The internet has undoubtably changed the world marketplace. Goods and services once difficult or expensive to obtain can now be secured with a click of the mouse. Niche markets can expand into new territories, creating new wealth. Yet the internet also created new challenges in business. One of the greatest and most publicized issues of the last decade involved the internet marketplace, or the lack thereof. Music downloading, especially the Napster and Grokster cases, brought copyright infrigement and internet sales to the forefront of public attention.
Peitz and Waelbroeck studied the effect of music piracy during Napster's heyday- 2001 through 2002. While the results were not shocking, the reasons behind the results are.

Peitz and Waelbroeck calculated a total 9% decrease in CD sales in 2002 (Peitz/Waelbroeck 16), mostly due to illegal downloading (22% of the 9% is attributed to illegal downloading). Sites such as Napster and Kazaa were clearly culprits in the illegal dowloading culture, but other, less obvious concerns effected sales as well. Internet radio and music streaming gained popularity during the same time period, as did other "digital activities" such as social networking, information searching, and gaming (Peitz/Waelbroeck 15).

Despite the decrease in CD sales, Peitz and Waelbroeck do not place all blame on illegal downloading. The number of internet users participating in illegal music downloading sharply declined from 2001 to 2002, yet CD sales continued to drastically decline throughout the mid 2000s (Peitz/Waelbroeck 12,14). This raises an important question: are people loosing interest in music, or have the drastic changes in how we aquire music made it harder to enjoy the artform?

Music downloading has created new outlets for art. Artists must work to reach potential buyers through creative marketing and higher quality products, but audiences clearly are still not buying. If downloading copyrighted material became completely legal, one can only assume the quality and quantity of such art would suffer.



Peitz, Martin, and Patrick Waelbroeck. "The Effect of Internet Piracy on CD Sales: Cross-Section Evidence." pp 1-25. The Center for Economic Studies of Munich, January 2004.