|Title:||Intellectual Property Strategy and the Long Tail: Evidence From the Recorded Music Industry|
|Citation:||Zhang, L. (2014). Intellectual Property Strategy and the Long Tail: Evidence From the Recorded Music Industry. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2515581|
|Link(s):||, Open Access|
|Key Related Studies:|
|Linked by:||Belleflamme and Peitz (2014)|
|About the Data|
|Data Description:||Data covers music sold between January 1992 and June 2012. dataset contains monthly data of the number of albums sold through traditional outlets like retail chains and digital albums.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:|
|Time Period(s) of Collection:||
Digitization has impacted firm profitability in many media industries by lowering the cost of copying and sharing creative works. I examine the impact of digital rights management (DRM) - a prevalent strategy used by firms in media industries to address piracy concerns - on music sales. I exploit a natural experiment, where different labels remove DRM from their entire catalogue of music at different times, to examine whether relaxing an album's sharing restrictions increases sales. Using a large sample of albums from all four major record labels, I find that removing DRM increases digital music sales by 10% but relaxing sharing restrictions does not impact all albums equally. It increases the sales of lower-selling albums (i.e., the \long tail") significantly (30%) but does not benefit top-selling albums. These results suggest that the optimal strength of copyright depends on the distribution of products in firms' portfolio.
Main Results of the Study
- Removng DRM increases record sales by 10% and increases sales more in the long tail of the disribution, meaning that less well known artists gain the most from removing DRM.
- This suggests that lowering search costs facilitates discovery and thus increases album sales. Of non mainstream artists.
Removing DRM had little effect on well established artists.
- The author notes that this strategy could also increase total consumer welfare by introducing songs to new people who otherwise wouldn't know of them.
- The author also notes that the results might be different for other copyright industries outside of the music industry.
Policy Implications as Stated By Author
Could be useful for companies to take the results into account and depending on their portfolio either use or not use DMR.