Digitization and the Quality and Quantity of New Music, Books, and Movies. Joel Waldfogel University of Minnesota and NBER WIPO, October 15, 2015

Transcription

1 Digitization and the Quality and Quantity of New Music, Books, and Movies Joel Waldfogel University of Minnesota and NBER WIPO, October 15, 2015

2 Introduction Digitization and media industries: a two-part story Bad news on demand side Napster, BitTorrent, etc Cost reduction on supply side Reduced costs of production, distribution, promotion along with nobody knows effect Revolutionary effects on recorded music, books, movies, television, Lots of new products, many of which are consequential

3 My additional goals today While piracy is interesting/important, we should focus more research energy on whether the supply of new products remains robust Rethink which evidence addresses whether copyright is fulfilling its function Are we experiencing a crisis? Evidence on music, books, movies, & television Copyright research needs more and better data Data availability woes necessitate flexibility

4 Outline Music quality since Napster: rising or falling? Why? Then revisit the relevant questions in book, motion picture, and other creative sectors in the order of the evolution of my understanding

5 Digitization in music, round 1 The standard music paper motivation since 99: the sky is falling! RIAA Total Value of US Shipments, $ millions total digital physical

6 Research Response Mostly a kerfuffle about whether file sharing cannibalizes sales Surprisingly hard question to answer» Oberholzer-Gee and Strumpf (2006),Rob and Waldfogel (2006), Blackburn (2004), Zentner (2006), and more but most believe that file sharing reduces sales

7 My Epiphany Revenue reduction, interesting for producers, is not the most important question Instead: will flow of new products continue? (We should worry about both consumers and producers) RIAA, IFPI: reduced investment will lead to an audio stone age

8 File sharing is not the only innovation Compound experiment Costs of production, promotion, and distribution have also fallen Maybe weaker IP protection is enough What has happened to the quality of new products since Napster? Contribute to an evidence-based discussion on adequacy of IP protection in new economy

9 Hard problem: assessing quality/service flow of work over time 2 approaches: Critics best of lists E.g. Number of albums on a best-of-the-decade list from each year Retrospective: to be on list, album s quality must exceed a constant threshold Usage information by time and vintage

10 Rolling Stone s 500 Best Albums (2004) Rolling Stone Rolling Stone Index from 2004 album list Index Index Availability Word, The Virgin Media Under the Radar Uncut Treble Treble Tiny Mix Tapes Times, The The Word The Times The Sunday Times The Sun The Guardian The Boombox Stylus Decade Stylus State Spinner Spinner Slant Slant Rolling Stone Rolling Stone Rock's Back Pages Rhapsody Rhapsody Resident Advisor Resident Advisor Popdose Popdose Pitchfork Pitchfork Pitchfork 1990s (99) Paste The Onion A.V. Club onethirtybpm OneThirtyBPM NPR National Public Radio Noise Creep NME NME musicomh Mixmag Metromix Denver Metacritic Lost At Sea LostAtSea The Line of Best Fit Kitsap Sun Irish Times HipHopDX Guardian, The Glide Gigwise Gigwise Ghostly FACT Entertainment Weekly emusic Delusions of Adequacy Decibel Daily Californian Creative Loafing Consequence of Sound Consequence of Sound Complex Complex CokeMachineGlow Boot, The Boom Box, The Billboard BetterPropaganda Austin Town Hall American Songwriter Q NOW MSN.com BET Pitchfork 1990s (03) Blender songs Rate Your Music Zagat Rolling Stone Best Ever Acclaimed Songs Acclaimed Albums Year Regression: Plot θ s Year Splice together to create overall index, covering pre- and post- Napster era.

11 And voila: Index of vintage quality Album Year Dummies and Napster weighted year Index is falling prior to Napster Post-Napster constancy is, if anything, a relative increase coef bottom of 95% interval top of 95% interval

12 Approach #2 Measure of vintage quality based on service flow/consumer decision Sales and airplay Idea: if one vintage s music is better than another s, its greater appeal should generate higher sales or greater airplay through time, after accounting for depreciation

13 Data Airplay by vintage Sales , by vintage From RIAA certifications

14 Regression approach Define s t,v = share of vintage v music in the sales or airplay of music in period t. For a given year t, s varies across vintages because of depreciation and variation in vintage quality Regress ln(s t,v ) on age dummies, vintage dummies. Allow flexible depreciation pattern Then: vintage dummies are index of vintage quality

15 Resulting Airplay Index Airplay-Based Index Flexible Nonparam etric Vintage Index bottom of 95% interval top of 95% interval

16 Sales-Based Index Sales-Based Index Flexible Nonparameric Index Vintage

17 Bottom line No evidence that vintage quality has declined More compelling evidence that it has increased Hard to know what it might otherwise have been Big contrast to IFPI/RIAA view Puzzle: why continued quality despite revenue collapse?

18 Fundamental features of creative products nobody knows anything (Caves/Goldman) Hard to predict success at time of investment Perhaps 10 percent succeed Traditionally, it has been expensive to experiment (Tervio) Must bring a product to market to learn whether it will succeed Music: $1 million using traditional means So bet on a few artists with ex ante promise

19 Along comes digitization ( and demand: piracy) and supply Obvious effects on production and distribution Recording, distribution are now inexpensive Promotion too? Traditionally, radio is a bottleneck Now Internet radio and online criticism It has become cheaper to experiment Do we end up discovering more artists with ex post value?

20 How could quality improve? Model inspired by Goldman ( nobody knows ) Label forms estimate of album marketability q as truth + error: q =q + ϵ Bring a product to market if q > T. Cost reduction trumps piracy, so that on balance, digitization reduces T, raising the number of projects that can be brought to market. Big question: what happens to the volume of good work available to consumers?

21 Suppose marketability were predictable Then reduction in T brings more products But they are of modest quality: T < q < T

22 With unpredictability Release all products with expected quality above T Result: more products with quality > T Release of products with less ex ante promise leads to a greater number of products with ex post success/value

23 Is this explanation right? Some questions: More new products? including indies with less ex ante promise? Do consumers have ways to learn about a proliferation of new products? Changing roles of traditional radio, Internet, and critics Do the products with less ex ante promise e.g. indie artists who would not have been released before digitization account for a rising share of ex post success?

24 Illustrative Anecdote: Arcade Fire s The Suburbs Released by indie Merge Records August, 3, 2011 Critical acclaim Metascore=87 (top 5%) Little conventional airplay Not on BB Airplay Chart But big on Internet radio Success Sold >0.5 million copies Best Album Grammy for 2011 listeners Arcade Fire Ready to Start on Last.fm 01jul oct jan apr jul2011 ddate

25 Answers Growth in releases? Yes. Nielsen: 35k in 2000, 100k in 2010 Changing information environment Ex ante promise and ex post success

26 Answers Growth in releases? Changing information environment Ex ante promise and ex post success

27 Changing Information Environment Traditional radio BB airplay top 75 songs by week 3,900 listings per year But only about 300 distinct artists Traditional vs Internet radio Compare BB list with last.fm top 420 songs of the week in 2006 Little overlap 10 percent

28 ARTIST Top 2006 BB Airplay Artists not on Last.fm Weekly Top 420 BB airplay index MARY J. BLIGE 14.3 BEYONCE 12.0 NE-YO 10.3 CASSIE 9.8 CHRIS BROWN 9.8 YUNG JOC 8.2 SHAKIRA 6.9 LUDACRIS 6.0 CHAMILLIONAIRE 5.7 AKON 5.2 Top Artists on Last.fm in 2006 without BB Airplay ARTIST listeners DEATH CAB FOR CUTIE 5,200,000 COLDPLAY 5,200,000 RADIOHEAD 4,700,000 MUSE 3,900,000 ARCTIC MONKEYS 3,000,000 THE POSTAL SERVICE 2,800,000 THE BEATLES 2,400,000 SYSTEM OF A DOWN 2,300,000 BLOC PARTY 2,100,000 NIRVANA 1,900,000 THE ARCADE FIRE 1,900,000 Takeaway: Internet radio allows promotion for artists with less promotion on traditional radio

29 Second, growth in criticism Much of it online Cumulative Metacritic Reviews Growth in Reviews sources founded since 1980 with over 2000 reviews in Metacritic Rolling Stone Uncut Pitchfork The A.V. Club Mojo All Music Guide Spin Q Magazine Entertainment Weekly Alternative Press Under The Radar Drowned In Sound PopMatters Founding Year

30 Success and promotional channels What s happening to the role of traditional airplay among successful artists? What s happening to the role of critics?

31 Learning from critics vs radio Of commercial successes: Share of BB200 with Billboard Airplay Share of BB200 with Metacritic Reviews m ean of dair mean of dmeta Declining share with airplay, especially since 2000 By contrast: increasing share with critical attention

32 Answers Growth in releases? Changing information environment Ex ante promise and ex post success

33 Ex ante promise and ex post success Do artist with less ex ante promise who would not have made it to market prior to digitization now achieve sales success? Specifically, do indies account for a growing share of sales? Indie Share among Billboard 200 Indie Share among Billboard 25 mean of dindie mean of dindie Even the losers get lucky sometimes

34 Summing up music Digital disintermediation provides possible explanation for increased quality Given unpredictability, more experimentation leads to discovery of additional good music Ex ante loser become ex post winners Much of which would not have come to market before digitization

35 What about other cultural products? Books, motion pictures, television, Of each, ask the questions (when possible): More products? Ways to learn about new products? Changing sales concentration Growing success of ex ante losers? Are the new vintages good?

36 Books Growth in new products, ecosystem? new self-published books 450' ' ' ' ' ' ' '000 50' Yes, especially self-published e-books, supported by diffusion of tablets & e-readers Share of Adults with Tablets and ereaders 01jul jul jul jul2013 ddate ebook reader either tablet

37 Commercial success of ex ante losers share Share of Bestseller Listings Originally Self-Published share Share of Bestseller Listings Originally Self-Published romance 01jan jan jan jan jan jan2014 date 01jan jan jan jan jan jan2014 date From Storming the Gatekeepers, Waldfogel and Reimers (2013)

38 Movies Different? More costly: $100m for an average MPAA title An important US export industry Jobs, jobs, jobs

39 Digitization and cost reduction in motion pictures Production Digital cameras that are cheap and good Distribution Digital sales (itunes, Netflix, Amazon, ) Promotion Lots of movies reviewed online + user-generated reviews.raising the possibility of 1) new movies that 2) might be discovered by, and of interest to, consumers. True?

40 Production Digital cameras introduced around 2000 Widely adopted by even major productions ca 2009 Arri Alexa, Red One, Canon 5D, Canon 70D Prices: $250,000, $50,000,,$2,000 Creates opportunity for indie film makers

41 (Attack of the digital clones) Camera Types for Theatrical Releases mean of arri mean of moviecam mean of alexa mean of canon mean of pana mean of aaton mean of red mean of other

42 Major titles are steady, even declining mpaareleases Major MPAA Releases year Source: MPAA

43 but huge growth in overall production Movies with IMDb pages as of August 2013

44 Growth in small-scale theatrical release Theatrical Release year/vintage MPAA movies theatrical releases 500+ screens reviewed at Metacritic Sources: MPAA, Box Office Mojo, Metacritic

45 More movies released to digital streaming services Online vs Theatrical In 2013, over 1000 vintage-2010 movies available on streaming Netflix, over 1,200 at Amazon Instant year/vintage Theatrical releases Streaming Netflix avail in '13 Streaming at Amazon Sources: IMDb, Instatwatcher.com, Box Office Mojo

46 Product discovery Significant growth in review provision and availability A range of professionals plus amateurs

47 Pro review availability goes deeper Growth in Critic Coverage by Group 1=top 250, 2= , 3= ,4= mean of dcritic Graphs by group Reviews of selected movies at IMDb

48 Many movies have user ratings at IMDb Movies with IMDb User Ratings User-rated Movies at IMDb by Vintage year Source: IMDb, movies with 5+ user ratings

49 Argo example: wide range of pros Density Alexa Traffic Ranks of IMDb Argo Reviewers vertical lines at Rolling Stone, indiewire Log Alexa Traffic Rank 588 reviews and the Alexa ranks of their sources. Median rank: 1.6 million

50 Do independent movies succeed? What is independent? I know it when I see it Independent Spirit Limited appeal Indiewire Not produced by major studio

51 Indies are growing share of box office and DVD revenue Independent Share of Theatrical and DVD Revenue year Box Office DVD listings

52 and a growing share of what s available through various channels Independent Share of Available Movies by Vintage as of August year Netflix streaming on television Amazon Instant Top 50 Vudu by Vintage Growth in independent movies by many measures

53 Are the new movies good Two kinds of approaches, based on critics and usage

54 Rotten Tomatoes Rotten Tomatoes Best 87-90, 90-95, mean of low mean of high mean of medium Absolute number of movies with high grades has risen a lot

55 Independent movies account for growing share of RT-top movies Share of RT Top Movies from Independent Studios Not Major year

56 Btw: pro and amateur opinions are positively correlated Critics and Lay Opinion at Metacritic User Rating Metascore Median bands

57 As before: Are new vintages good? Usage evidence Regress ln(s t,v ) on age dummies, vintage dummies. Allow flexible depreciation pattern Then: vintage dummies are index of vintage quality

58 Movies have been getting better Movie Vintage and Service Flow Extensive TV Listings Parameter estimate Mixed result: no apparent increase in vintage service flow during most recent growth, since year

59 Television Growth in products? count of x , TV Series at IMDb by Premiere Year Yes: more draws count of x 0 1,000 2,000 3,000 Rated TV Series at IMDb by Premiere Year

60 mean of traditional Falling traditional-network share of Traditional Broadcast Network Share of Metacrtic top 25 by series vintage acclaimed shows Top Shows by Vintage and Source IMDb ratings mean of traditional mean of premium mean of other

61 The best new shows are good compared to history Average of Top 10 Metascores average metascore premiere year The Golden Age of television is now

62 Where else? Video games? Photography? Democratization of means of production Creative and Editorial Images at Getty by Vintage Images (millions) Vintage

63 Conclusion While new digital technology brought threats to creative industries (piracy), it also brought opportunities Huge growth in new products and distribution And new products make up large and growing share of successful Threats to revenue are real, but no sign of diminished output and works are better

64 Public Policy Rights holders are concerned about declining revenue from some sources Understandable Copyright exists to provide incentives for creative activity Despite revenue performance in recorded music and newspapers, and fears in movies, there is no crisis in creative activity

65 Underlying works Piracy on the High C s.., with Rob, JLE 2006 Copyright, JLE 2012 And the Bands Played on.. NBER volume 2015 Storming the Gatekeepers with Reimers, IEP 2015 Cinematic Explosion forthcoming, JIE Digital Renaissance, Princeton Univ Press, 2016? Even the Losers with Aguiar, forthcoming, IEP Quality Predictability with Aguiar