Peer-to-Peer File Sharing and the Market for Digital Information Goods

By: Ramon Casadesus-Masanell and Jordan Mitchell and Andres Hervas

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Synopsis: As of 2005, over 10 million people were using peer-to-peer (P2P) file-sharing networks to swap music, movies, and software for free. P2P software programs such as Kazaa, Limewire, and eDonkey received a great deal of media attention. Music and movie industry organizations believed that downloading copyrighted material was stealing. The same industry associations took the P2P companies to court, maintaining that the P2P software developers should be held responsible when users unlawfully copied copyrighted songs, movies, and television programs. P2P software creators claimed that they were merely promoting a technology with multiple uses. Indeed, P2P was a network architecture that could be deployed to a number of other applications, such as distributed computing, instant messaging, voice telephony, spam filtering, and other commercial activities. In the midst of high-profile battles between the entertainment industry and P2P file-sharing software developers, a number of proprietary systems offering legal downloads had emerged. Entertainment industry supporters pointed to Apple's iTunes .99 cent download fee per song as an indicator of the future. Although iTunes satisfied entertainment industry executives that it was possible to pay for downloads successfully, the battle between proprietary systems and P2P file sharing seemed to continue. Who would win in the long run?