Superstars vs the long tail: How does music piracy affect digital song sales for different segments of the industry?

Abstract

This paper estimates the causal effect of illegal downloading on recorded music sales volumes. We explicitly allow for differing effects of piracy on superstars versus other songs (i.e. songs or artists that are respectively ranked at the top or lower in the sales distribution), with an extension about product variety. We use a difference-in-difference approach, exploiting the natural experiment of the introduction of the HADOPI anti-piracy law in France in 2009, using Belgium and the Netherlands as a control group. We find a positive effect on music sales after the introduction of the law, thus implying a negative effect of music piracy. The effect is greater for top selling songs compared to lower ranked songs. It is stronger shortly after the introduction of the law and diminishes in later periods for all songs except the top sellers or superstars. After the introduction of the law, consumption became more concentrated in terms of musical genre and style, indicating that piracy increases consumed product variety.