Piracy in the Music Industry’s Streaming Era: Who Suffers and Who Benefits?
With the development of digital music streaming services, it was expected that musical Streaming will be a perfect substitute of illegal file-sharing and will bring all partners in music industry towards legal solutions. Nonetheless, it was noted that Music piracy is still present in the market and has even evolved as the selling and consuming infringing content adapt to new technologies. Using an analytical model, this paper studies the impact of piracy in the music industry. The analysis addresses the payoff consequences on stakeholders of the coexistence of both piracy and streaming businesses in music industry. The investigation focused on equilibrium payoffs with respect to (i) the nuisance created by advertisement, (ii) the risk incurred by pirates and (iii) the consumers’ benefit of enjoying a large music library. We use a two-sided market business model that considers the cross-network benefit the advertisers gain from the free of charge subscribers. One of the main findings is that artists benefit from the piracy regime, while advertisers are harmed by it. Moreover, threshold values with respect to the nuisance caused by advertising for which the streaming service’s receipts coming from subscribers and/or from advertisers in case of piracy could exceed those without piracy, are determined.
Key words - Two-sided Market; Music; Piracy.
JEL numbers - L13; K42; L86