Indie Music – Entertainment Products.
The widespread use of the internet birthed phenomena such as social media and online communities, which would play a large role in the music industry as the 21st century continued. As discussed in my blog Indie Music – Broadband Penetration, 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.
The prices of audio and potential substitute goods prove largely statistically insignificant throughout the study. A lot of barriers within the production, promotion and distribution system were broken for the indie artists with the introduction of digital formats in recording instead of analog formats in the 1980s. When advancement in technology began to break down the previously rigid infrastructure of the recording industry, the strongly held oligopoly of the industry was shaken and almost eliminated after being predominant for over half a century. As discussed in my blog Transformation of the Indie Music Industry, internet brought with it an increasing number of affordable and powerful software that made the production costs of music fall drastically in the 1990s, with new technologies making robust recording equipment available to indie musicians. Today, there continues to be a reduction in the necessity of expensive studio time, enabling indie artists and musicians to take the DIY approach in creating music.
As mentioned previously, record companies, with their oligopoly position, were mostly able to maintain, and even increase, the price of audio prior the 2000s without necessarily having to adjust to the true nature of the demand schedule. This may serve as an explanation as to why the discussed model shows a statistically weak correlation between the price of music, which took a negative turn in 2000, and the value of record sales for indie music. The insignificance of the price of software confirms that, as a whole, this product bundle lacks substantial substitutive qualities with respect to record sales of indie music. Interestingly, the price of video proves statistically significant at the 5% level when including all independent variables. The all-inclusive model would suggest that a 1% increase in the price of video products yields a minimal .05% rise in the value of record sales. Although this is relatively economically unimportant, its positive sign suggests at least a weak substitutive quality between the two entertainment products and could help capture the diversion between prices for audio versus other forms of entertainment, most of which have steadily fallen in real terms since their introduction.
Before coming to further conclusions about the impact of prices, I will present the regression results isolating the differing price indices for audio and music. In addition to removing potential accuracy issues, this may allow more precise insight into differences between the two time periods. If you have been following my previous articles on Research Models, by now you should have a good understanding of the fundamentals. It might be wise to re-read those articles, or bookmark them to grab back whenever you encounter a subject that I have written about!
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