Information Spillovers in the Market for Recorded Music

Abstract

This paper studies the role of consumer learning in the demand for recorded music by examining the impact of an artist%u2019s 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%u2014especially 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%u2019s 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.