for it.
So does this mean that file sharing has a neutral, or even positive impact on music sales? Of course not. The increased demand for music has resulted in almost unquantifiable levels of piracy and a negative cumulative annual growth rate for the CD industry (at least until Q1 '04). Online music stores are still only generating statistically irrelevant amounts of revenue, and the market is, as ever, in dire need of a legitimate, commercial file sharing architecture. When such systems are launched, the industry will be able to rejuvenate itself, provided it hasn't damaged itself irreparably in the meantime. Oddly enough, research such as this may help ease irrational fear in the executive ranks of the industry and drive companies toward providing such a solution.
