Whatever Happened to Payola? An Empirical Analysis of Online Music Sharing

By SUDIP BHATTACHARJEE, University of Connecticut - Department of Operations & Information Management, RAM D. GOPAL, University of Connecticut - Department of Operations & Information Management, KAVEEPAN LERTWACHARA, University of Connecticut - Department of Operations & Information Management and JAMES R. MARSDEN, University of Connecticut - Department of Operations & Information Management

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Abstract

The popularity of online music-sharing networks has attracted interest from the music industry, artists, consumer advocacy groups, the popular press, and government legislative and regulatory entities. P2P networks have become lightning rods for debates on intellectual property rights and music market fates. Yet, to date, little has been based on actual observed activity on online sharing networks. Here, we report on an initial P2P network data-gathering and analysis endeavor and relate it to market performance of music albums. The relative market performance of music albums is gauged using the list of top 100 albums on the weekly Billboard charts. The P2P sharing data (mostly in MP3) gathered is longitudinal, spanning a period of eight weeks. We also identify and track data for 47 upcoming album releases providing pre- and post-release comparisons of sharing activity.

We offer four main findings:

1) significant piracy opportunity and activity were observed;

2) the level of sharing opportunities are related to albums' relative chart positions;

3) there is evidence of both pre-purchase sampling piracy and lost-sales piracy; and,

4) sharing activity levels provide leading indicators of direction of movement of albums on the Billboard charts.

Points (3) and (4) have particular implications for music marketing and promotion.