Mortimer, Nosko and Sorensen (2012)
Contents
Source Details
Mortimer, Nosko and Sorensen (2012) | |
Title: | Supply responses to digital distribution: Recorded music and live performances |
Author(s): | Mortimer, J. H., Nosko, C., Sorensen, A. |
Year: | 2012 |
Citation: | Mortimer, J. H., Nosko, C., & Sorensen, A. (2012). Supply responses to digital distribution: Recorded music and live performances. Information Economics and Policy, 24(1), 3-14. |
Link(s): | Definitive |
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About the Data | |
Data Description: | The data used in this study come from several sources.
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Data Type: | Secondary data |
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Data Analysis Methods: | |
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Country(ies): | |
Cross Country Study?: | No |
Comparative Study?: | No |
Literature review?: | No |
Government or policy study?: | No |
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Abstract
Technologies that enable free redistribution of digital goods (e.g., music, movies, software, books) can undermine sellers’ ability to profitably sell such goods, which raises concerns about the future development of socially valuable digital products. In this paper we explore the possibility that broad, illegitimate distribution of a digital good might have offsetting effects on the demand for complementary non-digital goods. We examine the impact of file-sharing on sales of recorded music and on the demand for live concert performances. We provide evidence suggesting that while file-sharing reduced album sales, it simultaneously increased demand for concerts. This effect is most pronounced for small artists, perhaps because file-sharing boosts awareness of such artists. The impact of file-sharing on large, well-known artists’ live performances is negligible.
Main Results of the Study
The main results of this study are:
- As with the earlier literature, the study finds that sales of recorded music declined precipitously with the entry of Napster and large-scale file-sharing.
- The evidence is consistent with illegitimate redistribution of digital goods increasing revenue from non-digital complementary products. While file-sharing may have substantially displaced album sales, it also facilitated a broader distribution of music, which appears to have expanded awareness of smaller artists and increased demand for their live concert performances.
- Concert revenues for large artists, however, appear to have been largely unaffected by file-sharing. Music for large artists was likely widely available prior to file-sharing, and as a result it is not surprising that demand for those artists’ concerts would have been largely unaffected by file-sharing.
- The decline in album sales is much more pronounced for large artists than for small artists. Large artists’ music may have been more readily available on file-sharing sites, in which case file-sharing would naturally have a bigger impact on large artists. But for small artists, file-sharing may have increased awareness of their music and encouraged some additional album sales from a larger fan base even as it displaced album sales to others.
- While the market for live music appears to expand after Napster, and the market for recorded music contracts, the results imply that large artists lose market share in both markets.
- Given the sharp changes observed over a very short period of time around the entry of Napster, along with the differences in the effects for large vs. small artists, the findings in this paper are more easily explained by file-sharing than by other contemporaneous factors.
Policy Implications as Stated By Author
The authors state that, "The implication, as argued by Teece (1986), is that public policy aimed at promoting innovation should not ignore the impact of an innovation on goods or assets that are complementary to it."
Further, it is strongly implied throughout this article that rather than simply measuring the damage caused by unauthorised file-sharing in one sector of the industries, the broader costs and benefits of innovation should be carefully considered when policy is devised.
Coverage of Study
Datasets
Sample size: | 227230 |
Level of aggregation: | Concerts |
Period of material under study: | 1993-2004 |
Sample size: | 1806 |
Level of aggregation: | Recording Artists |
Period of material under study: | 1993-2004 |