NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Information Spillovers in the Market for Recorded Music

Ken Hendricks, Alan Sorensen

NBER Working Paper No. 12263
Issued in May 2006
NBER Program(s):   IO

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.

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Document Object Identifier (DOI): 10.3386/w12263

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