What is the Value of Re-use? Complementarities in Popular Music

Digitization has drastically lowered the costs of replicating and distributing music, enabling piracy on the demand side, as well as supply side re-use and recontextualization. This paper examines cumulative creativity and re-use through the release of derivative works in the popular music industry. Combining novel data on “digital sampling” and cover songs with a new proprietary Spotify data-set tracking online music streaming, I study how the introduction of a derivative work impacts the market for the underlying good upon which it is based. With my data-set covering 11,682 artists and their daily streaming demand between 2015 and 2016, I utilize a matched-sample difference-in-differences estimator to find that, on average, re-use causes a 3% increase in demand for the treated artists. This effect is significantly mediated by prominence of the re-used artist– with the effect neutralized for highly prominent artists, while artists of low prominence have a larger 6% boost in listening. On the other hand, re-use downstream by popular artists significantly increases the baseline boost in listening to the original artist. Novel re-uses of artists that have not been subject to extensive past re-use appear to have the largest effect, resulting in an average 15% increase in online streaming. These results highlight an advertising effect of re-use, suggest that derivative works have limited ex post competition with upstream works, and point toward the potential benefits of permissive intellectual property rights licensing.