Empirical Literature on Indie Music.
To update the empirical literature on the impact of the Internet on the music industry, scholars have created a time series multiple regression model with observations from 1973-2011 using the log of record sales by real value as the dependent variable and several other independent variables including Internet-related factors and other relevant facets relating to demand. Some of these models may be broadly represented by the following:
Data Sources, Variable Selection and Potential Shortcomings:
All data regarding record sales of indie music was obtained from the Recording Industry Association of America (RIAA), the trade publication for major record labels for indie music and a reputable source of industry data. The RIAA’s U.S. shipment database dates back to 1973 and presents record sales of indie music using three different measures—units sold, value sales and real value adjusted for inflation to 2011 dollars. As illustrated in my blog Indie Music- Alternative Demand Factors, rises in units sold do not necessarily represent growth in record sales of indie music.
Data on Gross Domestic Product (GDP) is publicly available online through the U.S. Census Bureau. Per capita real GDP has been chosen, in terms of 2011 dollars, to provide consistency and best demonstrate the impact of personal income. The natural log has been taken of this as well once again to keep the focus on year-to-year changes.
The International Telecommunication Union (ITU), is a United Nations agency who, according to their website, aim to “identify, define and produce international official statistics covering the telecommunication/ICT sector.” Their free data on both Internet and broadband penetration has been utilized, which date back to 2000 and are presented as the number of people, for every 100 individuals, with subscriptions. Internet penetration captures anyone with a connection, while broadband should better represent changes in access to higher-speed networks. Although the lack of data is a potential shortcoming, it seems appropriate to introduce this variable in 2000 when the Internet was truly starting to take hold. For this segment of the data, the values have been kept in their original form as they are fairly linear.
The chained consumer price indices were obtained from the historical data of the U.S. Bureau of Labor Statistics (BLS). These numbers are based in a certain year, which holds the value of 100, as a way of expressing values in a way that is comparable across products. For both audio and video, two separate indices have been developed over time. The initial price index for audio, titled “Audio Products,” spans from 1977 to 1997 and is based in the years 1982-1984. For video products, data on price indices commenced in 1988, which is used as the base year, and was titled “Video Products Other Than Televisions” also spanning until 1997.
Starting in 1998, new indices, both based in 1997, were used for both audio, titled “Audio Discs, Tapes and Other Media,” and video products, titled “Video Discs and other Media.” According to the BLS, both of these include digital formats as well. A price index for software was also introduced, and based, in 1997. The natural log of the chained price index has been utilized, to emphasize marginal changes.
The most straight-forward approach to the differing price indices is to separate them as individual variables in the model that correspond with their appropriate years. This could also make for more valuable results by isolating significance of price in these fundamentally different time periods. Since software was not introduced to the consumer price index until 1997, there is no need for this type of split.
Presenting additional variables to a model already restricted by many variables, though, may present an issue in terms of explanatory power. This data manipulation also has potential downfalls mainly by comparing indices that include differing bundles of products.
In my next blog I am going to write more about the impact of internet on indie music business as a whole. Please share your experiences and I will add them to my future blogs.
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