Online Sales, Internet Use, File Sharing, and the Decline of Retail Music Specialty Stores

Abstract

This paper uses phonebook records of music retailers in the United States for the years 1998 and 2002 to examine how Internet use, file sharing, and online sales of records have affected the entry and exit of brick and mortar music specialty retailers. By merging music store information with data on Internet activity and broadband connectedness at the Metropolitan Statistical Area (MSA) level, with the number of broadband providers at the zip code level, and with a database of the location of universities, I analyze how online purchases, broadband, and Internet use affected the survival probability and the change in the number of music stores between 1998 and 2002. I further study whether the number of employees and chain membership affected the survival probability. I find that broadband connectedness increased the death rate of brick and mortar music stores and reduced their number. I also find that the presence of a university led to a reduction in the number of music specialty stores in the zip code.

Keywords: file sharing, internet, online, intellectual property, music