Working Paper: NBER ID: w12263
Authors: Ken Hendricks; Alan Sorensen
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.
Keywords: information spillovers; consumer learning; recorded music; album sales
JEL Codes: D83; L15; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| new album release (Y60) | sales of previous albums (Y92) |
| new album release (Y60) | sales of future albums (L14) |
| consumer learning (D18) | sales of previous albums (Y92) |
| promotional activities (M31) | consumer awareness (D18) |
| new album release (Y60) | consumer awareness (D18) |