Skip to navigation – Site map

Information asymmetry and 360-Degree Contracts in the Recorded Music Industry

Maya Bacache-Beauvallet, Marc Bourreau and François Moreau
p. 57-90

Abstracts

Digitization has given rise to a new type of contractual arrangement in the music industry–the so-called “360-degree” or “equity” deal–which allows a firm (e.g., a record label) to manage all of an artist’s activities, such as sales of recorded music, touring, merchandising, etc. Since these contracts internalize the positive externalities that exist between the recorded music market and the ancillary markets, it should be profit-enhancing for both record labels and artists to strike such deals. However, very few equity deals have been signed in the music market so far. In this paper we argue that artists who currently have a recording contract, or who have had one in the past, are reluctant to sign a 360-degree deal because they fear their bargaining power will be weaker in income-sharing with their record label. Using a representative survey of professional musicians in France, we provide empirical evidence that past contractual experience with a record label does indeed reduce the incentives to sign a 360-degree deal. Moreover, the more artists perform on stage, the more reluctant they are enter into 360-degree deals.

Top of page

Excerpt

Cairn

Full-text article available to subscribers or on a "pay per view" basis. It will be available on this URL in January 2020.
Read it

Outline

1. Introduction
2. Contracts in the recorded music industry
2.1. Standard record contracts
2.1.1. Bargaining power and income-sharing
2.1.2. The suboptimality of standard record contracts
2.2. The rise of 360-degree deals
2.3. Research hypotheses
3. Data
3.1. Dependent and explanatory variables
3.2. Main control variables
3.3. Other control variables
4. Empirical strategy and results
4.1. Main results
4.2. Robustness checks
5. Discussion
6. Concluding remarks

First lines

1. Introduction

Since the late 1990s, recorded music sales have collapsed, whereas other music revenues such as performance rights (especially from radio and TV broadcasters), synchronization rights (when recorded music is used in a movie for instance), and above all concert revenues have increased. For instance, between 2006 and 2011, worldwide live music revenues increased from $16.6 billion to $23.5 billion (+ 42%), while recorded music sales dropped from $22.4 billion to $16.6 billion (– 26%).

Up to now, the record companies’ business model has relied mainly on recorded music sales, which increased worldwide by 34.5% between 1991 and 2000. Record companies, and especially the three “majors” (Universal/EMI, Sony, Warner), which account for about 75% of worldwide music sales, used to view live music as useful only to the extent that it increased recorded music sales. One reaction of record labels to the downturn in music sales has been to try to change the contractual terms governin...

Top of page

References

Bibliographical reference

Maya Bacache-Beauvallet, Marc Bourreau and François Moreau, « Information asymmetry and 360-Degree Contracts in the Recorded Music Industry », Revue d'économie industrielle, 156 | 2016, 57-90.

Electronic reference

Maya Bacache-Beauvallet, Marc Bourreau and François Moreau, « Information asymmetry and 360-Degree Contracts in the Recorded Music Industry », Revue d'économie industrielle [Online], 156 | 4e trimestre 2016, Online since 31 December 2018, connection on 23 May 2017. URL : http://rei.revues.org/6446

Top of page

About the authors

Maya Bacache-Beauvallet

Telecom ParisTech, Department of Economics and Social Sciences, F-75013 Paris, France. E-mail: maya.bacache@telecom-paristech.fr

By this author

Marc Bourreau

Telecom ParisTech, Department of Economics and Social Sciences, F-75013 Paris, France. E-mail: marc.bourreau@telecom-paristech.fr

By this author

François Moreau

University Paris 13, Sorbonne Paris Cité, CEPN (CNRS, UMR 7234) and Labex ICCA. F-93430 Villetaneuse, France. E-mail: francois.moreau@univ-paris13.fr [corresponding author]

Top of page

Copyright

© Revue d’économie industrielle

Top of page