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The Web's Promotional Effect and Artists' Strategies

Author

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  • Francesco BALDUCCI

    () (Universita' Politecnica delle Marche, Dipartimento di Economia)

Abstract

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.

Suggested Citation

  • Francesco BALDUCCI, 2010. "The Web's Promotional Effect and Artists' Strategies," Working Papers 345, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  • Handle: RePEc:anc:wpaper:345
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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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    References listed on IDEAS

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    1. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    2. Michele Boldrin & David Levine, 2002. "The Case Against Intellectual Property," American Economic Review, American Economic Association, vol. 92(2), pages 209-212, May.
    3. Rick Harbaugh & Rahul Khemka, "undated". "Does Copyright Enforcement Encourage Piracy?," Claremont Colleges Working Papers 2000-14, Claremont Colleges.
    4. 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ruggero Grilli & Gabriele Tedeschi & Mauro Gallegati, 2015. "Markets connectivity and financial contagion," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(2), pages 287-304, October.
    2. Luca RICCETTI, 2011. "A Copula-GARCH Model for Macro Asset Allocation of a Portfolio with Commodities: an Out-of-Sample Analysis," Working Papers 355, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    3. Alberto Russo, 2014. "A Stochastic Model of Wealth Accumulation with Class Division," Metroeconomica, Wiley Blackwell, vol. 65(1), pages 1-35, February.
    4. Lenzu, Simone & Tedeschi, Gabriele, 2012. "Systemic risk on different interbank network topologies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(18), pages 4331-4341.
    5. Fabio FIORILLO & Agnese SACCHI, 2010. "I Want to Free-ride. An Opportunistic View on Decentralization Versus Centralization Problem," Working Papers 346, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    6. Elena AMBROSETTI & Eralba CELA & Tineke FOKKEMA, 2011. "The Remittances Behaviour of the Second Generation in Europe: Altruism or Self-Interest?," Working Papers 368, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    More about this item

    Keywords

    Artists' strategies; network effect; peer to peer; promotion;

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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