'Selling Out' and the Impact of Music Piracy on Artist Entry
18 Pages Posted: 21 May 2014 Last revised: 6 Jul 2015
Date Written: July 5, 2015
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: Suggested Citation