Digital copying and the supply of sound recordings

One concern with digitization in markets for information goods is that unauthorized, digital copying will reduce the number and quality of original works supplied. Despite a substantial literature on the effects of piracy on demand for recorded music, information on the supply-effects of digital copying is limited. This paper presents empirical evidence that digital copying has not reduced the supply of new, copyrighted sound recordings in Germany. Even with a strong reduction in sales of sound recordings that coincided with the diffusion of digital copying technology, the annual number of new titles released to the market continued to expand. Results indicate that the number of new titles released has not deviated significantly from a long-term upward trend. The paper also presents evidence that the amount of time listening to sound recordings has not fallen over this period, suggesting no strong decline in the quality of new work. (C) 2012 Elsevier B.V. All rights reserved.