Record Labels Will Never Die

Hit songs, books, and movies are many times more successful than average, suggesting that ‘‘the best’’ alternatives are qualitatively different from ‘‘the rest’’; yet experts routinely fail to predict which products will succeed. We investigated this paradox experimentally, by creating an artificial ‘‘music market’’ in which 14,341 participants downloaded previously unknown songs either with or without knowledge of previous participants’ choices. Increasing the strength of social influence increased both inequality and unpredictability of success. Success was also only partly determined by quality: The best songs rarely did poorly, and the worst rarely did well, but any other result was possible.

More here (via Barker).

A few quick thoughts:

  • A quick proxy for status is how many people talk about you when you’re not there. Record labels (and movie studios) create this real value.
  • There can be only one #1 song at any given moment so, all things equal, the biggest baddest promotion machine gets the slot. This is an arms race. Also, timing your release to avoid the Lady Gaga/Pitbull/whatever Gorillas matters.
  • One can imagine an equilibrium with lower overall promotional costs and similar music quality. It’s called the no-trademark equilibrium. There is no incentive problem in high-status businesses so higher returns just flow back into marketing budgets. And the arms race heats up.
  • So killing music trademarks will hobble marketing budgets. What effect does this have on eyeball businesses like the Internet? Might trademarks be key to the bubble so many feel but cannot prick? A transfer of measured GDP to more ‘real’ sectors would look pretty awesome to rocking chair economists.
Advertisements
This entry was posted in economics. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s