Piracy as promotion? The Importance of Diffusion in the Music Industry

Daniel Marszalec and Maria Martin-Rodriguez
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Maria Martin-Rodriguez: Graduate School of Economics, Nagoya University

No CIRJE-F-1139, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We present a model of the music industry including artists, consumers and platforms. Artists are heterogeneous in their degree of ex-ante popularity and each one has two sources of income: songs and concerts. However, only for the unknown artists there is a link between the number of songs sold (diffusion) and the revenue from concerts. Copies of the songs of the artists are hosted in platforms. The for-profit platform chooses a positive price to sell high-quality copies, whereas the open platform offers low-quality copies for free. We compare the equilibrium outcomes and welfare with copyright and with piracy. We find that the unknown artists prefer piracy more often than the famous artists, that the price charged by the for-profit platform does not necessarily decrease with piracy, and that piracy may damage the social welfare when the vertical differentiation is large enough.

Pages: 29 pages
Date: 2020-01
New Economics Papers: this item is included in nep-cul and nep-pay
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