Economic Impact of P2P File Sharing

P2P, or peer-to-peer, file sharing on personal computers has become the norm for many people who want to download music, video, or other digital media files. This type of file sharing has become so popular, in fact, that in an average month, over 240 million files were downloaded from P2P services, and over 75 million college aged people have reported downloading files from P2P networks.

However, whether they know it or not, the millions who download these files are often doing so illegally. Most of the songs, videos, and so forth that are downloaded are protected by copyright laws that make it illegal to share it without prior authorization.

How does P2P file sharing affect the economy?

While many people may think sharing and downloading files is harmless, it actually affects a wide range of people and has a large impact on the economy. There have been conflicting studies and information about the effect of file sharing on the music industry, particularly in the beginning, but most industry experts now will agree that illegal P2P file sharing has an adverse effect on the economy.

•Record sales. One way P2P file sharing has affected the economy is through record sales. Fewer people are buying whole CDs now because they can download them in their entirety, or pick the songs from the album that they like, for free from P2P networks. Economic studies have traced this drop in sales to the arrival of Napster, one of the original P2P sharing programs — almost $6 billion in just a few years.

•Entertainers and producers. Most music performers make substantial amounts from royalties from music. Downloading music from the Internet or P2P networks does not pay royalties to the performers, record companies, or producers of this media. As a result, they are losing money as well.

•Record stores. There are many small, independently run record stores that have gone out of business in recent years, and many economists and industry experts have attributed this to the surge in P2P file sharing. Because people can download music off the Internet for free, then burn it onto their own MP3 players or even CDs, many record stores are experiencing problems or going out of business. Since 2003, over 1,000 small, independent record stores have closed nationwide.

•Employees/owners. While many people think that the only ones who really lose money from P2P file sharing are the already-wealthy performers and record executives. However, everyone involved in the music industry, all the way down to the clerks in the record stores, are affected by illegal file sharing, and some of them lose their jobs over it.

What can you do?

There are a number of things you can do to help the music economy from illegal P2P file sharing. First of all, don’t download music illegally. There are a number of sites you can use that allow you to download music legally for a very small fee, or sometimes free.

You can also check your computer to make sure you aren’t unknowingly sharing music or other media files. Uninstall all of your P2P programs, which may have enabled your computer to share music, and then run an anti-virus to get rid of spy and malware.

P2P file sharing, although common, can have a very adverse effect on the economy and the music industry.

Cite This Page

Feldman, Barbara. "Economic Impact of P2P File Sharing." Surfnetkids. Feldman Publishing. 2 Jun. 2008. Web. 30 Aug. 2015. < >.

About This Page

By . Originally published June 2, 2008. Last modified June 2, 2008.

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  • Tim

    I am just curious to know what sources whoever wrote this article used. If anyone could help out :)

  • Bella

    Who wrote this article?

  • Sabrina Dae

    I agree that downloading music illegally is bad, but does it actually affect the economy? Does it affect the average person living in the United States?

    • jacob

      It is honestly debatable, some say it impacts the economy a lot, and others say not at all… Most people who want an album will actually go out and buy it, unless they do not have the money too… so in most cases they wouldnt be selling to many more, but the actual numbers can be debated every which way. Here is one take on it… read the first 3 or so pages of this…