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ECONOMICS Economic and Ethical Issues of Peer-to-Peer File Sharing and Its Impact on Music Industry Name of the Student Name of the University

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ECONOMICS ECONOMICS 5 S 5 ECONOMICS Economic and Ethical Issues of Peer-to-Peer File Sharing and it’s Impact on Music Industry Name of the Student Name of the University Author’s note: Issues of illegal P2P technologies Peer-to-peer (P2P) file sharing technology was pioneered by Napster in 1999. It has been found that, between 1999 and 2008, the annual revenue of the US recorded music industry fell from $12.8 billion to $5.5 billion

ECONOMICS Economic and Ethical Issues of Peer-to-Peer File Sharing and Its Impact on Music Industry Name of the Student Name of the University

   Added on 2021-06-17

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Running head: ECONOMICSEconomic and Ethical Issues of Peer-to-Peer File Sharing and it’s Impact on Music IndustryName of the StudentName of the UniversityAuthor’s note:
ECONOMICS Economic and Ethical Issues of Peer-to-Peer File Sharing and Its Impact on Music Industry Name of the Student Name of the University_1
ECONOMICS1Issues of illegal P2P technologies Peer-to-peer (P2P) file sharing technology was pioneered by Napster in 1999. It allowsmillions of users of internet to illegally share the unauthorized music by giving access to thedigital copies of music. It is a violation of the copyright laws. This P2P technology became asuccess because there was no reduction in quality in the generated copies of the file and it gavevery quick access to the music at a very little or almost no cost. Hence, access to the music hadbecome extremely easier even though it was illegal. After Napster’s huge success, many othercompanies have launched their P2P technologies, which had cast a very negative impact on thetraditional music industry, economically as well as ethically. Since 1999, the global recordedmusic industry, and the organizations representing the recorded music industry have faced adramatic fall in their revenues (Waelbroeck 2013). It has been found that, between 1999 and2008, the annual revenue of the US recorded music industry fell from $12.8 billion to $5.5billion due to the growing P2P file sharing. Even the fall in revenue for the global music industrywas from $37 billion in 1999 to $25 billion in 2007 (Waldfogel 2012). Along with that, thecopyright protection was effectively weakened for the recorded music, which reduced theamount of new music coming into the market. Recording Industry Association of America(RIAA) stated that the purpose of anti-piracy laws was to invest more in making new music.However, with the emergence of the illegal technology, the music industry not only sufferedfrom economic shock of decreasing profit, but also from the ethical issues, such as, lay offs,struggles of the musicians, lack of new music and increase in copyright violation (Sheehan, Tsaoand Pokrywczynski 2012). AnalysisSimilar to any other product, music generates surplus for two entities, buyers and sellers.There is always demand for new music in the market and the musicians and the recordingcompanies supply music. The price of music goes up and down depending on the marketdemand, and it determines the profits of the music industry. Before the emergence of P2Ptechnology, the customers would buy the records and CDs from the market and the producersurplus was generated from the sales. On the other hand, as stated by Frank and Cartwright(2013), music depreciates like many other tangible products and customers tend to attach lower
ECONOMICS Economic and Ethical Issues of Peer-to-Peer File Sharing and Its Impact on Music Industry Name of the Student Name of the University_2
PriceQuantity of musicSP0D2P2P1E1E2Music demand fell in legal market due to P2P technologyQ1Q2D1P’P*ECONOMICS2value to the music that they own for longer time. This is associated with the consumer surplusderived from music purchase. Thus, the phenomenon can be described through welfare analysis.The price of the product depends on marginal cost of production; and in case of digital filesharing, there is zero marginal cost. Hence, the digital copy is available for almost no costcompared to the physical products. Since, the P2P technology is illegal, there exists an illegalmarket for music, where the music supply is free. The success of P2P technologies indicate thatthe demand for free and illegal music has been increasing rapidly whereas the demand for legalmusic is falling, reflecting on the declining sales and profit of the recorded music industry (Wangand McClung 2012). The ethical issue regarding illegal music downloading is the music piracy, that is,unethical stealing of music (Robertson et al. 2012). This is a violation of the intellectual propertyrights. RIAA has sued many illegal downloaders while millions were not sued. They want toeducate the public about the cons of illegal downloads. While the music industry suffered fromloss of revenue and profit, they had to downsize the industry and many people lost their jobs.Hence, many lawsuits were filed across the world to save the music industry.Position
ECONOMICS Economic and Ethical Issues of Peer-to-Peer File Sharing and Its Impact on Music Industry Name of the Student Name of the University_3

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