Working Paper 09/228 - abstract

Digital Technology and the Allocation of Ownership in the Music Industry (PDF, 284kB)

Maija Halonen-Akatwijuka and Tobias Regner

This is an updated version of 04/096

We apply the property rights theory of Grossman-Hart-Moore in the music industry and study the optimal allocation of copyright between the artists who create music and the labels who promote and distribute it. Digital technology opens up a role for new intermediaries. We find that entry of online platforms occurs only if they are sufficiently more productive in distribution than the incumbent label. Furthermore, entry leads to a change in bargaining positions and it can become optimal for the copyright to be shifted from the label to the artist.