Video Killed the Radio Star? Online Music Videos and Recorded Music Sales

We study how online video platforms affect the sales volume and sales distribution of recorded music. To do so, we study two events that removed and then partially restored access to online music videos for consumers in Germany. Because of a legal dispute, virtually all music videos were blocked from YouTube, which led to a decrease in record sales of about 5%–10%. When the dedicated platform Vevo entered a few years later, record sales increased again by a similar amount. This is effect can be attributed to user-generated content (fan videos and cover versions) as much as to official music videos. Record sales of newcomer artists and mainstream music benefit disproportionally. We discuss the implications for debates on the reform of compulsory licensing rules and copyright. We study the heterogeneous effects of online video platforms on the sales volume and sales distribution of recorded music. Identification comes from two natural experiments in Germany. In 2009, virtually all music videos were blocked from YouTube as a result of a legal dispute. In 2013, the dedicated platform Vevo entered the market, making videos of a large number of artists available overnight. Our estimates suggest that restricting (enabling) access to online videos decreases (increases) recorded music sales on average by about 5%–10%. We show that the effect operates independently of the nature of video content, suggesting that user-generated content is as effective as official content. Moreover, we highlight heterogeneity in this effect: online music videos disproportionally benefit sales of new artists and sales of mainstream music.