Online Music Videos and Recorded Music Sales
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Research Collection Journal Article Video Killed the Radio Star? Online Music Videos and Recorded Music Sales Author(s): Peukert, Christian; Kretschmer, Tobias Publication Date: 2020-09 Permanent Link: https://doi.org/10.3929/ethz-b-000380595 Originally published in: Information Systems Research 31(3), http://doi.org/10.1287/isre.2019.0915 Rights / License: Creative Commons Attribution 4.0 International This page was generated automatically upon download from the ETH Zurich Research Collection. For more information please consult the Terms of use. ETH Library This article was downloaded by: [195.176.113.13] On: 29 September 2020, At: 23:47 Publisher: Institute for Operations Research and the Management Sciences (INFORMS) INFORMS is located in Maryland, USA Information Systems Research Publication details, including instructions for authors and subscription information: http://pubsonline.informs.org Video Killed the Radio Star? Online Music Videos and Recorded Music Sales Tobias Kretschmer, Christian Peukert To cite this article: Tobias Kretschmer, Christian Peukert (2020) Video Killed the Radio Star? Online Music Videos and Recorded Music Sales. Information Systems Research 31(3):776-800. https://doi.org/10.1287/isre.2019.0915 Full terms and conditions of use: https://pubsonline.informs.org/Publications/Librarians-Portal/PubsOnLine-Terms-and- Conditions This article may be used only for the purposes of research, teaching, and/or private study. Commercial use or systematic downloading (by robots or other automatic processes) is prohibited without explicit Publisher approval, unless otherwise noted. For more information, contact [email protected]. The Publisher does not warrant or guarantee the article’s accuracy, completeness, merchantability, fitness for a particular purpose, or non-infringement. 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For more information on INFORMS, its publications, membership, or meetings visit http://www.informs.org INFORMATION SYSTEMS RESEARCH Vol. 31, No. 3, September 2020, pp. 776–800 http://pubsonline.informs.org/journal/isre ISSN 1047-7047 (print), ISSN 1526-5536 (online) Video Killed the Radio Star? Online Music Videos and Recorded Music Sales Tobias Kretschmer,a,b Christian Peukertc,d a Ludwig-Maximilians-University of Munich, 80539 Munich, Germany; b Centre for Economic Policy Research, London EC1V 0DX, United Kingdom; c Catolica´ Lisbon School of Business and Economics, Universidade Catolica´ Portuguesa, 1649-023 Lisbon, Portugal d Center for Law and Economics, ETH Zurich, 8092 Zurich, Switzerland Contact: [email protected], https://orcid.org/0000-0002-7830-7825 (TK); [email protected], https://orcid.org/0000-0003-3997-8850 (CP) Received: February 7, 2018 Abstract. We study the heterogeneous effects of online video platforms on the sales Revised: December 14, 2018; July 13, 2019 volume and sales distribution of recorded music. Identification comes from two natural Accepted: September 24, 2019 experiments in Germany. In 2009, virtually all music videos were blocked from YouTube Published Online in Articles in Advance: as a result of a legal dispute. In 2013, the dedicated platform Vevo entered the market, June 10, 2020 making videos of a large number of artists available overnight. Our estimates suggest that https://doi.org/10.1287/isre.2019.0915 restricting (enabling) access to online videos decreases (increases) recorded music sales on average by about 5%–10%. We show that the effect operates independently of the nature of Copyright: © 2020 The Author(s) video content, suggesting that user-generated content is as effective as official content. Moreover, we highlight heterogeneity in this effect: online music videos disproportionally benefit sales of new artists and sales of mainstream music. History: Param Singh, Senior Editor; Gordon Burtch, Associate Editor. Open Access Statement: This work is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, distribute, transmit and adapt this work, but you must attribute this work as “Information Systems Research. Copyright © 2020 The Author(s). https://doi.org/10.1287/isre.2019.0915, used under a Creative Commons Attribution License: https://creativecommons.org/licenses/by/4.0/.” Funding: This work was supported by FCT-Portuguese Foundation of Science and Technology [Grants UID/GES/00407/2013 and FCT-PTDC/EGE-OGE/27968/2017]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2019.0915. Keywords: digital distribution platforms • user-generated content • natural experiment 1. Introduction literature on digital piracy suggests that unlicensed Digitization has brought important changes to the consumption mostly substitutes for licensed con- 1 recorded music industry. Thanks to a substantial sumption. Licensed platforms typically pay some decline in the fixed cost of production, distribution, and share of sales, advertising revenues, or per-use roy- promotion, the number of new songs on the market has alties. An emerging literature has started to look tripled (Aguiar and Waldfogel 2016, 2018a). However, into closed platform streaming services and typically the precise way that digital distribution and pro- finds that services such as Spotify substitute for pi- motion affect artists’ revenue streams (with impli- racy and digital ownership but leave aggregate rev- cations for incentives to invest in new content in the enues largely unchanged (e.g., Thomes 2013, Nguyen long run) is not fully understood. We compare open et al. 2014,Wlomert¨ and Papies 2016,Aguiarand and closed content distribution platforms in their ef- Waldfogel 2018b,Dattaetal.2018). Surprisingly lit- fects on revenues in other distribution channels and tle is known about licensed open platforms. They are highlight important heterogeneity in those effects. particularly interesting because they create a market Digital platforms distributing content differ in the for derivative works. Rights holders are compensated amount of control rights holders have over available for third-party use of their work without requiring in- content and the corresponding revenue model. The dividual licensing contracts. For example, on YouTube, spectrum ranges from unlicensed platforms,suchas where user-generated content (UGC) comprises the (the original) Napster or Megaupload, to licensed open majority of available content (Liikkanen and Salovaara platforms, such as YouTube and SoundCloud that 2015), rights holders can get a share of advertising allow anyone to upload content, to licensed closed revenues generated from third-party content. platforms, such as iTunes and Spotify, where only the We study how the open platform YouTube affects rights holders themselves can contribute. sales of recorded music and compare its effect with By definition, unlicensed platforms do not com- that of Vevo, a closed platform. We then investigate pensate rights holders. Indeed, the relatively large how availability on YouTube affects the type and 776 Kretschmer and Peukert: Online Music Videos and Recorded Music Sales Information Systems Research, 2020, vol. 31, no. 3, pp. 776–800, © 2020 The Author(s) 777 variety of music consumers demand on other chan- by the blocking on YouTube. We show that the size of nels (Piolatto and Schuett 2012, Datta et al. 2018). As our estimated effect does not vary across songs that with many other digital platforms, YouTube offers have a higher share of user-generated videos on tools that allow for search and social interaction and YouTube, suggesting that UGC has a complementary provides up-to-date lists of the most popular videos effect very similar to that of official content. Strik- and automated recommendations to help consumers ingly, weekly sales and streams increase by a similar comb through the vast amount of content available on amount when Vevo, a closed platform without UGC, the platform (Zhou et al. 2016), although its role in enters the market four years later. We do not find shaping the popularity distribution is not clear ex ante evidence that suggests that the complementary effect (Fleder and Hosanagar 2009,TuckerandZhang2011, is moderated by overall popularity as measured in Oestreicher-Singer and Sundararajan 2012b,Susarla sales. We then study heterogeneity across songs and et al. 2012, Godinho de Matos et al. 2016). find that YouTube disproportionately benefits sales A unique setting in the German market helps us of new artists and mass-market artists (mainstream establish a causal link between YouTube availability music). Finally, we show that the experiments we and other consumption channels for recorded mu- study in this paper affect the composition of not only sic. As a result of a royalty dispute between YouTube sales/streams of songs but also aggregated sales/ and the de facto monopolist