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1 | Copyright Protection, Technological | 28 | certs; 4428 single certs Covers most of |
Change, and the Quality of New Products: | music sales Tracks known patterns Sparse | ||
Evidence from Recorded Music since | < 1970. | ||
Napster. Joel Waldfogel University of | 29 | Depreciation in Sales Data. Older | |
Minnesota and NBER Media Economics | albums sell less Sales data are noisier. | ||
Conference, Moscow October 27, 2011. | 30 | Empirical Approach. Goal: derive an | |
2 | Intro – assuring flow of creative | index of the importance of the music from | |
works. Appropriability begets creative | each vintage Define st,v = share of | ||
works depends on both law and technology | vintage v music in the sales or airplay of | ||
IP rights are monopolies granted to | music in period t. Observe s for V | ||
provide incentives for creation Harms and | vintages and T years For a given year t, s | ||
benefits Recent technological changes may | varies across vintages for two reasons | ||
have altered the balance File sharing | Depreciation Variation in vintage quality. | ||
makes it harder to appropriate revenue. | 31 | Regression approach description. | |
3 | …and revenue has plunged. | Regress ln(st,v) on age dummies, vintage | |
4 | Ensuing Research. Mostly a kerfuffle | dummies. Allow flexible depreciation | |
about whether file sharing cannibalizes | pattern Then: vintage dummies are index of | ||
sales Oberholzer-Gee and Strumpf | vintage quality. | ||
(2006),Rob and Waldfogel (2006), Blackburn | 32 | Random utility interpretation. | |
(2004), Zentner (2006), and more Most | Consumers choose between vintages No | ||
believe that file sharing reduces sales | outside good (literally in airplay) in | ||
…and this has led to calls for | sales, don’t believe music is falling in | ||
strengthening IP protection. | utility relative to outside good Ut,v = | ||
5 | My Epiphany. Revenue reduction, | f(t-v) + ?v + ?t,v with extreme-value | |
interesting for producers, is not the most | error ln(st,v) – ln(st,0) = f(t-v) + ?v. | ||
interesting question Instead: will flow of | Normalization: ln(st,0) = constant | ||
new products continue? We should worry | Regression of ln(st,v) on age and vintage | ||
about both consumers and producers. | dummies recovers the evolution of “mean | ||
6 | Industry view: the sky is falling. | utility” with vintage. | |
IFPI: “Music is an investment-intensive | 33 | Flexible Depreciation Patterns. | |
business… Very few sectors have a | 34 | Airplay-Based Vintage Quality Index. | |
comparable proportion of sales to R&D | 35 | Ditto for Parametric Indices. | |
investment to the music industry.” Warner | 36 | Certification-Based Vintage Quality | |
Music: “…piracy makes it more difficult | Index (all media). Noisier. But similar | ||
for the whole industry to sustain that | pattern. | ||
regular investment in breaking talent.” | 37 | Tests. Following Napster, is vintage | |
RIAA: “Our goal with all these anti-piracy | quality Above or below previous level? | ||
efforts is to protect the ability of the | Relative to various starting points Above | ||
recording industry to invest in new bands | or below previous trends? Relative to | ||
and new music…”. | various starting points. | ||
7 | File sharing is not the only | 38 | The Post-Napster Airplay-Based Sales |
innovation. “Compound experiment” Costs of | Index Relative to Pre-Napster Levels and | ||
production, promotion, and distribution | Trends. (1). (2). (3). (4). (5). (6). (7). | ||
may also have fallen Maybe weaker IP | (8). (9). Post-Napster Level. -0.2231. | ||
protection is enough My empirical | 0.4875. 0.4822. 0.3790. 0.0032. (0.2340). | ||
question: What has happened to the quality | (0.3277). (0.2346)*. (0.1126)**. (0.1944). | ||
of new products since Napster? Contribute | Level since 1995. -0.8151. (0.2814)**. | ||
to an evidence-based discussion on | Level since 1990. -0.9484. (0.1873)**. | ||
adequacy of IP protection in new economy. | Level since 1980. -1.2359. (0.0899)**. | ||
8 | The current standard of empirical | Level since 1970. -0.9806. (0.1944)**. | |
evidence. Lennon and McCartney story | Post-Napster Trend. 0.3223. 0.2391. | ||
“"Somebody said to me, 'But the | 0.2239. 0.2032. (0.1350)*. (0.0747)**. | ||
Beatles were anti-materialistic.' That's a | (0.0393)**. (0.0241)**. Trend since 1995. | ||
huge myth. John and I literally used to | -0.2165. (0.0827)*. Trend since 1990. | ||
sit down and say, 'Now, let's write a | -0.1170. (0.0301)**. Trend since 1980. | ||
swimming pool.'" ”. | -0.0767. (0.0094)**. Trend since 1980. | ||
9 | Hard problem. Quantifying the volume | -0.0595. (0.0043)**. Constant. 2.8434. | |
of high-quality new music released over | 2.9479. 3.0866. 3.4772. 3.5977. 2.9097. | ||
time is hard Some obvious candidates are | 2.9942. 3.2408. 3.5293. (0.1013)**. | ||
non-starters # works released (but skew) # | (0.1007)**. (0.0948)**. (0.0644)**. | ||
works selling > X copies (moving | (0.1705)**. (0.1005)**. (0.0985)**. | ||
target) Estimate consumer surplus over | (0.0822)**. (0.0680)**. Observations. 48. | ||
time (But tendency to purchase has | 48. 48. 48. 48. 48. 48. 48. 48. R-squared. | ||
declined, independent of value to | 0.02. 0.17. 0.38. 0.81. 0.37. 0.13. 0.25. | ||
consumers). | 0.60. 0.81. | ||
10 | Three Separate Approaches. Quality | 39 | The Post-Napster Album |
index based on critics’ best-of lists 2 | Certification-Based Sales Index Relative | ||
indices based on vintage service flow | to Pre-Napster Levels and Trends. (1). | ||
Airplay by time and vintage Sales by time | (2). (3). (4). (5). (6). (7). Post-Napster | ||
and vintage. | Level. 0.0446. 0.1806. 0.1852. 0.1752. | ||
11 | Roadmap. Theory welfare from music | (0.0807). (0.1217). (0.0937). (0.0615)**. | |
Critic-based approach Data, validation, | Level since 1995. -0.1633. (0.1105). Level | ||
results Usage-based approaches Data, | since 1990. -0.2109. (0.0831)*. Level | ||
validation, results Discussion Changes in | since 1980. -0.3918. (0.0635)**. | ||
demand and supply, further puzzles. | Post-Napster Trend. 0.0564. 0.0401. | ||
12 | Welfare from Music. Static case (for | 0.0464. (0.0452). (0.0259). (0.0167)**. | |
music that already exists). Buying regime: | Trend since 1995. -0.0341. (0.0303). Trend | ||
CS = A, PS=B,DWL=C Stealing regime: CS = A | since 1990. -0.0173. (0.0122). Trend since | ||
+ B + C, PS=0, DWL=0 Static benefits of | 1980. -0.0155. (0.0052)**. Constant. | ||
stealing outweigh costs. | -0.9879. -0.9607. -0.9176. -0.7267. | ||
13 | Dynamic Case. Suppose PS motivates | -0.9668. -0.9519. -0.8745. (0.0418)**. | |
supply and music depreciates (already know | (0.0451)**. (0.0480)**. (0.0518)**. | ||
that music depreciates) Beatles +26 %/year | (0.0440)**. (0.0469)**. (0.0525)**. | ||
Britney Spears -28%/year. | Observations. 41. 41. 41. 41. 41. 41. 41. | ||
14 | Album Depreciation for Major Artists. | R-squared. 0.01. 0.06. 0.15. 0.50. 0.04. | |
These albums don’t depreciate much. These | 0.06. 0.20. | ||
albums depreciate a lot. 14. From Rob and | 40 | The Post-Napster Album | |
Waldfogel (2004). artist. adjusted | Certification-Based Sales Index Relative | ||
depreciation. Pleasantly surprised. Grew | to Pre-Napster Levels and Trends (all | ||
on me. Familiar before got it. Guessed | recorded music products). (1). (2). (3). | ||
right. Disappointed from start. Got tired | (4). (5). (6). (7). (8). Post-Napster | ||
of it. N. RED HOT CHILI PEPPERS. 31.3%. | Level. 0.0801. 0.3515. 0.2817. 0.2383. | ||
30.0%. 43.3%. 26.7%. 10.0%. 0.0%. 13.3%. | (0.1008). (0.1411)*. (0.1112)*. | ||
30. BEATLES, THE. 26.2%. 25.9%. 22.2%. | (0.0752)**. Level since 1995. -0.3257. | ||
33.3%. 0.0%. 0.0%. 22.2%. 27. JONES, | (0.1262)*. Level since 1990. -0.3024. | ||
NORAH. 17.4%. 35.3%. 58.8%. 11.8%. 5.9%. | (0.0963)**. Level since 1980. -0.4745. | ||
11.8%. 11.8%. 17. U2. 9.8%. 18.8%. 43.8%. | (0.0752)**. Post-Napster Trend. 0.1629. | ||
18.8%. 6.3%. 6.3%. 18.8%. 16. LINKIN PARK. | 0.1099. 0.0964. 0.0938. (0.0525)**. | ||
9.8%. 37.0%. 14.8%. 29.6%. 7.4%. 7.4%. | (0.0299)**. (0.0186)**. (0.0151)**. Trend | ||
14.8%. 27. DION, CELINE. 9.7%. 18.8%. | since 1995. -0.0923. (0.0340)**. Trend | ||
0.0%. 25.0%. 12.5%. 12.5%. 31.3%. 16. | since 1990. -0.0422. (0.0133)**. Trend | ||
COLDPLAY. 6.3%. 25.0%. 27.8%. 27.8%. | since 1980. -0.0263. (0.0053)**. Trend | ||
22.2%. 0.0%. 8.3%. 36. 2 PAC. 1.9%. 10.7%. | since 1970. -0.0233. (0.0036)**. Constant. | ||
25.0%. 21.4%. 7.1%. 0.0%. 42.9%. 28. | 0.3248. 0.3791. 0.4256. 0.6411. 0.3630. | ||
EMINEM. 0.7%. 22.9%. 21.4%. 21.4%. 8.6%. | 0.3940. 0.4987. 0.6695. (0.0504)**. | ||
0.0%. 31.4%. 70. SOUNDTRACK. 0.0%. 28.3%. | (0.0515)**. (0.0556)**. (0.0614)**. | ||
23.9%. 19.6%. 6.5%. 6.5%. 23.9%. 45. | (0.0480)**. (0.0502)**. (0.0531)**. | ||
DOORS, THE. -1.2%. 12.5%. 12.5%. 25.0%. | (0.0651)**. Observations. 40. 40. 40. 40. | ||
12.5%. 6.3%. 37.5%. 16. MATTHEWS, DAVE | 40. 40. 40. 40. R-squared. 0.02. 0.17. | ||
BAND. -5.2%. 7.1%. 19.0%. 26.2%. 14.3%. | 0.22. 0.53. 0.22. 0.27. 0.44. 0.56. | ||
19.0%. 26.2%. 42. MOBY. -6.2%. 5.9%. 5.9%. | 41 | Bottom line. No evidence that vintage | |
47.1%. 5.9%. 17.6%. 17.6%. 17. MAYER, | quality has declined Some evidence that it | ||
JOHN. -8.7%. 31.3%. 25.0%. 18.8%. 6.3%. | has increased Hard to know what it might | ||
6.3%. 25.0%. 16. NELLY. -17.2%. 15.8%. | otherwise have been Puzzle: why do high | ||
21.1%. 15.8%. 5.3%. 5.3%. 31.6%. 19. | quality products continue to be produced | ||
DESTINY'S CHILD. -20.2%. 0.0%. 6.7%. | despite collapse in effective copyright | ||
20.0%. 20.0%. 6.7%. 46.7%. 15. 50 CENT. | protection? | ||
-20.5%. 17.4%. 21.7%. 17.4%. 8.7%. 0.0%. | 42 | Discussion. File sharing reduced | |
39.1%. 23. 'N SYNC. -20.7%. 4.8%. 0.0%. | demand, but the quantity of new works | ||
4.8%. 4.8%. 14.3%. 71.4%. 21. AGUILERA, | seems not to have decline. How? ? | ||
CHRISTINA. -21.6%. 10.3%. 0.0%. 10.3%. | 43 | Cost Reduction. | |
13.8%. 10.3%. 55.2%. 29. BLINK 182. | 44 | Changes on Supply Side. Costs of | |
-23.0%. 6.7%. 13.3%. 6.7%. 6.7%. 26.7%. | creation, promotion, and distribution have | ||
46.7%. 15. CAREY, MARIAH. -23.5%. 0.0%. | all fallen Creation Succession of | ||
10.5%. 26.3%. 5.3%. 31.6%. 26.3%. 19. | cost-reductions Reel-to-reel tape (?1948), | ||
BACKSTREET BOYS. -24.5%. 0.0%. 0.0%. | DAT (?1985), Pro-Tools & Garageband | ||
17.6%. 5.9%. 11.8%. 64.7%. 17. DMX. | (since Napster) Promotion/musical | ||
-24.8%. 10.5%. 5.3%. 21.1%. 10.5%. 10.5%. | discovery Old days: Radio and payola $60 | ||
52.6%. 19. SPEARS, BRITNEY. -28.3%. 0.0%. | million payments to radio in 1985, when | ||
3.4%. 6.9%. 3.4%. 3.4%. 82.8%. 29. JA | recording industry profits were $200 | ||
RULE. -48.4%. 6.7%. 0.0%. 26.7%. 0.0%. | million $150,000 to promote hit single. | ||
26.7%. 40.0%. 15. JAY-Z. -52.4%. 17.4%. | 45 | Promotion, Now. “Infinite Dial” study. | |
0.0%. 8.7%. 17.4%. 26.1%. 34.8%. 23. | 46 | Changing media for musical discovery. | |
VARIOUS. -86.9%. 10.0%. 0.0%. 5.0%. 5.0%. | 47 | Which outlets? | |
10.0%. 45.0%. 15. 618. | 48 | Distribution has changed too. Old | |
15 | Dynamic Case. Suppose PS motivates | days: physical product, trucks, billing | |
supply and music depreciates (already know | Now, can get song available at iTunes | ||
that music depreciates) Beatles +26 %/year | Music Stores for $10 (or less) CDBaby, | ||
Britney Spears -28%/year Then in next | TuneCore, etc. | ||
period, CS=PS=DWL=0 Key question: ebbed | 49 | Entry barrier: change back from $10. | |
flow of new products? | 50 | Indies Filling Void? Leeds (2005) - | |
16 | Approach #1: critics’ lists. Want | independent labels appear to have lower | |
index of the number of works released each | costs, allowing them to subsist on smaller | ||
year surpassing a constant threshold Use | sales: “Unlike the majors, independent | ||
critics’ retrospective best-of lists E.g. | labels typically do not allocate money to | ||
Number of albums on a best-of-the-decade | producing slick videos or marketing songs | ||
list from each year Retrospective: to be | to radio stations. An established | ||
on list, album’s quality must exceed a | independent …can turn a profit after | ||
constant threshold. | selling roughly 25,000 copies of an album; | ||
17 | Rolling Stone’s 500 Best Albums | success on a major label release sometimes | |
(2004). | doesn't kick in until sales of half a | ||
18 | “Splice” together to create overall | million.”. | |
index, covering pre- and post-Napster era. | 51 | Label Examples. Majors: Indies | |
19 | Data Validity. Do indices pick up | (selected artists): 4AD (Pixies, National) | |
major eras? Larkin (2007): “The 60s will | SST (Husker Du) Matador (Pavement, | ||
remain, probably forever, the single most | Interpol) Merge (Arcade Fire, Spoon). | ||
important decade for popular music.” Do | 52 | Indie Role by Decade. Difference | |
indices track each other? Are critical | between the 2000s and the previous two | ||
responses relevant to demand (and | decades is significant at the 5 percent | ||
therefore economic welfare)? | level in a one-sided test (p-val =0.04). | ||
20 | Concordance of Long Term Indices. All | 53 | Also true among top sellers. |
correlations exceed 0.7, except with | 54 | Changed Rewards for Artists. More | |
Zagat. | readily available music stimulates demand | ||
21 | The Most Listed Albums of the 2000s, | for live performance Shapiro and Varian | |
or How Cool Are You? Lots of concordance. | (1999), Connolly and Krueger (2006), | ||
Significant sales; not economically | Mortimer, Nosko, and Sorenson (2010) | ||
irrelevant. rank. artist. album. number of | Potentially why artists don’t go back to | ||
lists. year. RIAA cert. 1. Radiohead. Kid | law school. | ||
A. 32. 2000. P. 2. Arcade Fire. Funeral. | 55 | Conclusions. New data for documenting | |
31. 2004. 3. Strokes, The. Is This It. 29. | effects on supply following Napster based | ||
2001. G. 4. OutKast. Stankonia. 29. 2000. | on behavior vs critics No reduction – and | ||
3xP. 5. Wilco. Yankee Hotel Foxtrot. 28. | possibly an increase - in consequential | ||
2002. G. 6. Jay-Z. The Blueprint. 25. | new products despite reduction in demand | ||
2001. 2xP. 7. Flaming Lips, The. Yoshimi | Reduced costs, changed industrial | ||
Battles the Pink Robots. 21. 2002. G. 8. | organization (majors vs indies). | ||
LCD Soundsystem. Sound of Silver. 20. | 56 | Conclusions, cont’d. Far from clear we | |
2007. 9. West, Kanye. The College Dropout. | need stronger IP protection here Caveats: | ||
20. 2004. 2xP. 10. Stevens, Sufjan. | Not clear what relevance results have for | ||
Illinois. 20. 2005. 11. TV on the Radio. | other kinds of works (e.g. movies are | ||
Return to Cookie Mountain. 19. 2006. 12. | still pretty expensive to make) Don’t know | ||
Modest Mouse. The Moon & Antarctica. | the counter-factual Next step: look under | ||
19. 2000. G. 13. White Stripes, The. | the hood of recording industry. | ||
Elephant. 19. 2003. P. 14. Daft Punk. | 57 | Backup slides. | |
Discovery. 19. 2001. G. 15. Interpol. Turn | 58 | Controlling for Depreciation. Compare | |
On the Bright Lights. 18. 2002. 16. | different vintages’ market shares in years | ||
Eminem. The Marshall Mathers LP. 18. 2000. | that occur equally long after the | ||
9xP. 17. Radiohead. In Rainbows. 18. 2007. | respective releases Define | ||
G. 18. Beck. Sea Change. 17. 2002. G. 19. | s(k,v)=st,v|t-v=k = share of vintage v | ||
Bon Iver. For Emma, Forever Ago. 17. 2007. | music among airplay or sales k years later | ||
20. Broken Social Scene. You Forgot It in | (t=v+k). | ||
People. 16. 2002. 21. Spoon. Kill the | 59 | With airplay data, t=2004,…,2008; | |
Moonlight. 15. 2002. 22. Knife, The. | v=1960,..t, So s(0,v) can be calculated | ||
Silent Shout. 15. 2006. 23. White Stripes, | for v=2004,…,2008. showing evolution of | ||
The. White Blood Cells. 15. 2001. G. 24. | vintage quality, 04-08 Music that’s one | ||
Animal Collective. Merriweather Post | year old in 2004 was released in 2003, so… | ||
Pavillon. 15. 2009. 25. Madvillain. | s(1,v) can be calculated for v=2003,…,2007 | ||
Madvillainy. 15. 2004. | showing evolution of vintage quality 03-07 | ||
22 | The lists are highly correlated: 250 | s(k,v) can be calculated for | |
albums account for two thirds of the 2390 | 2004-k,…,2008-k. | ||
“best of” list entries. | 60 | Series show vintages’ shares | |
23 | Splice Indices. Plot ?’s. | 2004-2008, when they are k-years old. | |
24 | And voila: Index of vintage quality. | Current music share falls 2004-2008. | |
25 | And voila: Index of vintage quality. | 1-yr-old music’s share rises 2003-4, falls | |
Index is falling prior to Napster. | to 08. 2-year-old music’s share rises | ||
Post-Napster constancy is, if anything, a | 2002-4, then falls. 3-year-old music’s | ||
relative increase. | share rises 2001-4, then falls. For any | ||
26 | Approaches #2 and #3. Measure of | vintage, we have 4 estimates of % change | |
vintage quality based on service | in vintage quality. | ||
flow/consumer decision Sales and airplay | 61 | Concordance back to 1960. | |
Idea: if one vintage’s music is better | 62 | Vintage quality index. For each | |
than another’s, its superior quality | vintage between 1960 and 2004, there are | ||
should generate higher sales or greater | five separate series s(k,v) covering the | ||
airplay through time, after accounting for | vintage 4 percent changes Calculate the | ||
depreciation. | average percent change for each vintage, | ||
27 | Data: Airplay. (Describing data first | accumulate them. | |
makes empirical approach easier to | 63 | Resulting Airplay Index. | |
exposit) For 2004-2008, observe the annual | 64 | Any guesses? | |
share of aired songs originally released | 65 | Next steps: understanding the increase | |
in each prior year. From Mediaguide 2000, | in quality. Perhaps cheaper | ||
over 1 million spins/year Lots of data: | “experimentation” allows us to find better | ||
smooth, precise. Direct evidence of | music (Tervio, 2009) Have been collecting | ||
depreciation. | data on volume of new releases from | ||
28 | Data: Sales. Coarse sales data: RIAA | independent and major labels Indie share | |
certifications See when sales pass | among successful Average career age among | ||
thresholds, know when released Gold=0.5 | indie and major releases Aggressive | ||
million, Platinum=1 million, | experimentation by indies vs majors. | ||
multi-platinum=X million. 17,935 album | |||
Copyright Protection, Technological Change, and the Quality of New Products: Evidence from Recorded Music since Napster.pptx |
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