And The Bands Played On
Although revenue for recorded music has collapsed since the explosion of file sharing, results elsewhere suggest that the quality of new music has not suffered. One possible explanation is that digitization has allowed a wider range of firms to bring far more music to market using lower-cost methods of production, distribution, and promotion. Record labels have traditionally found it difficult to predict which albums will find commercial success, so many released albums fail while many nascent but unpromoted albums might have been successful. Forces raising the number of products released may allow consumers to discover more appealing choices if they can sift through the offerings. Digitization has promoted both Internet radio and a growing cadre of online music reviewers, providing alternatives to radio airplay as means for new product discovery. To explore this, I assemble data on new works of recorded music released between 1980 and 2010, along with data on particular albums’ sales, airplay on both traditional and Internet radio, and album reviews at Metacritic since 2000. First, I document that despite a substantial drop in major-label album releases, the total quantity of new albums released annually has increased sharply since 2000, driven by independent labels and purely digital products. Second, increased product availability has been accompanied by a reduction in the concentration of sales in the top albums. Third, new information channels – Internet radio and online criticism – change the number and kinds of products about which consumers have information. Fourth, in the past dozen years, increasing numbers of albums find commercial success without substantial traditional airplay. Finally, albums from independent labels – which previously might not have made it to market – account for a growing share of commercially successful albums.
Joel Waldfogel is the Frederick R. Kappel Professor of Applied Economics at the University of Minnesota’s Carlson School of Management. He was previously the Ehrenkranz Family Professor of Business and Public Policy at the University of Pennsylvania’s Wharton School and an associate professor of economics at Yale University.
His main research interests are industrial organization and law and economics, and he has conducted empirical studies of price advertising, media markets, the operation of differentiated product markets, and issues related to digital products, including piracy, pricing, and revenue sharing. He has published more than 50 articles in scholarly outlets, including the American Economic Review, the Journal of Political Economy, and the RAND Journal of Economics. He also has published several books, including The Tyranny of the Market: Why You Can’t Always Get What You Want (Harvard University Press, 2007) and Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays (Princeton University Press, 2009). He has also written for Slate.
Waldfogel received a B.A. in economics from Brandeis University and a Ph.D. in economics from Stanford University.
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