Yet, despite the popularity of the new technology, 
file sharing has not undermined the incentives of authors to produce
new works. We argue that the effect of file sharing has been muted for three
reasons. (1) The cannibalization of sales that is due to file sharing is more 
modest than many observers assume. Empirical work suggests that in music, no
more than 20% of the recent decline in sales is due to sharing. (2) File sharing
increases the demand for complements to protected works, raising, for instance,
the demand for concerts and concert prices. The sale of more expensive complements 
has added to artists’ incomes. (3) In many creative industries, monetary 
incentives play a reduced role in motivating authors to remain creative.
Data on the supply of new works are consistent with the argument that file
sharing did not discourage authors and publishers. Since the advent of file 
sharing, the production of music, books, and movies has increased sharply.

Yet, despite the popularity of the new technology, 
file sharing has not undermined the incentives of authors to produce
new works. We argue that the effect of file sharing has been muted for three
reasons. (1) The cannibalization of sales that is due to file sharing is more 
modest than many observers assume. Empirical work suggests that in music, no
more than 20% of the recent decline in sales is due to sharing. (2) File sharing
increases the demand for complements to protected works, raising, for instance,
the demand for concerts and concert prices. The sale of more expensive complements 
has added to artists’ incomes. (3) In many creative industries, monetary 
incentives play a reduced role in motivating authors to remain creative.
Data on the supply of new works are consistent with the argument that file
sharing did not discourage authors and publishers. Since the advent of file 
sharing, the production of music, books, and movies has increased sharply.