The effect of Digital sharing Technologies on Music Markets : A survival analysis of albums on ranking charts. Reviewing paper from Sudip Bhattacharjee and Ram Gopal for KAIST Business Analytics Class.

1. Bhattacharjee, S., Gopal, R.
D., Lertwachara, K., Marsden,
J. R., & Telang, R. (2007)
MSB 881, Prof. Chulho Lee
Team Illari: Ileana, Lamia, Riri
November 29th, 2016

2. Sudip Bhattacharjee
Associate Professor, School of Business -
University of Connecticut
Interested in Fields such as :
❏ Economics of Information Systems
❏ Piracy and Intellectual Property Rights
❏ Digital Goods and Markets
❏ Supply Chain
❏ Energy Informatics
❏ Process Modelling & System Dynamics
# 1678
Ram D. Gopal
Professor, Department Head, -University of
Connecticut
Interested in Fields such as :
❏ MIS & Database management
❏ economics of information systems
management,
❏ database design and security issues,
❏ Economic and ethical issues relating to
software piracy and organization impacts of
information technology.
#3694
➔ It Has #190 Citations as per Nov 24th
, 2016
Fields of Study of Citing Papers:
❏ Piracy Issues
❏ Digital music, movies and business strategy
❏ Social Networks, User Generated Contents
❏ Innovation
About this paper:
2

3. “
“Music Industry and Digital
Sharing”
The effect of digital sharing technologies on music markets:
A survival analysis of albums on ranking charts
2007 , 1995 - 2003, 100, 2
3

4. Contents:
- Context & Concepts
- Research Idea
4

5. 1.
Context & Concepts
- Music Industry + Technology Timeline
- Big Picture
- Concepts
5

6. Music Industry + Technology
Phase 1:
6
20031995
Event Window 1
Event
Window 2
Phase 2:
enacted new Act &
Sanctions to individuals
who shared files

7. 7

8. “Effect” in
Music
Markets:
(Supporting) (Against)
- Easier information sharing and
sampling enhance access to music
- Sampling Mechanisms lead to more
sales
- There are other factors asides from
P2P Sharing that affect Music
Industry Growth (Competition from
other audiovisual industries,
Macroeconomic Conditions)
- Music Shipments (Units & $ Value)
Sharp Decrease
- Enhances Free Riders
- Undermine Market Efficiencies due
to free exchange of music
P2PSHARING
8

9. Concepts
BillboardP2P Music
P2P file sharing allows users to
access media files such as books,
music, movies, and games using a
P2P software program that searches
for other connected computers on a
P2P network to locate the desired
content.
(Google Define)
Billboard is an American
entertainment media brand owned
by Prometheus Global Media. It
publishes pieces involving news,
video, opinion, reviews and events.
It is also known for its music
charts,which track the most
popular singles and albums in
different genres.
(http://www.billboard.com/faq)
“An experience good whose true
value is revealed only after
consumption, a product whose
evaluation is based primarily on
personal experience and
individual consumer taste”
(Nelson, 1970)
9

10. Concepts
Billboard’s
Top 100
Charts
Level of
Sharing
Album
Survival
10
P2P file sharing allows users to
access media files such as books,
music, movies, and games using a
P2P software program that searches
for other connected computers on a
P2P network to locate the desired
content.
(Google Define)
Album survival captures the
“Popular-life” of an album.
Appearance and continued presence
of an album on the chart has
important economic implications
and influence on awareness,
perceptions and profits.
(Bradlow & Fader, 2001)
The Billboard charts tabulate the
relative weekly popularity of
singles or albums in the United
States and elsewhere. The results
are published in Billboard magazine.
(http://www.billboard.com/faq)

11. Why Billboard?
11
30,000 Albums
produced in US Music
Industry
Album (Entity)
Characteristics:
- Label: Minor, Major
- Superstardom
- Artisti: Group,
Single, Male,
Female
Billboard’s
Top 100
Sales,
Appearance
Popular Life of the Album
(Album’s Survival Time in the Charts)

12. 12

13. 13
Back of 2003

14. 2.
Paper’s Research Idea
- Research Question & Outline
- Research Approach
- Results & Discussion
14

15. Does the level of sharing
influence Albums’ Survival
time on the charts?
Research Question:
15

16. Research Outline
Comparative Analysis
Before and After
Event Window 1
(Oct-1995 to Oct-2003).
16
Assess the impact of recent market
and technological developments on
survival of music albums on the top
100 charts
Objective 1
Objective 2
Evaluate the specific impact of P2P
sharing on album chart survival.
Phase 1
Impact of Sharing on
Album Survival, during
Event Window 2
(Oct-2002- to Dec-2003).
Phase 2

17. Survival Model:
• is a weekly stochastic process that governs
whether an album exits the charts.
Accelerated Failure Time Model (AFT):
Proportional Hazard Model (PH):
17
ResearchApproach
• A survival model that assumes that the effect of
a covariate is to multiply the hazard by some
constant.
Alternative parametric model to PH:
• assumes that the effect of a covariate is to
accelerate or decelerate the life course by some
constant. =>Describes a situation where the biological or mechanical life history
of an event is accelerated.
Can be directly compared with OLS estimates.

18. Idea (Phase 1)
18
Comparative Analysis
Before and After
Event Window 1
(Oct-1995 to Oct-2003).

19. Variables (Phase 1)
Label Definition Values
Survival
Number of weeks an album appears on Billboard top
100 chart
1-34 (weeks)
Debut Rank
The rank at which an album debuts on Billboard top
100 chart
1-100 (rank)
Debut Post-TS Indicator Variable (Dummy) 0 (Pre-TS) /1 (Post-TS)
Album Released
Number of albums released during each year of the
study period (Control Variable)
1~N
Superstar Reputation of Artist (Dummy) 1/0
Minor Label Distributing Label (Dummy) 1/0
Solo Male Solo Male (Dummy) 1/0
Holiday_Debut_Album Holiday Effect (Dummy) 1/0
19

20. Strategy (Estimation Models, Phase 1)
20
AFT OLS
Results Virtually
Identical

21. Process (Phase 1)
Estimation Equation
21

22. Process (Phase 1)
Estimation Equation
Interaction Effect
22

23. Process (Phase 1)
Estimation Equation
Interaction Effect
23

24. Findings (Phase 1)
• Average survival time on the
charts decreased by 42% in the
post-TS period.
• Debut rank had a highly
negative impact on album
survival, more pronounced in
the post-TS period for albums
debuting lower on the charts
(i.e., less popular albums).
24
• Across both pre- and post-TS
periods, albums promoted by
major labels tended to survive
longer than those promoted by
minor labels.
=> However, minor label albums have
experienced a significant beneficial
shift in the post-TS period and are
surviving longer than before.
• Albums by female artists
continue to have a survival
advantage over those by solo
male artists and groups
Assess the impact of recent market and technological
developments on survival of music albums on the top
100 charts

25. P2P Effect on
Album Survival
Phase 2 (Idea)
❏ Data were collected from WinMX file sharing
platform.
❏ Albums appearing on the chart were randomly
sorted, on a daily basis
❏ The daily results were averaged to produce weekly
information on sharing for each album.
25
Impact of Sharing on
Album Survival, during
Event Window 2
(Oct-2002- to Dec-2003).

26. Variables
Label Definition Values
Share_debut Average number sharing level observed in the first four weeks 0- N
Share_Max
Maximum available copies of a file over a four week period or until
the album drops off the charts
0- N
+ Variables used in Phase I.
26

27. Strategy (Estimation Models, Phase 2)
27
AFT OLS
Results
Virtually
Identical
Part I.

28. Phase 2 (Process)- can the drop in survival be
attributable to file sharing?
28
Estimation model

29. Estimation using RIAA
Announcement as
Instrument Variable
Suspect Omitted Variable
29
Estimation modelEstimation for Endogenous Variable

30. Strategy (Estimation Models, Phase 2)
30
AFT OLS
Results
Virtually
Identical
Part I. Part II.
OLS
Omitted Variable
Issue
No equivalent
methodology to 2SLS in
Hazard Models

31. Phase 2 (Process)- Is the 2003 Sample different
?
31

32. Phase 2 (Process)- Was RIAA announcement a
legal consideration?
32

33. Phase 2 (Process)- Effect of sharing on survival
33
Estimation w/Interaction Effect model

34. Evaluate the specific impact of P2P sharing on album
chart survival.
Findings (Phase 2)
• Level of sharing has a negative
impact for lower debut ranked
albums.
• music label offering a less
popular album might be
hurt by negative
word-of-mouth that can
quickly chill demand.
34
• Superstars and debut rank are
important markers of success.
• Minor labels are closing the
gap with the major labels.

35. Discussion
Sharing
Measurement
When measuring
the sharing, is it
relevant to focus
on Sharing
Intensity or in
Downloads?
Geographic
Limitation
Measuring Sales
in US, but
collecting P2P
shares (from
worldwide users)?
Was there any
control on the
location of the
sharing?
IV -> RIAA
Since RRIA is
promoting
research to justify
their sanction &
regulatory actions,
was the use of the
RIAA
Announcement as
IV in the paper
valid?
35

36. New Ideas
New Sharing
Torrent,
Search Engines Improvements
How about Streaming Spotify,
Views in Youtube?
Playlists?
New Business Models
New Business Models make new
variables in success
measurements.
New Areas Applications
Piracy Issues
Digital music, movies and business
strategy
Social Networks
36
Is this study still applicable to today’s condition?

37. Thanks!
Any questions?
37
2007 , 1995 - 2003, 100, 2