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On file sharing with indirect Network effects between concert ticket sales and music recordings

  • Dewenter, Ralf
  • Haucap, Justus
  • Wenzel, Tobias

This paper analyses the interdependency between the market for music recordings and concert tickets, assuming that there are positive indirect network effects both from the record market to ticket sales for live performances and vice versa. In a model with two interrelated Hotelling lines prices in both markets are corrected downwards when compared to the standard Hotelling model. Also, file sharing has ambiguous effects on firms' profitability. As file sharing can indirectly increase demand for live performances overall profits can either increase or decrease, depending on the strength of indirect network effects. Finally, file sharing may induce firms to switch from the traditional business model with two separate firms to an integrated business model where one agency markets both records and concerts (so-called 360 degree deals).

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File URL: http://econstor.eu/bitstream/10419/48607/1/664674194.pdf
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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 28.

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Date of creation: 2011
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Handle: RePEc:zbw:dicedp:28
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  1. 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.
  2. 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.
  3. Belleflamme, Paul & Peitz, Martin, 2010. "Platform competition and seller investment incentives," European Economic Review, Elsevier, vol. 54(8), pages 1059-1076, November.
  4. Oz Shy & Jacques-Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 163-190, 06.
  5. Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
  6. Gayer, Amit & Shy, Oz, 2003. "Internet and peer-to-peer distributions in markets for digital products," Economics Letters, Elsevier, vol. 81(2), pages 197-203, November.
  7. Brett Danaher & Samita Dhanasobhon & Michael D. Smith & Rahul Telang, 2010. "Converting Pirates Without Cannibalizing Purchasers: The Impact of Digital Distribution on Physical Sales and Internet Piracy," Marketing Science, INFORMS, vol. 29(6), pages 1138-1151, 11-12.
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