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"Selling Out" and the Impact of Music Piracy on Artist Entry

  • Joshua S. Gans

There is a puzzle arising from empirical analyses of the impact of music piracy that this has caused declines in music revenue without a consequential decline, and perhaps even an increase, in the entry of artists and the supply of high quality music. There have been numerous explanations posited and this paper adds a novel one: that artists are time inconsistent and hence, tend to underweight fame over fortune when making future choices; i.e., the degree to which they will 'sell out.' Regardless of whether selling out is anticipated or not, the puzzle is resolved. When selling out is not anticipated, future expectations of piracy are not a concern as these impact on monetary awards that are not driving entry. When selling out is anticipated, piracy actually constrains the degree to which artists sell out, and assured of that, raises entry returns. Implications and the role of publisher contracts are also explored.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20162.

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Date of creation: May 2014
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Handle: RePEc:nbr:nberwo:20162
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  1. Richard E. Caves, 2003. "Contracts Between Art and Commerce," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 73-83, Spring.
  2. Joel Waldfogel, 2011. "Bye, Bye, Miss American Pie? The Supply of New Recorded Music Since Napster," NBER Working Papers 16882, National Bureau of Economic Research, Inc.
  3. Nicolas Curien & Francois Moreau, 2009. "The Music Industry in the Digital Era: Toward New Contracts," Journal of Media Economics, Taylor & Francis Journals, vol. 22(2), pages 102-113.
  4. Liebowitz, Stan J, 2006. "File Sharing: Creative Destruction or Just Plain Destruction?," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 1-28, April.
  5. King, Stephen P. & Lampe, Ryan, 2003. "Network externalities, price discrimination and profitable piracy," Information Economics and Policy, Elsevier, vol. 15(3), pages 271-290, September.
  6. Peitz, Martin & Waelbroeck, Patrick, 2006. "Why the music industry may gain from free downloading -- The role of sampling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 907-913, September.
  7. Connolly, Marie & Krueger, Alan B., 2006. "Rockonomics: The Economics of Popular Music," Handbook of the Economics of Art and Culture, Elsevier.
  8. Rafael Rob & Joel Waldfogel, 2004. "Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students," NBER Working Papers 10874, National Bureau of Economic Research, Inc.
  9. Malmendier, Ulrike M. & Della Vigna, Stefano, 2003. "Contract Design and Self Control: Theory and Evidence," Research Papers 1801, Stanford University, Graduate School of Business.
  10. Mortimer, Julie Holland & Nosko, Chris & Sorensen, Alan, 2012. "Supply responses to digital distribution: Recorded music and live performances," Information Economics and Policy, Elsevier, vol. 24(1), pages 3-14.
  11. Zentner, Alejandro, 2006. "Measuring the Effect of File Sharing on Music Purchases," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 63-90, April.
  12. Felix Oberholzer-Gee & Koleman Strumpf, 2007. "The Effect of File Sharing on Record Sales: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 115, pages 1-42.
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