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

Who will win the competitive battle between P2P file sharing networks and iTunes over the long run and why?

According to this case, it seems P2P file sharing networks will take over the market of music "sales." It's understandable that record labels and musicians do not want file sharing at $14.99 a month (as of 2005) for unlimited songs as the most expensive offer. Overall revenue from music sales will and are suffering due to file sharing. However, as with any industry, change is certain.

In this case buyers are creating a stronghold on the industry. Buyers know what is out there as far as services for downloading music and can make an educated decision as to the best option. Since there is most likely not much differentiation between the various music files, buyers will choose the lowest cost option, which is not iTunes or buying a physical CD. The music file sharing sites are withing government regulations at this time so unless this changes, which is a threat to the P2P file sharing industry, they will win the majority of this market.

The competition within this P2P industry will most likely increase and prices will fall even further because barriers to entry appear low (I don't know the start-up details). Unless there is some legal intervention into this industry, P2P file sharing is the future of music downloads.