Indie Music – Broadband Penetration.
The millennium variable is a simple time trend, from 1-12, beginning in the year 2000. This has been discussed in detail in my blog Indie Music – The Substitutive Model, and was included to explain any other Internet and technology factors might not be represented in the dependent variables. The main shortcomings of this model come with the relatively small number of observations, possibly omitted explanatory variables and potential complex interconnections within the dependent variables. With only 12 values for the Internet and time trend variables, it may still be difficult to come to fully conclusive results about the impact of the millennium. In addition, the existence of general trends in response to the emergence of the internet could cause multicollinearity.
Results
Introducing the internet and time trend variables each individually, we see that all have a negative coefficient at the 1% level with varying levels of economic importance. The next observation suggests that every additional one in one hundred, or 1% increase in people with any internet subscriptions is associated with less than a 1% decline in total record sales by value. Moving ahead though, we see that the broadband and time trend variables individually have a stronger, and more practically meaningful, negative relationship with total record sales of indie music. Broadband penetration’s larger negative coefficient may result from the necessity of a high-speed connection for many media-related online activities, from illegal downloads to legal purchases and streaming. As discussed in my blog Trends in Record Sales of Indie Music, several studies have utilized broadband and Internet penetration as proxies for illegal file-sharing. In the years from 2000-2003, this assumption may hold valid. Since legal digital distribution had not yet been widely successful, consumers, with relation to music, could really only access and download songs illegally online. Thus, the trends in rise of the prevalence of Internet and broadband connections could be considered representative of Napster’s inception and the growth of music piracy from 2000-2003.
It is important to note, though, that the widespread use of the Internet also birthed other phenomena such as social media and online communities, which would play a large role in the music industry as the 21st century continued. With widespread legal digital distribution becoming available in 2004, consumers now at least had the option of purchasing music online, which was reflected by the first growth, a modest 1.4% in indie music record sales by value since 1999. When all three variables are included in the model, both internet and broadband become statistically insignificant with the time trend seemingly absorbing their explanatory power. This shift is to be expected, considering the high correlation between these three variables as presented in this study. The fact that the millennium time trend retains its significance, albeit at the 5% level, may suggest that there has been a unifying, linear change during the 2000s that likely encompasses not only the general rise of the Internet and other technological developments but also the intangible social, cultural and economic changes that come with it. Its coefficient may be interpreted as each additional year into the millennium being associated with an undeniably economically important drop of nearly 17% in the value of record sales of indie music.
When tested on their own, the included demand factors show relatively low explanatory power for the value of record sales of indie music. Surprisingly, personal income only shows statistical significance at the 10% level in two of the regressions. In the cases where it is significant, a 1% rise in per capita GDP is related to a nearly proportionate percentage rise in value of record sales of indie music. The positive sign of its coefficient, though, is in the direction one would expect as higher per capita GDP is generally associated with more consumption and spending. Although, in the case of recession for example, there may be several periods of time in the data set where more extreme personal income changes played a role in the value of record sales of indie music, the results suggest that they are not closely related from a longer-term, more stable, perspective.
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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