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Piracy as promotion? The Importance of Diffusion in the Music Industry

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  • Daniel Marszalec

    (Faculty of Economics, The University of Tokyo)

  • Maria Martin-Rodriguez

    (Graduate School of Economics, Nagoya University)

Abstract

We present a model of the music industry including artists, consumers and platforms. Artists are heterogeneous in their degree of ex-ante popularity and each one has two sources of income: songs and concerts. However, only for the unknown artists there is a link between the number of songs sold (diffusion) and the revenue from concerts. Copies of the songs of the artists are hosted in platforms. The for-profit platform chooses a positive price to sell high-quality copies, whereas the open platform offers low-quality copies for free. We compare the equilibrium outcomes and welfare with copyright and with piracy. We find that the unknown artists prefer piracy more often than the famous artists, that the price charged by the for-profit platform does not necessarily decrease with piracy, and that piracy may damage the social welfare when the vertical differentiation is large enough.

Suggested Citation

  • Daniel Marszalec & Maria Martin-Rodriguez, 2020. "Piracy as promotion? The Importance of Diffusion in the Music Industry," CIRJE F-Series CIRJE-F-1139, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2020cf1139
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    References listed on IDEAS

    as
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