|Online sales, Internet use, file sharing, and the decline of retail music specialty stores
|Zentner, A. (2008). Online sales, Internet use, file sharing, and the decline of retail music specialty stores. Information Economics and Policy, 20(3), 288-300.
|Definitive , Open Access
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|About the Data
|To address the decline of brick and mortar music stores, data was taken from InfoUSA and comprised of phonebook records of music retailers for the entire US for the years 1998 and 2002.
To study how online purchases and file-sharing affected the survival probability of music stores, data was taken from the Current Population Survey (by the US Bureau of Labor Statistics) and comprised of internet activity and broadband penetration at the Metropolitan Statistical Area (MSA) level,. Data was also taken from the Federal Communication Commission (FCC) and comprised of information on the number of broadband providers at the zip code level. Finally, data from the Integrated Postsecondary Education Data System provided the location of universities.
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This paper uses phonebook records of music retailers for the entire US in the years 1998 and 2002 to examine how music downloads and online sales of records have affected the entry and exit of brick and mortar music specialty retailers. Merging music stores information with data on internet activity and broadband connectedness at the Metropolitan Statistical Area (MSA) level, with data on the number of broadband providers at the zip code level, and with a database of the location of universities, I analyze how online purchases and file-sharing affected the survival probability and the change in the number of music stores between the years 1998 and 2002. I use store characteristics to further study how the new economy has affected the market structure of the retail music business
Main Results of the Study
- The number of traditional music specialty experienced a decline of around 7% between the years 1998 and 2002.
- The results suggest that file sharing may have increased the death rate of brick and mortar music stores and reduced its number. However, they do not support that online purchases of CDs have also negatively affected traditional music specialty stores.
- Results showed a smaller survival probability for stores with a lower number of employees. However, the paper documents that the number of smaller music stores increased between 1998 and 2002, instead of being displaced by corporate music specialty chains. This suggests the creation rate of smaller music stores was even higher than the destruction rate.
Policy Implications as Stated By Author
- Stores located in places with large increases in online purchases and high downloading activity may reconstitute themselves and circumvent death, for example, by adding new product lines, by participating in the online business, or by reducing the number of employees.
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