Aguiar and Waldfogel (2014)
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Source Details
Aguiar and Waldfogel (2014) | |
Title: | Digitization, Copyright, and the Welfare Effects of Music Trade |
Author(s): | Aguiar, L., Waldfogel, J. |
Year: | 2014 |
Citation: | Aguiar, Luis, and Joel Waldfogel. Digitization, Copyright, and the Welfare Effects of Music Trade. Copyright, and the Welfare Effects of Music Trade (December 3, 2014) (2014). |
Link(s): | Definitive , Open Access |
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About the Data | |
Data Description: | This study uses reports of sales of digital music from Nielsen and IFPI from 2006 to 2011. The authors propose a model for a 'frictionless' market within the EU to examine the effects of the single market for music on social welfare. |
Data Type: | Secondary data |
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Data Analysis Methods: | |
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Country(ies): | |
Cross Country Study?: | Yes |
Comparative Study?: | No |
Literature review?: | No |
Government or policy study?: | Yes |
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Abstract
"Since the launch of the iTunes Music Store in the US in 2003 and in much of Europe in the following years, music trade has shifted rapidly from physical to digital products, raising the availability of products in different countries. Despite substantial growth in availability, choice sets have not converged across countries; and observers point to copyright-related transaction costs as an obstacle to greater availability. Policy makers are now contemplating various copyright reforms that could reduce these trade costs. The possibility of these changes raises the question of how much benefit they would create for consumers and producers around the world. We address these questions with a structural model of supply and demand for music in 17 countries, which we employ to counterfactually simulate the effect of a European digital single market (the equivalent of a pan-European copyright regime) on the welfare of consumers and producers. We also simulate autarky and worldwide frictionless trade - in which all products are available in all countries - allowing us to quantify both the conventional gains from status quo trade as well as the maximum possible gains available to free trade. Existing and additional trade have different patterns of benefit to consumers and producers. Status quo trade benefits consumers everywhere, but European consumers have benefited more than North Americans. Existing trade has had large benefits to American producers but on balance small benefits to European producers. Additional trade would continue the pattern of consumers benefits with larger gains to European consumers but would reverse the pattern for producers. Greater availability of products resulting from easing of copyright restrictions would raise per capita gains to producers in Europe more than in North America. Finally, we find that a European single market would bring most of the benefits of worldwide frictionless trade to both consumers and producers alike."
Main Results of the Study
Moving from the current status quo to an EU Digital Single Market for music would increase consumer surplus from digital music consumption by 1.8 per cent (€19 million) and music producers' revenue by 1.1 per cent (€10 million). Benefits vary considerably across Member States. Under worldwide frictionless trade consumers in 15 European countries gain €31 million (a 3% increase) while North American consumers gain €6.5 million (a 0.35% increase). Most of the gains from fully frictionless trade - about two thirds - are accomplished by a European single market. Annual gains from worldwide frictionless trade for producers, compared to autarky, reach 1.9% in Europe and 0.38% in the US. Clearly, the additional gains from moving beyond a European Digital Single Market to a worldwide open market would be small for European producers and consumers. Digital music production and consumption is only a small part of all media markets covered by copyright. We note that the figures presented here represent only a fraction of the potential benefits from further trade opening in other digital media.
Policy Implications as Stated By Author
- Copyright transaction costs can serve as a barrier to the trading of goods.* The disproportionate amount of digital music imported by EU nations from the US (and other English speaking nations Canada and the UK) lead to a cultural disadvantage further hampered by copyright transaction costs between member states.
Coverage of Study
Datasets
Sample size: | 1,532,095 |
Level of aggregation: | Individual data |
Period of material under study: | 2006 to 2011 |
Sample size: | 75,239 |
Level of aggregation: | Individual data |
Period of material under study: | 2006 to 2011 |