"Digital Technology and the Allocation of Ownership in the Music Industry"

Maija Halonen-Akatwijuka and Tobias Regner

We apply the property rights theory of Grossman-Hart-Moore in the music industry and study the optimal allocation of copyright between the artists who create music and the labels who promote and distribute it. Digital technology opens up a role for new intermediaries. We fi…nd that entry of online platforms occurs only if they are sufficiently more productive in distribution than the incumbent label. Furthermore, entry leads to a change in bargaining positions and it can become optimal for the copyright to be shifted from the label to the artist.

Digital Technology and the Allocation of Ownership in the Music Industry