Supply Responses to Digital Distribution: Recorded Music and Live Performances

Technologies that enable free redistribution of digital goods (e.g., music, movies, software, books) can undermine sellers’ ability to profitably sell such goods, which raises concerns about the future development of socially valuable digital products. In this paper we explore the possibility that broad, illegitimate distribution of a digital good might have offsetting effects on the demand for complementary non-digital goods. We examine the impact of file-sharing on sales of recorded music and on the demand for live concert performances. We provide evidence suggesting that while file-sharing reduced album sales, it simultaneously increased demand for concerts. This effect is most pronounced for small artists, perhaps because file-sharing boosts awareness of such artists. The impact of file-sharing on large, well-known artists’ live performances is negligible.

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