The Web's Promotional Effect and Artists' Strategies

Francesco Balducci ()
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Francesco Balducci: Universita' Politecnica delle Marche, Dipartimento di Economia

No 345, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: The paper explores one of the new business models of the music market proposed by Varian (2005): the importance of the promotional effect of web-based diffusion. An indirect form of such investment consists in non-opposition by artists against the circulation of their music files online, or, likewise, their choice of permitting free downloads of their music albums. The profits lost from legal sales - online or on traditional supports - may be off-set by promotional advantages deriving from greater diffusion, with an increase in the artist's market share. The model assumes the existence of a strong network effect and an exchange of information, opinions and contents among web users. The model's results are determined by the initial conditions, i.e. by an artist's market share at an initial instant of time: or in other words, by his/her popularity. It is shown that emerging artists should make maximum investment in promotion, so that the diffusion of their work can be driven by the network effect and they can emerge from anonymity. Instead, for well-established artists, whose market shares are already large, the optimal strategy is to make the least promotional effort, given that the spontaneous diffusion of their work is already high.

Keywords: Artists' strategies; network effect; peer to peer; promotion (search for similar items in EconPapers)
JEL-codes: L82 O33 Z11 (search for similar items in EconPapers)
Pages: 27
Date: 2010-07
New Economics Papers: this item is included in nep-cul, nep-ict and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:anc:wpaper:345

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