Digitization and Market Efficiency: Evidence from Book Publishing Deals
53 Pages Posted: 2 Feb 2018 Last revised: 19 Apr 2021
Date Written: April 19, 2021
Digitization has given creators direct access to consumers as well as a plethora of new data for suppliers of new products to draw on. We study how this affects licensing outcomes and market efficiency in the context of book publishing. Using data on about 50,000 license deals over more than ten years, we identify the effects of digitization from quasi-experimental variation across book types. Consistent with increases in competition on the publisher level, we find that digitization leads to more favorable deals for authors, and especially for established ones. Consistent with digitization generating additional information for predicting ex-post product appeal, we show that the size of license payments more accurately reflects a product’s ex-post success, and more so for publishers that tend to embrace data analytics. Digitization can thus have large impacts on the allocation of resources across products of varying qualities and on the distribution of rents among intermediaries and creators in markets in which product appeal has traditionally been difficult to predict ex-ante.
Keywords: Disintermediation, Innovation, Book Publishing, Natural Experiment
JEL Classification: D22, D83, L82
Suggested Citation: Suggested Citation