We analyze a large file sharing dataset which includes 0.01% of the world’s downloads from the last third of 2002. We focus on users located in the U.S. Their audio downloads are matched to the album they were released on, for which we have concurrent U.S. weekly sales data. This allows us to consider the relationship between downloads and sales. To establish causality, we instrument for downloads using technical features related to file sharing (such as network congestion or song length) and international school holidays, both of which are plausibly exogenous to sales. We are able to obtain relatively precise estimates because the data contain over ten thousand album-weeks...369K PDF Link (Thanks, Koleman!)
Even in the most pessimistic specification, five thousand downloads are needed to displace a single album sale...high selling albums actually benefit from file sharing.
I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.