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Video Killed the Radio Star? Online Music Videos and Recorded Music Sales

CEP Discussion Paper No 1265

66 Pages Posted: 17 Apr 2014 Last revised: 18 Jun 2017

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

Christian Peukert

University of Zurich - Faculty of Economics, Business Administration and Information Technology

Date Written: June 12, 2017

Abstract

We study how YouTube, as a global digital distribution platform for music content, affects sales volume and sales distribution of recorded music. Within songs, YouTube may displace record sales, or it may enhance them. Across songs, YouTube may increase competition for consumer awareness. Identification comes from two quasi-experiments in Germany. In 2009, virtually all official music videos were blocked from YouTube due to a legal dispute. The situation remained largely unchanged until the dedicated platform VEVO entered the market in 2013, making videos of a large number of artists available over night. We find that both restricting and enabling access to online videos has consistent complementary effects on recorded music sales. We show that the effect operates independent of the nature of video content, suggesting that user-generated content is as effective in affecting revenues of firms as self-produced official content. Moreover, YouTube is much more effective in triggering sales of songs by new artists compared to established artists, and disproportionally benefits sales of mainstream music. We find that this pattern - new artists and mainstream artists benefiting disproportionately from video availability on YouTube - is consistent with the type of recommender systems that YouTube had in place. Finally, we discuss implications that go beyond the application to the music industry.

Keywords: Sampling, Displacement, Promotion, Sales

JEL Classification: L82, M37, D83

Suggested Citation

Kretschmer, Tobias and Peukert, Christian, Video Killed the Radio Star? Online Music Videos and Recorded Music Sales (June 12, 2017). CEP Discussion Paper No 1265. Available at SSRN: https://ssrn.com/abstract=2425386 or http://dx.doi.org/10.2139/ssrn.2425386

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, 80539
Germany

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Christian Peukert (Contact Author)

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Affolternstrasse 56
Z├╝rich, 8050
Switzerland

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