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The Web's Promotional Effect and Artists' Strategies

  • Francesco BALDUCCI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

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    The paper explores one of the new business models of the music market proposed by Varian (2005): the importance of the promotional effect of web-based diffusion. An indirect form of such investment consists in non-opposition by artists against the circulation of their music files online, or, likewise, their choice of permitting free downloads of their music albums. The profits lost from legal sales - online or on traditional supports - may be off-set by promotional advantages deriving from greater diffusion, with an increase in the artist's market share. The model assumes the existence of a strong network effect and an exchange of information, opinions and contents among web users. The model's results are determined by the initial conditions, i.e. by an artist's market share at an initial instant of time: or in other words, by his/her popularity. It is shown that emerging artists should make maximum investment in promotion, so that the diffusion of their work can be driven by the network effect and they can emerge from anonymity. Instead, for well-established artists, whose market shares are already large, the optimal strategy is to make the least promotional effort, given that the spontaneous diffusion of their work is already high.

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    File URL: http://docs.dises.univpm.it/web/quaderni/pdf/345.pdf
    File Function: First version, 2010
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    Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 345.

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    Length: 27
    Date of creation: Jul 2010
    Date of revision:
    Handle: RePEc:anc:wpaper:345
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    1. Paul Belleflamme & Pierre M. Picard, 2004. "Piracy and Competition," CESifo Working Paper Series 1350, CESifo Group Munich.
    2. Michele Boldrin & David K Levine, 2002. "The Case Against Intellectual Property," Levine's Working Paper Archive 618897000000000003, David K. Levine.
    3. Josh Lerner & Jean Tirole, 2005. "The Economics of Technology Sharing: Open Source and Beyond," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 99-120, Spring.
    4. Rick Harbaugh & Rahul Khemka, . "Does Copyright Enforcement Encourage Piracy?," Claremont Colleges Working Papers 2000-14, Claremont Colleges.
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