Information Spillovers in the Market for Recorded Music

44 Pages Posted: 1 Jun 2006 Last revised: 26 Dec 2022

See all articles by Kenneth Hendricks

Kenneth Hendricks

University of Texas at Austin - Department of Economics

Alan T. Sorensen

National Bureau of Economic Research (NBER)

Date Written: May 2006

Abstract

This paper studies the role of consumer learning in the demand for recorded music by examining the impact of an artist's new album on sales of past and future albums. Using detailed album sales data for a sample of 355 artists, we show that the release of a new album increases sales of old albums, and the increase is substantial and permanent—especially if the new release is a hit. Various patterns in the data suggest the source of the spillover is information: a new release causes some uninformed consumers to learn about their preferences for the artist's past albums. These information spillovers suggest that the high concentration of success across artists may partly result from a lack of information, and they have significant implications for investment and the structure of contracts between artists and record labels.

Suggested Citation

Hendricks, Kenneth and Sorensen, Alan T., Information Spillovers in the Market for Recorded Music (May 2006). NBER Working Paper No. w12263, Available at SSRN: https://ssrn.com/abstract=905520

Kenneth Hendricks

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States
512-475-8532 (Phone)
512-471-3510 (Fax)

Alan T. Sorensen (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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