Faddists, enthusiasts and Canadian divas:a model of the recorded music market

This paper constructs a model of the provision of commercial music in which some consumers (enthusiasts) enjoy diversity and others (faddists) prefer to follow what is popular. Record companies sign up bands, only some of whom will 'succeed' - a process modelled in a number of alternate ways - and radio stations broadcast recordings. Consumers hear music on the radio and purchase recordings, where the likelihood of purchase depends, in part, on the extent of radio airplay for a particular recording. We show that consumers' taste for diversity leads to under-entry in general and we illustrate the working of the model by considering the impact of a local content quota in broadcasting. It is shown that a quota that restricts the airtime devoted to foreign music induces a shift in the pattern of band entry into 'international' genres. But a mild quota is welfare-improving in this model: even though the diversity of local music is reduced, the quota increases the number of new entrants, drawn in by the increased profitability of success. We also discuss the consequences of a quota that requires increased broadcasting of 'new' music and show that, while the addition of the 'new' band component decreases the total amount of time devoted to listening to the radio by consumers (yielding a welfare loss), it does nothing to a record company's incentives to sign up new bands.