Information and the Skewness of Music Sales

Abstract

This paper studies the role of product discovery in the demand for recorded music. We show that releasing a new album causes a substantial and permanent increase in sales of the artist's old albums—especially if the new release is a hit. Patterns in these “backward spillovers” suggest that they result from consumers discovering the artist upon hearing the new release. To explore the implications of consumers’ incomplete information, we estimate a simple, learning‐based model of market demand. Our results imply that the distribution of sales is substantially more skewed than it would be if consumers were more fully informed.