“Selling Out” and the impact of music piracy on artist entry

- Piracy is empirically associated with no change in entry of music artists that current theories cannot explain.
- If artists are time inconsistent then they may be overconfident they will not sell out in the future.
- Those artists are not impacted by forecast monetary losses associated with piracy.
- These effects remain even when publishers act as intermediaries.

There is a puzzle arising from empirical analyses of the impact of music piracy that this has caused declines in music revenue without a consequential decline, and perhaps even an increase, in the entry of artists and the supply of high quality music. There have been numerous explanations posited and this paper adds a novel one: that artists are time inconsistent and hence, tend to underweight fame over fortune when making future choices; i.e., the degree to which they will 'sell out.' Regardless of whether selling out is anticipated or not, the puzzle is resolved. When selling out is not anticipated, future expectations of piracy are not a concern as these only impact on monetary awards that are not driving entry. When selling out is anticipated, piracy actually constrains the degree to which artists sell out, and assured of that, raises entry returns. Implications and the role of publisher contracts are also explored.