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The creative destruction of the "winner-take-all" society? Property rights and the economics of the long tail in the music industry




Strachan, Ian Clark, author
Phillips, Ronnie J., 1951-, advisor
Graff, Gregory D., committee member
Jianakoplos, Nancy A., 1951-, committee member
Mushinski, David W., committee member

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Technological change has always impacted the music industry, which is now absorbing the destructive effects of the digital revolution. The Internet and MP3s have allowed for illegal downloading and file sharing. For producers, revenue streams have run dry because consumers can get their music for free. The old property rights regime has been eroded for incumbents and a market failure is imminent. But the digital revolution also has the potential to create opportunity for entrepreneurial artists and firms who are able to utilize new technology for disseminating their content. This dissertation utilizes a random sample of recorded music unit sales for 2,051 artists from 2004 to 2008. The data is used to test if the digital revolution has created a 'long tail effect' where less popular and nascent artists enjoy more sales, or a 'superstar effect' where a small number of top artists take the lion's share of sales. I find that the market is characterized by an extremely skewed sales distribution profile which reaches a peak in both sales and inequality in 2006 while sales and inequality decline thereafter. I also find a superstar effect in digital formats and a long tail effect in non-digital formats across all five years. The 'middle class' of artists also declines steadily. For property rights, these changes in the sales distribution profile highlight the importance of retaining excludability through bundling content together. Bundling can still be facilitated by copyright collectives and intermediaries.


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winner take all
Music trade -- Economic aspects
music industry
Music and the Internet
long tail
Market segmentation
digital revolution
Intellectual property -- Management
cultural economics
Intellectual property -- Access control


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