Incentive, Control and Firm Boundaries in the Music Industry : Explaining the Recent Downturn

For several years now the music industry has to contend with drops in turnover supposedly caused by music piracy and file sharing. However, as accumulating evidence indicates, file sharing and other conventional explanations referring to demand-side factors like the macroeconomic conditions or increased competition for consumer budgets don't make up the whole story. This paper provides a complementary explanation by focussing on supply-side factors: incentive and control problems between both artists and labels as well as investors and labels prevent labels from providing enough outstanding content to stimulate a sufficient demand. Several proposals how to cope with these challenges are discussed