An Empirical Investigation Into the Effect of Music Downloading on the Consumer Expenditure of Recorded Music: A Time Series Approach

The downloading of music from the internet has been proliferating over the past three years. The recording industry believes that this phenomenon is responsible for the decline in recorded music sales since the year 2000, and to a certain extent this is supported by consumer surveys and previous studies that have used panel or cross-sectional data. In this analysis, an econometric, time-series model of consumer spending on tapes, LPs, and CDs is estimated which takes into account factors that are posited as effecting the consumption of recorded music, but not used in previous studies. The most significant finding is that music downloading, subsequent to 2000, affects consumer spending on tapes, LPs, and CDs through the price elasticity of demand. Falling DVD prices have also served to reduce the demand of recorded music during this same period. Copyright Springer 2005