Play it Again, Sam? Reference-Point Formation and Product Differentiation in the Music Industry

Abstract

Newly released music is never assessed in isolation by audiences, who tend to compare objective (sonic attributes) and subjective (genre affiliations) elements of its identity with the previous musical catalog of the corresponding artist, her musically proximal peers, and the most successful releases in the market. In this paper, we provide a general framework that disentangles the objective and subjective identities of new musical releases, and evaluates how differentiation affects audience reactions. We posit that radio stations, who seek commercial success, have different preferences towards differentiation in comparison with critics, who grant cultural legitimacy in the industry. Combining play numbers, reviews, and music description data from different sources, we find that radio stations prefer consistency in the musical style of successive releases by the focal artist and especially favor albums that sound similar to chart-toppers. Critics, however, exhibit opposite preferences, preferring novelty compared to past works of the artist, while remaining uninfluenced by contemporaneous music dynamics. Our moderation checks reveal that decisions around genre affiliations and scheduling of new releases aid music producers to effectively manage audience expectations. This suggests that data-driven decision support systems can help artists to strategically release new products that cater to heterogeneous tastes.

Keywords: New Product Development, Product differentiation, Reference Effects, Satiation, Attachment, Music, Cultural Operations

JEL Classification: M1