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The Impact of Social Media on Music Demand: Evidence from a Quasi-Natural Experiment

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  • Daniel Winkler
  • Christian Hotz-Behofsits
  • Nils Wlomert
  • Dominik Papies
  • Jura Liaukonyte

Abstract

The digital age has significantly changed how music is consumed, promoted, and monetized. Social media platforms like TikTok are playing a pivotal role in this transformation. This shift has sparked a debate within the music industry: While some stakeholders see social media platforms like TikTok as opportunities to boost songs to viral status, others raise concerns about potential cannibalization effects, fearing that such exposure might reduce revenue from streaming services like Spotify. In this paper, we evaluate the effect of a song's presence - or absence - on social media on its demand on music streaming services using a quasi-natural experiment: Universal Music Group's (UMG) - one of "The Big 3" record labels - decision to remove its entire content library from TikTok in February 2024. We use representative samples covering close to 50% of the US and 94% of the German streaming markets, employing a difference-in-differences approach to compare the streaming consumption of songs that were removed from TikTok with those that were not. We find that UMG's removal of music from TikTok led to a 2-3% increase in streams on audio platforms for affected songs, indicating substitution effects. However, this average treatment effect masks significant heterogeneity: older songs and songs with less promotional support elsewhere saw a decrease in streaming consumption, suggesting that TikTok helps consumers discover or rediscover content that is not top of mind for consumers.

Suggested Citation

  • Daniel Winkler & Christian Hotz-Behofsits & Nils Wlomert & Dominik Papies & Jura Liaukonyte, 2024. "The Impact of Social Media on Music Demand: Evidence from a Quasi-Natural Experiment," Papers 2405.14999, arXiv.org.
    • Handle: RePEc:arx:papers:2405.14999
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    3. Luis Aguiar & Joel Waldfogel, 2021. "Platforms, Power, and Promotion: Evidence from Spotify Playlists," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 653-691, September.
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