Within-Group Concentration, Between-Group Concentration, and the Winners and Losers of Digital Music Distribution

By lowering search costs, making more products available, and providing access to free content, information technology (IT) has changed patterns of market concentration in media industries such as recorded music. In this paper, I argue that to understand how IT has changed media markets we need to go beyond considering market concentration in terms of the distribution of sales by product, and also consider the distribution of sales by group of products: between-group concentration. With cross-country panel data, I show that IT had different effects on sales that depended strongly on the between-group concentration in each country at the time of the internet shock. I develop and test the hypothesis that the formal industry fared relatively better in markets with more between-group concentration than in markets with less. I conclude with a discussion of lessons and further questions implied by the results