The Rise of Streaming Music and Implications for Music Production

29 Pages Posted: 9 Oct 2015 Last revised: 11 Nov 2017

See all articles by R. Scott Hiller

R. Scott Hiller

Fairfield University - Department of Economics

Jason M. Walter

University of Wisconsin - Stout

Date Written: November 8, 2017

Abstract

In this paper, we model the potential for streaming music, a non-durable product, to upend and displace durable music sales. As the popularity of streaming music increases producers will switch their focus to the non-durable channel. We identify conditions under which the changing industry will encourage musicians to release fewer, but higher quality songs, leading to market deepening and increased listeners. We find that increases on the extensive margin are larger than the intensive margin from this strategy. This result could extend to information goods increasingly provided as a non-durable product. Beyond a model of consumer utility and producer profit, we analyze the most played songs of the large streaming music platform, Spotify, and compare those results to traditional album sales using Nielsen data.

Keywords: bundling, non-durable goods, music industry

Suggested Citation

Hiller, R. Scott and Walter, Jason M., The Rise of Streaming Music and Implications for Music Production (November 8, 2017). Available at SSRN: https://ssrn.com/abstract=2670976 or http://dx.doi.org/10.2139/ssrn.2670976

R. Scott Hiller (Contact Author)

Fairfield University - Department of Economics ( email )

Fairfield, CT 06824
United States

Jason M. Walter

University of Wisconsin - Stout ( email )

Menomonie , WI 54751
United States

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