Online Sales, Music Downloads, and the Decline of Retail Music Specialty Stores

This paper uses phonebook records of music retailers for the entire US in the years 1998 and 2002 to examine how music downloads and online sales of records have affected the entry and exit of brick and mortar music specialty retailers. Merging music stores information with data on internet activity and broadband connectedness at the Metropolitan Statistical Area (MSA) level, with data on the number of broadband providers at the zip code level, and with a database of the location of universities, I analyze how online purchases and file-sharing affected the survival probability and the change in the number of music stores between the years 1998 and 2002. I use store characteristics to further study how the new economy has affected the market structure of the retail music business.