Radio Airplay, Digital Music Sales and the Fallacy of Composition in New Zealand

15 Pages Posted: 23 Jul 2010  

Mehnaz Bandookwala

University of Canterbury - Economics and Finance

Date Written: July 21, 2010

Abstract

I examine the effect that radio airplay has on the sale of digital music in New Zealand. This effect is also likely to influence the behavior of various music industry participants, including the record companies, radio industry and listeners. I find that on an industry level, radio airplay has no significant effect on the sale of digital music. However, on average, an increase in radio airplay of a given song is predicted to increase sales of that song, which is the so-called exposure effect. The discrepancy between the aggregate and individual effects is explained by the existence of the fallacy of composition: An increase in the airplay of a particular song usually happens at the expense of another song’s airplay, and so if more airplay does give greater sales of a given song, so less airplay will reduce the sales of competing songs, leading to ambiguous aggregate effects. It is also true that while individual songs compete with other songs for airplay, the radio industry competes with other activities and products consumed by listeners. Increases in the total airplay may not increase total sales, as the listener’s decision regarding digital single purchase is now made with consideration of their non-music consumption goods, and budget and time constraints.

Suggested Citation

Bandookwala, Mehnaz, Radio Airplay, Digital Music Sales and the Fallacy of Composition in New Zealand (July 21, 2010). Review of Economic Research on Copyright Issues, Vol. 7, No. 1, pp. 67-81, 2010. Available at SSRN: https://ssrn.com/abstract=1646647

Mehnaz Bandookwala (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

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