The main economic issue that P2P sharing brought was a change in the financial landscape of the music industry and other interested parties. It is clear that when discussing the effects of P2P file sharing, most people only focus on its disadvantages. It is important to note that even if P2P file sharing affects some sectors negatively it can affect other sectors of the economy positively. In regards, to this, this article will identify both positive and negative issues related to P2P sharing and relate them to current economic models.
First, the P2P file sharing has increased the accessibility of music files all over the world. In economics, the forces of demand and supply determine the price of any product. Therefore, when the supply of a product, in this case, music files is increased exponentially, then the market forces will reduce the price of such files. One way to look at this is that with P2P file sharing, demand for music files has increase but the source from which they are getting the files has not increased. All the demand can be satisfied on one online platform that is free. Since the consumers get the files for free, then there is no way that suppliers can generate enough revenue to cover their costs. These costs include the cost of producing and distributing the music files. This inadvertently reduces the purchases in this industry causing the music industry to suffer losses of up to 12.5 billion (Adkins 1). In economic terms, the market has been flooded with counterfeit products increasing the supply and thus causing the equilibrium price to shift to the left.
Another issue that P2P file sharing raises is the death of the music industry. Since the music industry is an avenue in which individuals can find and secure employment, its death will increase the rate of unemployment. This is known as involuntary unemployment according to the Keynesian theory since a reduction in demand for the music files will force firms to reduce their output. A reduction in production output will translate to a decrease in the number of employees required hence increasing unemployment. This new problem will force engineers, artists, promoters, marketers, songwriters, and producers out of employment. According to RIAA, 71,000 people who worked in the music industry have been laid off since the introduction of Napster (Adkins 1).
Another way that P2P sharing is killing the new industry is by limiting the ability of the industry to support new talent. Every upcoming artist requires a platform that they can use to launch their careers. This, however, is no longer possible since the industry is in a slump. Therefore, the industry has fewer resources to invest in the recruitment and development of new talent.
Avenue for New Opportunities
P2P file sharing brought about new avenues that the industry might evolve. Instead of the players in the music industry fighting forcefully to limit the use of P2P file sharing, they should put this effort into finding new ways that they can generate revenue. Reduction in revenue is the biggest economic factor that P2P causes this, however, can be mitigated.
Instead of only focusing on selling songs to generate revenue, the industry can create new revenue streams through digital licensing. This way the industry will have a way to earn from their products as opposed to letting the world get their music for free. Another bonus of using the online platform to share their music is that it reduces the costs of production. Music industry no longer has to incur the cost of purchasing CDs, printing cost, and distribution costs. With reduced costs, the profit margin of the industry will increase and it will make up for the loss P2P sharing brought.
P2P file sharing has also benefited the electronics manufacturer. Since P2P file sharing requires improved hardware, electronics manufacturers have a new demand to satisfy (Christin 6). They need to come up with faster processing computers with bigger storage space that will enable individuals to store their new online albums. The demand for these new products will force production to increase causing the economy to grow in more than one sector.
According to a study done by Joe Caraganis, different age groups view P2P file sharing differently. He collected the data a below that will help analyze how ethical or unethical file sharing is.
Source: Caraganis 2012
When considering the ethical effects of file sharing in an online environment, two considerations should be made. The first one being that sharing music files does not amount to theft since creating an extra copy of a song does not deprive the owner the use of that song. The second consideration is that making an extra copy of music file infringes on the economic benefits that the owner of the song would have received from selling that song.
According to the chart, it is clear that individuals between 18-29 years have a very high tolerance when it comes to file sharing (Caraganis 1). This group believes that sharing does not hurt anyone and therefore it is not unethical. According to this group, file sharing is convenient and easily accessible as opposed to buying an original cd of the music. In addition, this group believes that sharing is one of the fundamental aspects of being human. People love to share and in this way, they can share the music they love to those without. They, however, forget to factor in the damage that they do to the owners of the music they are sharing. They do not factor in the loss of profits caused by their activities online. In addition, they forget to factor in the massive unemployment that their actions bring about. If an individual factors in all the negative effects of illegally downloading and sharing of music files, then they should come up with the conclusion that it is unethical to engage in such behaviors.
In the chart above some of the individual even go a step further to sell copies of unauthorized music files to both knowing and unknowing parties (Caraganis 1). This amounts to theft and it is unethical in our society.
In conclusion, file sharing is a new innovation that is already widely accepted. Since consumers have embraced this innovation, supplies should stop trying to limit the use of P2P sharing. Suppliers should embrace this innovation and build new business models that will enhance the use of this technology. Such models include the selling of ringtones, selling digital rights, use iTunes and related sites or embrace hybrid strategies.
Adkins, Amy. “How Does Illegally Downloading Music Impact the Music Industry?” 2018. Chron. http://smallbusiness.chron.com/illegally-downloading-music-impact-music-industry-27748.html. 3 May 2018.
Caraganis, Joe. “Unauthorized File Sharing: Is It Wrong?” 2012. American Assembly. https://piracy.americanassembly.org/file-sharing-is-it-wrong/. 3 May 2018.
Christin, Nicolas. “Peer-to-Peer Networks: Interdisciplinary Challenges for.” Information Assurance and Security Ethics in Complex Systems: Interdisciplinary Perspectives: Interdisciplinary Perspectives (2010): 81.