Cannibalizing or Complementing?. The Impact of Online Streaming Services on Music Record Sales

Abstract

The Internet has changed the media contents industry, and the music industry's business form has transformed from records into online digital products as the online music platform increasingly develops. Before the stabilization of the online music platform, digital music files were considered music piracy and were related to the decline of music record sales. Although research finds that increased Internet penetration led the decline of music record sales, after the stabilization of the online music platform and the introduction of online streaming services in the mid-2000s, a recognizable increase in music record sales appeared. We analyze the impact of adopting online music streaming services on the sales of music records to determine the effect of digital products on physical products by a two-stage least squares (2SLS) regression approach. Using monthly music record sales and streaming data from the official Korean Gaon Music Chart, we find that online streaming services positively impact music record sales. Furthermore, male artists sell more records than female artists as female fans, who prefer male artists, have a higher willingness-to-pay for individual services. Both the number of songs included in one album and the number of artists in one group also positively affect music record sales. Our analysis suggests that online streaming positively impacts music record sales.