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

18 Pages Posted: 21 May 2014 Last revised: 6 Jul 2015

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Date Written: July 5, 2015

Abstract

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.

Keywords: copyright, piracy, music, digitisation, hyperbolic discounting, time inconsistency

JEL Classification: D03, K11, L82

Suggested Citation

Gans, Joshua S., 'Selling Out' and the Impact of Music Piracy on Artist Entry (July 5, 2015). Rotman School of Management Working Paper No. 2439358. Available at SSRN: https://ssrn.com/abstract=2439358 or http://dx.doi.org/10.2139/ssrn.2439358

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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