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Faddists, enthusiasts and Canadian divas:a model of the recorded music market

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  • Martin Richardson
  • Simon Wilkie

Abstract

This paper constructs a model of the provision of commercial music in which some consumers (enthusiasts) enjoy diversity and others (faddists) prefer to follow what is popular. Record companies sign up bands, only some of whom will 'succeed' - a process modelled in a number of alternate ways - and radio stations broadcast recordings. Consumers hear music on the radio and purchase recordings, where the likelihood of purchase depends, in part, on the extent of radio airplay for a particular recording. We show that consumers' taste for diversity leads to under-entry in general and we illustrate the working of the model by considering the impact of a local content quota in broadcasting. It is shown that a quota that restricts the airtime devoted to foreign music induces a shift in the pattern of band entry into 'international' genres. But a mild quota is welfare-improving in this model: even though the diversity of local music is reduced, the quota increases the number of new entrants, drawn in by the increased profitability of success. We also discuss the consequences of a quota that requires increased broadcasting of 'new' music and show that, while the addition of the 'new' band component decreases the total amount of time devoted to listening to the radio by consumers (yielding a welfare loss), it does nothing to a record company's incentives to sign up new bands.

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Bibliographic Info

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2013-600.

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Length: 58 Pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:acb:cbeeco:2013-600

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  1. Marie Connolly & Alan B. Krueger, 2005. "Rockonomics: The Economics of Popular Music," NBER Working Papers 11282, National Bureau of Economic Research, Inc.
  2. Acheson, Keith & Maule, Christopher, 2006. "Culture in International Trade," Handbook of the Economics of Art and Culture, Elsevier.
  3. Claude Crampes & Abraham Hollander, 2008. "The regulation of audiovisual content: quotas and conflicting objectives," Journal of Regulatory Economics, Springer, vol. 34(3), pages 195-219, December.
  4. Keith Acheson & Christopher Maule, 1990. "Canadian Content Rules: A Time for Reconsideration," Canadian Public Policy, University of Toronto Press, vol. 16(3), pages 284-297, September.
  5. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, vol. 15(3), pages 305-315, September.
  6. Doyle, Chris, 1998. "Programming in a competitive broadcasting market: entry, welfare and regulation," Information Economics and Policy, Elsevier, vol. 10(1), pages 23-39, March.
  7. Ben Shiller & Joel Waldfogel, 2011. "Music for a Song: An Empirical Look at Uniform Pricing and Its Alternatives," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 630-660, December.
  8. Perona, Mathieu, 2010. "How Broadcasting Quotas Harm Program Diversity," MPRA Paper 19860, University Library of Munich, Germany.
  9. Francois, Patrick & van Ypersele, Tanguy, 2002. "On the protection of cultural goods," Journal of International Economics, Elsevier, vol. 56(2), pages 359-369, March.
  10. Martin Richardson, 2006. "Commercial Broadcasting and Local Content: Cultural Quotas, Advertising and Public Stations," Economic Journal, Royal Economic Society, vol. 116(511), pages 605-625, 04.
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