In this article Kai Lung Hui and Ivan P.L. Png argue that although the demand for cds decreased with piracy, the impact of piracy on cd sales was much smaller than the industry estimates. They believe that the music industry lost only about 6.6% of its revenue to piracy. According to the IFPI in 1999 the music industry estimated a loss of 4.1 billion dollars to pirating.
In the beginning of the introduction Hui and Png give a few reasons as to why the publishers' losses to piracy may not be as large as what they claim. One reason is that if piracy were prevented users of pirated products may stop using the products instead of switching to the legitimate items. Another reason deals with the publishers' pricing strategy. Hui and Png also argue that piracy could actually boost the demand for legitimate items. Piracy steals from the demand of legitimate items because potential buyers switch to pirated products, but it also increases the demand for legitimate items because it intices more people to buy and increases their willingness to pay. Another issue that is looked at in this article is how prices are adjusted in response to the pirating of products.
In the second section of the article, Hui and Png look at two models of information product piracy. The first model called end-user piracy deals with private copying. The second model known as re-seller piracy deals with pirating by third-party members. Through extensive statistical analysis of these two models, Hui and Png came up with two hypothesis to test the demands for legitimate and pirated items.
This article is full of extensive data and research but it combats my topic that piracy has had a great effect on the music industry. This article argues that piracy has had much less of an effect on the music industry than what has been stated.