'Selling Out' and the Impact of Music Piracy on Artist Entry
Joshua S. Gans
University of Toronto - Rotman School of Management; NBER
July 5, 2015
Rotman School of Management Working Paper No. 2439358
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 only 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.
Number of Pages in PDF File: 18
Keywords: copyright, piracy, music, digitisation, hyperbolic discounting, time inconsistency
JEL Classification: D03, K11, L82
Date posted: May 21, 2014 ; Last revised: July 6, 2015
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