Abstract
In this paper we propose a model which shows that the impact of copyright infringement on music artists depends on the type of revenue that they receive (royalties from record companies, profits for self-released artists, revenues from live concerts). We then test the hypotheses derived from the model on a dataset consisting of a survey of 710 artists representative of the whole population of French professional musicians. The results are consistent with our model in so far as: (i) those artists with a recording contract who do more live performances are more tolerant of piracy; and (ii) self-released artists are less tolerant of piracy, and that their attitude is therefore closer to that of record companies.
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Notes
Artists like Skrillex, Franz Ferdinand and Trent Reznor have even encouraged their fans to pirate their music. Others, like Lily Allen or James Blunt, campaign against file-sharing.
See Belleflamme and Peitz (2010) for a recent survey of the theoretical literature on online piracy.
There has been a strong controversy around the reliability of Oberholzer-Gee and Strumpf’s results, due to potential methodological weaknesses (see Liebowitz 2007).
Dewenter et al. (2011) take into account the reverse positive externality, according to which live music attendance boosts recorded music sales. El Harbi et al. (2011) introduce a third option for consumers besides paying the listed price or using file sharing: the pay-what-you-want option. Using a theoretical model, they show that offering such an option to consumers increases the demand for live performances.
To simplify the analysis, we do not model the consumer choice between purchasing music and pirating it. For a model setup which incorporates this choice, see, for instance, Gayer and Shy (2006).
The idea is that only the consumers who have listened to the artist’s music are aware of the existence of the artist, and could therefore consider attending a live concert. The existence of such a positive externality from the recorded music market towards the live music market is empirically confirmed by Montoro-Pons and Cuadrado-Garcia (2011).
Despite the attempt of record companies to propose contracts where all the music revenues (from CD sales, live performances, merchandising, etc.) are shared between an artist and the label (the so-called “360-degree deals”), full control of live performances by the artist is still the dominant model.
The second-order condition is always satisfied.
This corresponds to the “royalty rate.”
The second-order condition is always satisfied.
It has no indirect effect via the price of records, as this price is set optimally by the artist (i.e., the envelope theorem applies).
In Le Monde, November 18, 2007.
The survey was conducted with a specialized survey company, ISL.
The remaining 14,000 members are actors.
We have some information on the members of Adami, which allows us to compare our sample to the full population in terms of gender, age, region of residence, and amount of rights that the artists receive from Adami. The comparison shows that the composition of our sample is relatively close to that of the full population.
Here, we aggregate two positive answers: "very bothered" and "a little bothered". We discuss this aggregation in the robustness section.
These 146 artists have lower income and are older. They are also less likely to have (or to have had) a contract with a record company, to have self-released an album and to have won a Gold record or a music award (the descriptive statistics are available upon request from the authors). We will deal with the possible sample selection issue in Sect. 5.3.
Artists who declared that their music is not shared on P2P networks will be included in the analysis in Sect. 5.3 as a robustness check.
We do not know the actual number of live concerts. In the survey, we asked the artists how many times they had performed on stage in the last 12 months, and four answers were proposed: 0, 1 to 10 times, 11 to 50 times, and more than 50 times. We ran our regression with the full four modalities of the live concerts variable (interacted with the CONTRACT variable), instead of the LIVE dummy variable. Our results remained unchanged. We obtained similar coefficients for the first two modalities and for the last two. Therefore, to simplify the analysis, we construct and use a simple dummy variable, LIVE, to measure the artist’s live concert activity.
Note that CONTRACT is included in the regression via its mirror variable NOCONTRACT (which equals 0 if the artist is under contract, and 1 otherwise).
Marginal effects have been calculated at sample means. Note that for the dummy variable the marginal effect reports a change from 0 to 1.
We also looked for non-linear effects of age, but did not find any.
The suspicion of an endogenity problem does not arise for the SELFRELEASE variable. Indeed, self-releasing is a common practice for all types of artists, regardless of how well-known they are. The stars, whose projects often carry little risk, can self-release their music to capture the profits otherwise left to their record company. Conversely, small-audience artists self-release their albums mainly because record companies refuse to fund their musical projects.
Our implicit assumption is that these artists are less well-known than those whose revenues come exclusively from music activities.
We also performed the same analysis by considering as an IV candidate a dummy reflecting the possession of a homestudio (HOMESTUDIO). A homestudio is composed of a computer, some relevant software and additional devices, which allow an artist to record her music with an almost professional quality. Our results remain unchanged.
The results are available upon request from the authors.
We also checked that the use of a logit model instead of a probit model does not change our results.
We also tested a model with SELFRELEASE_LIVE or NOCONTRACT_LIVE as independent variables, but neither of them was significant.
All the regressions concerning these robustness checks are available upon request from the authors.
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We thank two anonymous referees for their valuable comments and suggestions. We also thank the audience at the European Association of Law and Economics Conference (2010) and seminar participants at Telecom ParisTech, University Paris 10 and Cepremap.
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Bacache-Beauvallet , M., Bourreau, M. & Moreau, F. Piracy and creation: the case of the music industry. Eur J Law Econ 39, 245–262 (2015). https://doi.org/10.1007/s10657-012-9360-1
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DOI: https://doi.org/10.1007/s10657-012-9360-1