Music Supply Behavior in the Digital Era

Abstract: Due to the increase in file-sharing in later years, there is a wide concern among music industry professionals and others that the music supply will be negatively affected by the decreasing sales of pre-recorded music. However, almost no research effort has been put into measuring the change in the supply of music. Using two indicators of music supply, this paper investigates how the supply from individual music producers has changed during the last five years. Moreover, a labour supply model and relevant concepts from economic theory are used to outline how music producers are affected by the recent changes in the music industry. The findings of this paper suggests that the supply of music is in fact increasing, and some explanations are given for how increasing supply can be compatible with decreasing compensation levels.