On File Sharing with Indirect Network Effects between Concert Ticket Sales and Music Recordings
Heinrich Heine Universität Dusseldorf - Department of Economics; German Institute for Economic Research (DIW Berlin)
University of the Federal Armed Forces Hamburg - Department of Economics
Heinrich Heine Universität Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)
March 3, 2012
This paper analyses the interdependency between the market for music recordings on the one side and the market for concert tickets on the other side, 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. In the integrated business model file sharing has an ambiguous effect 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).
Number of Pages in PDF File: 15
Keywords: Music Industry, Indirect Network Effects, File Sharing, Piracy, Record Sales, Concert Tickets, 360 degree deals
JEL Classification: L13, L82, Z10working papers series
Date posted: March 4, 2012
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