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Information Spillovers in the Market for Recorded Music

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  • Ken Hendricks
  • Alan Sorensen
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    Abstract

    This paper studies the role of consumer learning in the demand for recorded music by examining the impact of an artist%u2019s new album on sales of past and future albums. Using detailed album sales data for a sample of 355 artists, we show that the release of a new album increases sales of old albums, and the increase is substantial and permanent%u2014especially if the new release is a hit. Various patterns in the data suggest the source of the spillover is information: a new release causes some uninformed consumers to learn about their preferences for the artist%u2019s past albums. These information spillovers suggest that the high concentration of success across artists may partly result from a lack of information, and they have significant implications for investment and the structure of contracts between artists and record labels.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12263.

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    Date of creation: May 2006
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    Handle: RePEc:nbr:nberwo:12263

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