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On the impact of digital music distribution

Author

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  • Yoon, Kiho

Abstract

We present a framework to evaluate the impact of digital music distribution. We set up a representative model that enables the comparative static analysis. We then interpret two empirical observations about the music industry, the sales decline and the price constancy, and fit the model to these observations. We find that, while the impact of digitalization on the producers' profits is probably negative, it may not be as severe as the observed impact on the quantity. On the other hand, the impact of digitalization on the consumer surplus is unambiguously positive. The impact on the social welfare is rather ambiguous, but numerical calculations reveal that the social welfare has increased for most parameter values. We also show that enhanced copyright protection to counteract the impacts of digitalization may have an unexpected effect on the social welfare.

Suggested Citation

  • Yoon, Kiho, 2007. "On the impact of digital music distribution," IIR Working Paper 07-09, Institute of Innovation Research, Hitotsubashi University.
  • Handle: RePEc:hit:iirwps:07-09
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    Cited by:

    1. Ahn, Illtae & Shin, Ilsoon, 2010. "On the optimal level of protection in DRM," Information Economics and Policy, Elsevier, vol. 22(4), pages 341-353, December.

    More about this item

    Keywords

    Music industry; Digital music; Copyright; File sharing;

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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