Release Date: April 9, 2002
BUFFALO, N.Y. -- MP3 downloading won't kill the music industry, but it may knock off a few pop superstars, according to a new study on the economics of digital music sharing.
The study by researchers at the University at Buffalo School of Management and the University of Connecticut School of Business found that digital music sharing favors new artists and groups.
They suggest that the music industry consider online music-sharing services as a way to increase profits and counter online music piracy.
The study was conducted by Ram D. Gopal, associate professor of operations and information management at the University of Connecticut; Sudip Bhattacharjee, assistant professor of operations and information management at the University of Connecticut, and Lawrence Sanders, UB professor of management science and systems at UB.
The study analyzed the Billboard Top 200 charts -- reflecting weekly album sales -- from 1991 to 2000. Over the 10-year period, they found a 31.5 percent increase in the number of different artists on the Top 200, indicating that more new artists are hitting the charts than ever before, pushing established musical acts from the charts or keeping them from hitting the charts at all.
The biggest change occurred from 1998 to 2000, when there was a 10 percent increase in the number of different artists who hit the Billboard 200.
The researchers link the trend to rapid growth in the number of Internet users -- from 3 million to 116.7 million -- over the past 10 years and the emergence of music-sharing services such as Napster, which has led to widespread online music sampling and piracy.
"The prevalence of online music technologies appears to be eroding what is known as the 'superstar phenomenon,'" explains Gopal. "This theory contends that past reputation is more
important than artistic merit in fueling the continued commercial success of entertainment superstars."
Which may be why many current pop superstars are adamantly opposed to online music sharing, adds Bhattacharjee.
"Our data shows that the dominance of a few music superstars is decreasing and their hold on music sales is slipping," he says. "This is definitely good news for up-and-coming artists and groups, who now have a better chance at chart success because of these technologies."
And what's good for pop's rising stars is good for the music industry: Contrary to conventional wisdom, the researchers say inexpensive online music services, such as Rhapsody and Pressplay, can increase music-industry profits and reverse the effects of online music piracy.
Sanders says the researchers found that "lowering the cost to legally sample music online will actually propel more users to purchase music because it allows them to check out new songs or new artists.
"Here again, though, the news is bad for music's superstars," adds Sanders. "Users are more likely to pirate a superstar's music than they are to pay to sample it because they are already aware of the value, or likeability, of the superstar's music."
Based on their findings, the researchers suggest that music companies support online music sampling services or begin to invest more in their own sampling services. They also recommend that companies use flexible pricing: charging a lower fee to sample unknown artists and a higher fee to sample superstar artists, which would help superstars recoup some profits lost to pirating.
Their research on online music sharing is forthcoming in Communications of the ACM and the Journal of Organizational Computing and Electronic Commerce.