The Effect of File sharing on Consumer’s Purchasing Pattern:
A Survey Approach

August, 2006

Seonmi Lee*

Abstract

Digital compression and distribution technologies influence the music industry in various ways.
This paper investigates how consumer behavior is affected by the free music products on the
Internet. Survey methodology was used to determine the respondents’ perceived likelihood of
purchasing legitimate CDs depending on the free availability of the same music via a streaming
service or downloading on the Internet. In the pre-study, several factors affecting consumer
purchasing were identified based on the responses of 106 university students. In consideration of
these factors, the paper investigated how the price and free music availability jointly affect a
consumer’s willingness to buy. In addition, this paper examined how the effects of price and
non-price factors such as rating of singer, preference for genre, number of songs on a CD, SES
factors, and music consumption style may change in the “free” vs. “non-free” Internet
availability conditions. The results showed that there was a weak pattern of interaction between
price and free music availability, though the interaction effect was not significant. In the non-free
Internet availability situation, price along with some other factors had significant effects on
consumer purchasing patterns for some CDs, whereas in the free Internet availability situation,
price had insignificant effects on a consumer’s willingness to purchase all twelve CDs used in
the questionnaire. Instead, some non-price factors influenced consumer purchasing patterns.












* Doctoral Student, College of Journalism and Communications, G035, Weimer Hall, P.O.Box
118400, University of Florida, Gainesville, Florida 32611-8400, (352)846-1060,
email: seonlee@ufl.edu

1
INTRODUCTION
Beginning with the Napster trial, a great deal of attention has been paid to the effect of
file-sharing and MP3 technologies on the record industry. As Napster, which had a central server
enabling users to share and distribute unauthorized digital music, started its service in 1999,
music sales began to decrease coincidently.
1
The record industry sued Napster, claiming that the
company was responsible for copying, uploading, transmitting, or distributing copyrighted
musical works without permission from the copyrighters themselves, and the court ordered
Napster to shut down. To avoid legal problems similar to those of Napster, websites such as
Gnutella, KaZaA, and FastTrack have evolved to allow for connections among users without a
central server, and in so doing have taken Napster’s place in the market.
The recording industry has expressed its concerns that CD piracy will accelerate the
recent downturn in sales, believing that unauthorized free music files, transmitted by file-sharing
technology, would substitute for legitimate CDs. Indeed, the Recording Industry Association of
America (RIAA) reported that CD shipments fell from 1,160.6 million units in 1999 to 634.8
million in 2005. Having taken legal actions against both peer-to-peer (P2P) operators and
individuals who downloaded music via P2P sites, the music industry has repeatedly required the
government to enforce strong legal protection under the copyright law. The government is
actively investigating new policies and how they may influence suppliers, consumers, and
society as a whole.
In the past, similar phenomena involving copying from Xerox machines or recording
from VCRs are known to have occurred, but without the concern shown to digitalized media.
This is mainly because the copied contents from Xerox machines or VCRs are likely to be

1
Based on data from the RIAA, US CD shipments grew to 1,160.6 million units in 1999. However, it fell gradually
from 1,079.2 million in 2000 to 968.5 million in 2001.