Digital Music Sales Research Articles

The effect of streaming services on the concentration of digital music consumption

Purpose The purpose of this paper is to articulate whether consumers’ use of music via streaming service benefits niche products and diversified consumption of music. It examines does winner take all or is long tail achieved in the digital music market. Design/methodology/approach To investigate the degree of concentration in the digital music sales, this study measures multiple concentration metrics using the top 100 songs for 245 weeks listed on the Korean music ranking chart. Findings Conflicting results are found between the analyses based on short-run and long-run data. When sales distributions are compared weekly or monthly, the results show that streaming services have a less concentrated sales distribution than download services. However, the result becomes the opposite in the long-run analysis (i.e. one year). Originality/value This study proposes that the non-technological drivers such as the beneficial addiction of music consumption can be a crucial driver affecting the usage concentration in music industry, coupled with the royalty policy of access-based services.

Television singing competitions create stars? Empirical evidence from the digital music chart in South Korea

After the success of American Idol, television singing competitions have become widespread and popular around the world. Although this format has had a substantial influence on the music market of many countries, few studies have quantified this influence. This study examines whether musicians from singing competitions (contestants) earned more money through digital music sales than did other musicians (non-contestants). We used a unique dataset that summed sales from the top 200 monthly digital music chart of South Korea between 2011 and 2014. We analyze the number of the song sold during this tenure, considering several variables such as gender and seasonality. Our findings indicate that songs by contestants yielded larger sales than did those of non-contestants. This positive impact is greater for the top two finalists in the competitions. The insights gained in this study will provide guidance to record companies who are considering recording contracts with contest winners.

Television Singing Competitions Create Stars?: An Empirical Evidence from the Digital Music Chart

After the success of American Idol, television singing competitions have become widespread and popular around the world. Although this format has had a substantial influence on the music market of many countries, few studies have quantified this influence. This study examines whether musicians from singing competitions (contestants) earned more money through digital music sales than did other musicians (non-contestants). We used a unique dataset that summed sales from the top 200 monthly digital music chart of South Korea between 2011 and 2014. We analyze the duration that a song has been listed on the charts, and the number of the song sold during this tenure, considering several variables such as gender and seasonality. Our findings indicate that songs by contestants stayed on the charts longer and yielded larger sales than did those of non-contestants. The insights gained in this study will provide guidance to record companies who are considering recording contracts with contest winners.

Intellectual Property Strategy and the Long Tail: Evidence from the Recorded Music Industry

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 (40%) but does not benefit top-selling albums. These results suggest that reducing search costs facilitates the discovery of niche products. This paper was accepted by Lee Fleming, entrepreneurship and innovation.

Digital music consumption on the Internet: Evidence from clickstream data

We use clickstream data on a panel of more than 16,500 European consumers to analyze the relationship between different online music consumption channels. In particular, we revisit the question of sales displacement in the digital era, and analyze how licensed online music streaming affects digital music purchasing behavior. Our results show no evidence of digital music sales displacement by unlicensed downloading and present, for some countries in our sample, a rather small but positive elasticity of up to 0.04 between these two channels. We also find a positive relationship between the use of licensed streaming websites and licensed websites selling digital music, suggesting a stimulating effect of music streaming on digital music sales. Our results present important cross country differences in these effects, with elasticities ranging between 0.09 and 0.01. Finally, we find heterogeneous effects according to individuals’ profiles. For both unlicensed downloading and licensed streaming alike, our results suggest that consumers with higher interest in music view these channels as complements to licensed digital purchases to a larger extent.

What's Going on? Digitization and Global Music Trade Patterns Since 2006

The objective of this paper is to document the evolution of cross-border music trade patterns in this transition period and to explain what drives digital music trade patterns. The shift from analogue to digital music distribution has substantially reduced trade costs and has enlarged the choice sets of music consumers around the world. Using comprehensive data on digital track sales in the US, Canada, and 16 European countries, 2006-2011, we document patterns of music trade in the digital era and contrast it with what’s known from elsewhere about trade in popular music for the past half century. While home bias in music consumption among the top 100 songs had grown in the pre-digital distribution period prior to 2006, home bias has declined since then. We find that the share of imported songs in music consumption has grown in all countries except in the US. Moreover, although the number of European songs available has risen faster than the number of US songs, the market share of the US in digital music sales has increased while the market shares of European repertoires have fallen. US repertoire holds the largest market share in almost every country. Home bias is lower in the long tail than at the top end of the distribution. We consider four candidate explanations for the shift away from domestic music: a) that growth in availability of particular repertoires explains their growth in total sales and market shares, b) that changes in the effect of distance-related trade costs on trade made possible by digitization explain changed patterns of trade, c) that changed preferences toward particular origin repertoires explains changed patterns, and d) that recent vintages of particular repertoires have grown more appealing to world consumers. We conclude that a combination of c) and d) offers the most credible explanation for the observed patterns.

Intellectual Property Strategy and the Long Tail: Evidence from the Recorded Music Industry

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.

The Effect of Graduated Response Anti‐Piracy Laws on Music Sales: Evidence from an Event Study in France

Despite the problem that filesharing poses to the creative industries, there is little research on the effectiveness of governmental anti‐piracy policies. This study analyzes how the HADOPI graduated response law in France affected digital music sales. Using a panel of sales data from the four major labels, we applied a difference‐in‐difference approach, comparing sales trends in France to a control group of European countries. We find that increased consumer awareness of HADOPI caused French iTunes music sales to increase by 22‐25%. The observed sales increase is larger in high piracy genres than low piracy ones, strengthening the causal interpretation of our results.

Video Killed the Radio Star? Online Music Videos and Digital Music Sales

In experience goods markets, free samples help consumers make informed purchase decisions. However, sampling may also let consumers substitute purchases with free consumption. We study this trade-off in the market for recorded music where con- sumers can sample songs by watching free music videos online. Identification comes from two quasi-experiments in Germany. In 2009, virtually all official music videos were blocked from YouTube due to a legal dispute. The situation remained largely unchanged until the dedicated platform VEVO entered the market in 2013, making videos of a large number of artists available over night. We find that both restricting and enabling access to online videos has consistent complementary effects on digital music sales, but there is not much evidence for an effect on physical sales. Moreover, online videos are much more effective in triggering downloads of songs by new artists compared to established artists. This yields interesting implications for managers and policy.

Copyright and Sales Distribution in the Era of Digitization: Evidence from the Music Industry

Digitization has been associated with ushering in Schumpeterian creative destruction in many media industries, such as music, books, movies, and newspapers, while also increasing the variety of products available for consumption. It has also increased the cost of copyright protection by significantly lowering the cost of distributing and storing information. One strategy used to address piracy concerns is the implementation of digital rights management (DRM) technology which allows digital publishers and copyright holders to exert control over how consumers use digital works, by making it difficult to reproduce and distribute copies of legally purchased digital products. However, the effect of DRM on sales is ambiguous because while its implementation has the potential to curtail piracy, it may also have impeded sales by imposing restrictions on how legitimate consumers use legally purchased products. I exploit a natural experiment where the recorded music industry removes digital rights management (DRM) on their entire catalogues of music at different times to examine whether “opening up” the industry’s copyright strategy increases music sales. Using a large sample of albums from all four major record labels that covers multiple genres and both tails of the sales distribution, I find that removing DRM increases digital music sales by 15%. Interestingly, the effect is more pronounced for albums at the left-tail of the music sales distribution, providing evidence that lowering copyright protection disproportionately impacts consumption in the Long- Tail.

The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France

Digital piracy is a significant problem for the creative industries. Still, while there have been many academic studies showing that piracy hurts sales, there have been far fewer studies analyzing the effectiveness of anti-piracy measures in reversing this effect. This study attempts to address this question by analyzing how the HADOPI “three strikes” law in France affected digital music sales on the iTunes music store. To do this, we obtained a panel of iTunes sales data from the four major music labels (Universal Music, Warner Music, EMI Music and Sony Music) across a broad set of countries. We then applied a difference-in-difference approach, using sales trends in a control group of European countries to simulate the counterfactual of what music sales in France would have been if HADOPI had not been passed. Our results suggest that increased consumer awareness of HADOPI caused iTunes song and album sales to increase by 22.5% and 25% respectively relative to changes in the control group. In terms of robustness, we find that these sales changes are similar for each of the four major music labels, suggesting that our results are not peculiar to any particular label. We also find that the observed sales increase is much larger in genres that, prior to HADOPI, experienced high piracy levels (e.g., Rap and Hip Hop) than for less pirated genres (e.g., Christian music, classical, and jazz). This strengthens the causal interpretation of our results since if HADOPI is causing pirates to become legitimate purchases, its effects should be stronger for heavily pirated music than it is for other music genres.

Music Industry: Toward A New Business Model?

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: Times New Roman; font-size: x-small;">The last ten years have seen many changes in the music industry, mainly caused by Internet music downloading, legal and illegal.<span style="mso-spacerun: yes;">   </span>The traditional business model of the recording music industry, based on the sales of CDs in retail stores, seems to be on its way out.<span style="mso-spacerun: yes;">   </span>No clear new model has emerged yet, but several trends are noticeable for the recording music industry.<span style="mso-spacerun: yes;">  </span>First, the decline of CD sales since the peak year of 2000 has accelerated, totaling 30% in the USA.<span style="mso-spacerun: yes;">  </span>Second the recording music industry is going through a restructuring, marked by sell offs and mergers among the recording labels, by the disappearance of music retail stores, and by the foray of the majors in new directions, such as concerts.<span style="mso-spacerun: yes;">  </span>Finally, revenues from digital music sales are increasing, partially compensating for the decrease in CD sales.<span style="mso-spacerun: yes;">  </span>Whereas the providers of content, namely the labels and the artists, can be seen as victims of music downloading, the providers of the technology have benefited.<span style="mso-spacerun: yes;">  </span>The sales of its iPod/iTunes systems have provided Apple’s more revenues than the sales of its computers.<span style="mso-spacerun: yes;">  </span>Other manufacturers are also entering this market.<span style="mso-spacerun: yes;">  </span>Meanwhile, academics and policy makers have been studying new types of copyright licenses.<span style="mso-spacerun: yes;">  </span>One idea is to impose a global license, paid by Internet service providers, and repaid to them by Internet users.<span style="mso-spacerun: yes;">  </span>Many technological and legal questions must be resolved for such a scheme to become viable.</span></p>

Ten Years of File Sharing and Its Effect on International Physical and Digital Music Sales

Music consumption is arguably at a historic high. File sharing technology would undoubtedly be welfare-improving provided that it did not displace music sales. Yet music purchases have decayed sharply since the introduction of file sharing a decade ago. This paper seeks to measure the effect of peer-to-peer file sharing on music sales. I use a long panel of twelve years of country-level data containing information on both physical and digital music sales and on Internet and broadband penetration. This database includes not only information going back to a period when peer-to-peer downloading did not exist, but also includes more recent information up to 2008. I employ Internet connectedness and the speed of Internet connections as proxies for unauthorized downloading, and study whether physical and total country-level music purchases have decayed more rapidly in countries experiencing faster increases in the adoption of file swapping technology. This paper uses the increase in broadband penetration replacing dial-up in order to isolate the effect of file sharing from any other possible Internet impact on music sales. My results indicate that peer-to-peer file-sharing can explain a reduction in music sales that ranges from half of the actual decrease in sales up to the entire decrease.

The future of digital music sales among web-enabled professionals: an empirical investigation

Typically, artists and recording companies sell their music to distributors or retail stores. Digital music offers them the opportunity to change their strategies and compete directly against retailers. The basic premise of this research is that there are Customer Relations Management (CRM) implications of digital music and how it affects the future of the record industry. A stratified sample of employed professional, web-enabled representatives of the service industry (mainly financial and customer services) located in the metropolitan section of Pittsburgh, Pennsylvania resulted in 200 useable questionnaires from an initial sampling frame of over 300. From an analyses derived from multiple regression and exploratory factor techniques, it has that a number of variables could discriminate the importance of the price of piracy as a dependent variable factor-based construct. The Shared Usage and Convenience construct was found to be highly significant and positively related to the price of piracy, while significant and inversely related to the price of piracy were the Content Issues, Technology Usage, and Online Music Buying constructs, since they are the very reasons why many customers turn to legitimate sources of digital music products and services. A number of specific recommendations were made to management based on the results.

South Korea's Way to the Future

South Korea leads the world in access to broadband services; as of early 2006, 83 percent of households had broadband, compared to roughly 45 percent in the US. Not coincidentally, the country also leads in the transition to digital music sales via digital rights management (DRM) software. In fact; the past decade has seen South Korea's music scene change dramatically. It once had 8,000 music stores; now, it has 400 - partly because of the Asian financial crisis of the late 1990s, but mostly due to the change in music distribution patterns. South Korea is also the first country in which online music sales exceeded CD sales in value. According to The Korea Times, South Koreans spent 400 billion won buying music from traditional stores in 1999; by 2005, that number was down to 108 billion won whereas online music purchases had reached 262 billion won. The exchange rate is roughly 1,000 won to every US dollar, so converting the word "billion" to "million" gives US readers an idea of what's going on in a country one-sixth the US s size and with 1 /15th of its gross domestic product. A typical South Korean mobile phone is a camera as well as a music player, and some include video players, stored value cards, and full keyboards. South Korea's ringtone market alone is larger than its CD market - ringtones brought in US$336 million in 2004, for example. Consumers can buy unlimited music downloads for $5 per month or broadband service for $20 per month - and they're about to have a new form of interoperability among music vendors