Business Innovation and Disruption in the Music Industry
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Business Innovation and Disruption in the Music Industry

Edited by Patrik Wikström and Robert DeFillippi

Over the past fifteen years the music industry has experienced a disruptive process of digital transformation that has reshaped most aspects of the industry; in 2015 the contours of a “new music economy” have begun to emerge. The structure and mechanics of these evolutionary processes vary considerably between continents, and this book examines these processes within Europe, America and Asia. The contributors offer a range of theoretical perspectives, as well as empirical findings from the social sciences and business, as well as the media industries. They offer a holistic understanding of the forces shaping the new music economy, and shed some light on the impact of these forces on the ways in which music is created, aggregated and distributed, and on the economic and social consequences for industry producers and consumers.
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Chapter 4: The fallacy of composition and disruption in the music industry

Robert G. Hammond


The fallacy of composition refers to an incorrect presumption that something that is true for some part of a group is necessarily true for the entire group. This chapter reviews the existing evidence on settings in which the fallacy of composition occurs and discusses a specific manifestation of the fallacy of composition: the effects of file sharing on sales in the music industry may differ between an analysis of aggregate industry sales (where file sharing has been shown to harm the music industry) and an analysis of artist-level sales (where file sharing has been shown to benefit some types of individual artists). The author then presents Monte Carlo simulations to offer new evidence from the types of econometric analysis that is often applied to data from creative industries such as the music industry. By quantifying which types of artists are expected to gain from particular technological innovations and which are expected to lose, this chapter provides insights into the prospective economic winners and losers in the evolution of the music industry.

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