Digitization and Entrepreneurship: Self-releasing in the Recorded

Music Industry
Maya Bacache, Marc Bourreau, Francois Moreau
February 24, 2014

Abstract
In this paper, we study the impact of digitization on self-releasing strategies in the recorded
music industry. Building upon the Schumpeterian model of commercialization of inventions,
we argue that digitization facilitates self-releasing strategies by musicians, because it weakens
the control of complementary assets (i.e., distribution and promotion) by incumbent record
companies. Using an original dataset from a survey of 710 French professional musicians, we
show that digitization (i.e., the digital home studio) has indeed a positive impact on the decision
to self-release, both for the artists who have not the possibility to sign a contract with a record
company, and for the artists who can effectively trade-off between signing a contract and selfreleasing their music. However, the motivations for self-releasing music differ between these two
groups of artists.
Keywords: Self-releasing; Entrepreneurship; Commercialization strategies; Recorded music
industry; Digitization.
JEL Codes: L26; O3; L82.

We thank Eric Brousseau, Raphael Suire, Paul Belleflamme, Paul David, Anindya Ghose and Thierry Penard for
useful remarks. We also thank seminar participants at University of Paris-Sceaux and University of Paris-Ouest.

Telecom ParisTech, Department of Economics and Social Sciences, Paris. Email: maya.bacache@telecomparistech.fr.

Telecom ParisTech, Department of Economics and Social Sciences, and CREST-LEI, Paris.
Email:
marc.bourreau@telecom-paristech.fr.

CEPN, University Paris 13, France. Email: francois.moreau@univ-paris13.fr

Introduction
What is called the music business today [...] is not the business of producing music.
At some point it became the business of selling CDs in plastic cases, and that business
will soon be over. But thats not bad news for music, and its certainly not bad news
for musicians. Indeed, with all the ways to reach an audience, there have never been
more opportunities for artists. (David Byrne, Wired Magazine, 2007)
In the recorded music industry, some artists choose to self-release their albums, that is, to

record and commercialize their music on their own, without the cooperation of established record
companies. According to Burke (1997), in the 1990s, self-releasing concerned mainly musicians that
had been rejected by record labels. Young artists were also often forced to self-release their first
album, before being signed by a record label. For example, rock musician Mark Everett (Eels)
self-released his first album, Bad Dude in Love, in 1985, and later released his second album with
a major label, Polydor.
Since Burkes study in the 1990s, the recorded music industry has undergone a profound transformation due to digitization. Music has moved from plastic CD cases to digital MP3 files, changing
the way music is produced, distributed, and consumed. Digitization has in particular sharply reduced the costs of a self-releasing strategy:1 (i) with the development of the digital home studio,2
recording costs have declined to almost zero, (ii) distribution costs have become negligible, and (iii)
new opportunities of (online) promotion have emerged, allowing an artist to promote his or her
own work on the Web, on general-audience social networks like Myspace or Facebook, or specific
music-related social networks like Bandcamp or SoundCloud, etc.
At one extreme, the sharp decrease in self-releasing (entry) costs has led to a dramatic increase
in the total number of self-proclaimed musicians who record and distribute their music on their
own, including a large share of amateurs. For example, according to Beuscart (2008), in 2008, there
were 9 million registered musicians on Myspace, worldwide. For France only, there were 130,000
self-declared musicians on Myspace, whereas the number of professional musicians is estimated to
be around 25,000 (Coulangeon, 2004). Since digitization reduces self-releasing costs, we can expect
that it had a positive impact on self-releasing for these artists who may be outside the radar of
1

For the same reasons, digitization has also made it easier for small independent labels to enter the music market,
as stressed by Waldfogel (2012).
2
A digital home-studio includes all hardware (e.g., a computer, an audio card, etc.) and software (e.g., an audio
sequencer, digital instruments, etc.) that allow an artist to record music in-house.

record companies.
At the other extreme, digitization has also made it more attractive for stars to self-release
their music. For example, in 2007, the English rock band Radiohead decided to self-release its new
album, In Rainbows. Radioheads lead singer Thom Yorke commented this decision in an interview
for TIME Magazine (2007) as follows: I like the people at our record company, but the time is at
hand when you have to ask why anyone needs one. And, yes, it probably would give [Radiohead]
some perverse pleasure to say F#@! you to this decaying business model.
But what is true for Radiohead is not true for all music stars. In the last few years, some
famous music stars (e.g., Madonna) have signed so-called 360 contracts (or equity deals)
with music companies. With these contracts, all the artists activity (and hence, revenues, less the
artists share) is handled by one single company, including the sales of recorded music, live concerts,
etc. An equity deal means less control for an artist, and hence, it represents a strategy which is
opposite to the self-releasing strategy. 360 deals are often described as a response to the effects
of digitization on the music industry;3 since music sales have decreased sharply, record companies
are eager to take control of the other sources of revenues, in particular live concerts.
Therefore, the effect of digitization on self-releasing by star artists is a priori ambiguous. It can
either lead them to self-release more (Radioheads example) or less (Madonnas example). Or, as
David Byrne (2007) puts it, the totally DIY model is certainly not for everyone but thats the
point. Now theres choice.4
In this paper, we would like to answer the following questions: Does digitization increase the
propensity to self-release? Is it the case for the professional artists that are rejected by record labels
(in line with Burkes earlier findings)? It is also true for the artists who have the opportunity to
sign with a record label?
In line with the Schumpeterian model of entrepreneurship,5 we view a musician as an inventor.
The musician creates new music (an invention), and then has to decide whether to self-release her
music (i.e., to become an entrepreneur) or to sign a contract with a record label. Teece (1986
and 2006) and Gans and Stern (2003 and 2010), among others, refer to the inventors decision of
whether to vertically integrate as a commercialization strategy.They also show that the inventor
is more likely to commercialize his invention on his own if he has access to some specific assets that
are complementary to entrepreneurial success.
3

See, for example, Karubian et al. (2009) and Dewenter et al. (2012).
DIY means Do It Yourself.
5
According to Schumpeter, the inventor produces ideas, the entrepreneur gets things done (Schumpeter, 1947).
4

We argue that distribution and promotion represent such complementary assets in the music
industry, and that digitization has increased the artists incentives to self-release their music, because it has weakened the control of these complementary assets by the incumbent major record
companies. We therefore predict that digitization increases (all) artists propensity to self-release
their music, be they stars or not.
To test our theoretical prediction, we use an original dataset from a survey of 710 French
professional musicians. We distinguish two categories of artists: the label artists, who have the
possibility to sign a contract with a record company, and the no-label artists, who have no such
choice. We consider than an artist is digitized when he or she owns a digital home-studio. We
show that owning a digital home-studio has a positive impact on the likelihood to self-release, both
for the label artists, and for the no-label artists. However, the motivations for self-releasing music
differ between those two groups of artists. We also provide various tests to check for the robustness
of our findings.
Our paper is closely related to the literature on the commercialization strategies of inventors.
This literature analyzes the factors that influence an independent inventors trade-off between selling
his innovation and commercializing it himself. Anton and Yao (1994), Gans, Hsu and Stern (2008),
Gans and Stern (2010) show that asymmetric information and property rights play an important
role in the commercialization strategy, while Teece (1986 and 2006) and Gans and Stern (2003)
stress the importance of the control of complementary assets.
To our knowledge, very few empirical papers study the incentives of an inventor to develop his
innovation compared to selling or licensing it, as we do. Braunerhjelm and Svensson (2009) use
survey data on 867 Swedish patents owned by small firms and individuals. They study the factors
that influence the performance of the innovation, and show that commercialization performance
is superior when the patent is sold or licensed, or when the inventor is employed, compared to a
situation where the inventor commercializes the invention in his own firm. However, they do not
study who are the entrepreneurial inventors.
Norback, Persson and Svensson (2013) use the same data as Braunerhjelm and Svensson (2009).
They show that a higher quality of patent (proxied by the number of forward citations) yields a
higher probability of sale relative to own commercialization. However, they do not study the impact
of inventors individual characteristics on their propensity to become an entrepreneur. Except for
this last paper, we are not aware of any empirical study of the factors which affect the trade-off
between commercialization and sale of an innovation. Our main contribution is to provide such a
4

study for the music industry.

Our paper is also contributes to the literature on entrepreneurship in creative industries. According to Hang and Weezel (2007), this literature is rather scant. Moreover, it includes mainly
qualitative studies, such as de Bruine (2005)s paper on entrepreneurship in the New Zealand screen
production industry. We contribute to this literature, first, by providing a quantitative study, and
second, by showing that the model of commercialization is the best fit to account for entrepreneurship by creators.
In this literature, a closely related paper to ours, and a quantitative one, is the one by Burke
(1997). Burke analyzes the self-releasing strategies of 248 Irish composers in 1993. However, he
does not address the impact of digitization on self-releasing strategies (of course, given that his
study was conducted at the very beginning of the Internet). Moreover, Burke views self-releasing
as an occupational choice, that is, a trade-off between profits (in case of self-releasing) and wages
(in case of a contract with a record company).6 This does not fit well to the reality, since artists
trade off between a larger share of profits (with self-releasing) and a lower share (with a contract),
for the same project.7
Finally, our paper is also related to the literature on the economics of the music industry (e.g.,
see Ordanini, 2006; Hendricks and Sorensen, 2009; etc.) and on the effects of digitization (see Belleflamme and Peitz, 2012, for a survey). We contribute to these two streams of literature by providing
the first study on the impact of digitization on self-releasing strategies. WE PROVIDE A STUDY
ON THE MICRO EFFECTS OF INVESTMENTS IN IT IN THE MUSIC INDUSTRY. SUGGESTS THAT IT LEADS TO A DECONCENTRATION OF THE MUSIC INDUSTRY (MORE
ENTREPRENEURSHIP HENCE BYPASS OF INCUMBENT FIRMS BY CREATORS).
Fairlie (2006) uses survey data from the US between 1997 and 2001 and shows a positive relation
between computer ownershio and entrepreneurship.
Silveira and Wright (2010): study a market for ideas, where innovators can sell their ideas to
entrepreneurs or implement them themselves, but entrepreneurs are more efficient than innovators
in the implementation of innovations.
6

In the neo-classical Knightian model of entrepreneurship (Knight, 1921; Lucas, 1978; Khilstrom and Laffont,
1979; etc.), the entrepreneurship decision is viewed as an occupational choice, that is, a trade-off between profits and
wages. The literature that analyzes this model of entrepreneurship studies, for example, what types of individuals
become entrepreneurs. For Lucas (1978), they are those with the highest managerial ability; for Khilstrom and
Laffont (1979), the less risk adverse. etc. See Parker (2005) and Bianchi and Herenkson (2005) for extensive surveys
of this literature.
7
Whereas, in the occupational model, an individual trades off between two different project, namely, their entrepreneurial project and a job.

Silveira, R. and Wright, R. (2010): Search and the market for ideas, Journal of Economic
Theory 145, 1550-1573.
Chatterjee and Rossi-Hansberg (2012).Study a growth model where workers can have ideas of
new businesses and can decide to sell them to their employer or to exploit them independently in a
spinoff. Find that ideas that are of higher quality than this critical level lead to spinoffs, whereas
ideas that are of lower quality than the critical level are sold to existing firms. Low quality ideas
are not implemented.
Chatterjee, S. and Rossi-Hansberg, E. (2012). Spinoffs and the Market for Ideas. International
Economic Review, Vol. 53(1), pp. 53-93.
The rest of the paper is as follows. In Section 2, we provide a theoretical framework to show
how digitization can affect self-releasing strategies. In Section 3, we describe our dataset. The
econometric specification and the estimation results are provided in Section 4. Finally, in Section
5 we conclude.

Digitization and Self-releasing

Self-releasing as a commercialization strategy.

When deciding on whether to self-release her

music, an artist does not trade-off between profits (via the self-release strategy) and wages, like in
the occupational choice model of entrepreneurship. She rather trades off between commercializing
her music on her own and bear all the risk, and selling it to a record company against royalty fees.8
In other words, self-releasing is a commercialization strategy.9 Like an inventor, an artist has
to decide on how to commercialize her creation. It can either involve a contract with a downstream
firm (i.e., a record label) or vertical integration (i.e., the self-releasing strategy), or as we will
document below, no commercialization at all.
The effect of digitization on complementary assets. Our research question is whether
digitization increases the net benefit for an artist of self-releasing her music relative to signing a
contract with a record label. We are therefore interested in the factors that can make self-releasing
more likely; our question then becomes whether digitization is related to such a factor.
The literature on commercialization strategies stresses that entrepreneurship by innovators is
8
In reality, different models exist between the pure independent self-releasing and commercialization strategy, and
an artists contract with a record label. In particular, artists can licence they music (for which they own all recording
rights) to a record label, which will then take care of the commercialization.
9
See, among others, Teece (1986 and 2006) and Gans and Stern (2003 and 2010).

more likely when complementary assets are freely available. Teece (1986) states that the extent
to which complementary assets (such as marketing or after-sales support) are needed for commercialization is an important determinant of whether the innovator commercializes his invention.
Gans and Stern (2003) argue that if no competitor has control of complementary assets, integrated
structureswhere the innovators commercialize their own inventionsare more likely to emerge.
By contrast, if established firms control complementary assets, hybrid forms of organization are
more likely (e.g., via licensing or cooperation agreements).
In the music industry, two assets are traditionally viewed as complementary to success: distribution and promotion. Distribution refers to the step in the value chain where records are delivered
from the record companies to the retailers. As most sales for a new title occur in the first weeks
after release, distribution is key to commercial success: the distributor should be able to deliver
records quickly to a larger number of dispersed retailers. Promotion helps ensure that an artist
is drawn to the public attention. It involves media exposure through radio or television airplay,
advertising in the press or on television, touring, etc. Good promotion is also critical for commercial
success: consumers rarely purchase music from an artist they have never heard of.10
Before digitization (e.g., in the 80s or early 90s), the incumbent firmsi.e., the major record
companies: Universal, Warner, EMI, Sony-BMGhad strong control of these complementary assets. First, majors are vertically integrated in (physical) distribution, and in the 90s they had a
share of this market of around 80-90% in most countries.11 Second, for long, radio airplay has been
the main promotion channel for achieving large sales. Due in particular to the limited number
of slots for new titles on the leading radio channels, very few titles or artists benefit from large
exposure on radio, and very often those of the major labels.12 For example, in 2011 in France, 2%
of the 80,000 songs that were played on radio accounted for 74% of airplay. Furthermore, the share
of majors on radio airplay is larger than their share in sales.13
Digitization has lowered the control of these complementary assets by incumbent firms. First,
digitization has made physical distribution obsolete, and no competitor has control of digital dis10

On the importance of distribution and promotion for success, see, for example, the detailed study of the British
competitive authority on the recorded music industry in the UK (MMC, 1992).
11
According to Nielsen SoundScan data, the market share of majors in distribution was still 88% in 2012 and 2013.
12
The competition for media exposure is illustrated by the payola system, which became popular in the US in
the 1950s. Payola was the practise of record companies paying money for the broadcast of records on the radio.
Payola was prohibited by federal legislation in the 1960s (see Bhattacharjee et al., 2006). However, this practice has
not completely disappeared. For example, in 2005, Sony-BMG and Warner Music agreed to pay fines of $10 million
and $5 million, respectively, for having engaged in pay-for-play practices.
13
For example, in 2010 majors had a share of radio airplay of 81.1% against a share of 75.6% of music sales. This
has also been true between 2003 and 2009, according to data from French Music Observatory, 2011.

tribution. A new artist can now easily distribute her music on the major digital platforms (such as
iTunes Music Store or Amazon MP3), either on her own or via an independent digital distributor
(such CD Baby or TuneCore, or Believe in France).14 Second, promotion in the mass media has
become less essential, due to the development of decentralized promotion. An artist can create a
web site, or a specific page on social networks like MySpace or Facebook, on music networks like
Bandcamp, etc. Therefore, traditional promotion is no longer a necessary condition for success and
all artists can have access to online promotion.15
Since incumbent firms have a lower control of complementary assets in the digital world, we
expect that artists who have turned digital will have larger incentives to self-release their music,
compared to artists who continue producing music the traditional way. Furthermore, we conjecture
that stars have an even easier access to complementary assets, since they have a larger consumer
base, and can conclude better deals with digital distributors as well as achieving a larger visibility
online. We therefore expect the effect of digitization on the propensity to self-release to be larger
for stars than for non-stars.

Data

We use a dataset built from a postal survey16 conducted during fall 2008, of French musicians who
are members of Adami, the French organization for the collective administration of performers
rights. Adami, which collects the sums paid for the use of artists recorded works, had over 23,000
members in 2008, including 9,000 musicians.17 Only musicians who have already participated in
an album commercialized by main retailers can join Adami. Therefore, our sample is composed of
professional musicians only. There are also strong incentives for professional musicians to join
Adami, because this organization guarantees the collection of royalties on their music, especially
from radio airplays and TV broadcasts.
We conducted a questionnaire survey on approximately 4,000 musicians, randomly drawn from
the 9,000 members of Adami. With a response rate of about 20%, we finally have 710 artists in
14
For example, CD Baby allows self-released artistsor musicians signed by independent labelsto make their music
available on major music digital platforms such iTunes or Spotify, for a set-up fee of about $50 per album and a 9%
share of digital sales. This is to be compared with the typical share of sales of 25-30% charged by majors to distribute
physical records from an independent label (e.g., see Passman, 2003; Krasilovsky and Shemel, 2003).
15
See, for example, Bourreau, Maillard and Moreau (2014), who study the adoption of online promotion tools by
music artists.
16
The survey was conducted with a specialized survey company, ISL.
17
The remaining 14,000 members were actors.

our database.18 Table 6 in the Appendix provides the definition of our variables, and Table 7 gives
the summary statistics. We start by describing our measures of the artists self-releasing decision.
Then, we discuss our digitization variable. Finally, we present our control variables.

3.1

The self-releasing decision

We consider that an artist self-releases her music when she finances herself, directly or indirectly,
the recording and owns the master recording. In our survey we asked the artists whether they had
self-released an album in the last three years (SELFRELEASE variable). 50% of the musicians in
our sample had self-released an album in this time period, providing evidence that self-releasing
is nowadays widespread in the music industry. 60% of the surveyed musicians also intended to
self-release an album in the next two years (SR-PROJECT variable).19
The budget of the self-released albums was lower than 10.000e for 55% of the self-released
artists, and between 10.000e and 50.000e for 41% of them. Self-releasing involved self-financing
for 87% of the projects. The average album sales for self-released albums were 3,860 units, and
35% of the self-release projects were profitable, according to the artists.
To study the decision to self-release music, we distinguish two groups of artists: those artists
who had the opportunity to sign a contract with a record label for a given project, but decided to
self-release their album, and those who had no such opportunity. We refer to the former category
as the label artists, and to the latter as the no-label artists.
Different reasons might explain why an artist has no opportunity to sign a contract with a
record label. First, the artists music might belong to a niche genre of music, which is not viable
enough for a record label. Consistent with this interpretation, 66% of the self-released artists in our
sample state that self-releasing is the rule in their genre of music. Second, there might be strong
uncertainty about the artists potential, in particular if she is young in her career. Due to adverse
selection, some artists might then be left out by record companies.20
To determine if an artist had the opportunity to sign a contract with a record label, we use
some indirect information from our survey. For the self-released artists, we know if they self-released
18

We have some information on the members of Adami, which allows us to compare our sample to the full population
in terms of gender, age, region of residence, and amount of rights that the artists receive from Adami. The comparison
shows that the composition of our sample is relatively close to that of the full population.
19
We will use this variable below for a robustness check.
20
The same reasoning may apply more generally to the commercialization model: due to adverse selection, some
inventors might be unable to sell their invention. Their commercialization choice then boils down to whether to
become an entrepreneur or to exercize some outside option (e.g., finding a job).

their music because they could not secure a deal with a record label.21 For the artists who did
not self-release an album in the last three years, we know whether this is because the artist had a
project that she rather conducted with a record company.
We find that 27% of the artists in our survey are label artists, that is, they had the possibility
to sign a contract with a record label. Among them, 45% chose to self-release their music. The
remaining artists (i.e., 73% of all artists) are no-label artists. 50% of them chose to self-release an
album (see Table 1 below).22 These descriptive statistics show that self-releasing is a strategy that
is widely adopted by the no-label artists who are rejected by record labels (as in Burkes study),
but also by the most successful artists, that is, those who have the possibility to sign a record
contract (i.e., the label artists).
Table 1: Proportion of self-released artists.
All artists

Label artists

No-label artists

Self-release: Yes (%)

Number of individuals

48.4
305

45.2
76

49.6
229

Self-release: No (%)
Number of individuals

51.6
325

54.8
92

50.4
233

Total number of individuals

630

168

462

Note: due missing answers, the total number of artists (630) is lower than the size
of the full sample (710).

The trade-off that an artist faces, and therefore her motivation for self-releasing, depends on
whether she is a label or no-label artist. Label artists have the outside option of signing a contract
with a record company, and therefore, trade-off between profits (from the self-released strategy)
and royalties (from a record contract). According to our survey, in this first group of artists, the
motivations to self-release ones music are related to pecuniary incentives, that is, a larger share
of revenues, for 64% of artists, but also to non-pecuniary incentives, such as the possibility to be
independent (an important factor for 74% of the artists), and more artistic control (an important
factor for 87% of the artists).
By contrast, no-label artists trade-off between profits (from self-releasing) and the value of
some outside option (if they do not record/produce their music at all). This outside option could
21

More precisely, we know whether the fact that record companies were reluctant to produce their album was an
important factor (or not) in their decision to self release their music. We consider that the artists for whom it was
an important factor did not have the option to sign a contract with a record company, and that the artists for whom
it was not an important factor had this option.
22
Note that an artist may have conducted more than one musical project in the last three years.

10

be working on the artists next project in line, or finding another job. For such an artist, an album
is equivalent to a business card. It allows the artist to send her music to live concert organizers,
record labels, the press, etc. Therefore, we expect that artists with a strong activity on stage and
young artists, who need to get known by the industry, are more likely to self-release their music.

3.2

Digitization

As a measure of an artists digitization, we use a dummy variable, HOMESTUDIO, which indicates

whether the artist owns a digital home-studio or not. A digital home-studio is a music studio set
up for home recording. It consists of hardware and software that allow a musician to record her
music on her own, at home.
There are two reasons why owning a home-studio could increase the propensity to self release.
First, using a home-studio reduces recording costs. The artist has no longer a studio to rent, and
it is possible to replace musicians by virtual instruments to some extent. Second, a home-studio
allows the artist to experiment new music, new sound universes, at low cost. It can therefore
improve the artists creativity.
On the other hand, if the artist becomes more creative and the quality of her music improves,
she becomes more attractive for a record label too. Therefore, how owning a home-studio alters the
trade-off of a label artist between self-releasing and signing a record contract might be ambiguous.

3.3

Control variables

Finally, we use a list of control variables, which are considered as determinants of entrepreneurship
in the empirical literature (e.g., see Parker (2005) and Bianchi and Herenkson (2005)).
As a first measure of human capital, we use the artists experience, which we proxy by her age
(AGE ).23 From a theoretical point of view, the effect of age or experience is ambiguous. On the
one hand, older musicians are more likely to have the human or financial capital required for a
self-releasing/entrepreneurship strategy (e.g., see Jovanovic (1982), who argues that entrepreneurs
learn about their ability over time). Moreover, musicians who have been in the music business
for a longer time might have a larger network.24 On the other hand, young people are sometimes
viewed as less risk-adverse than older people, which would generate a negative relation between self23

We do not know the artists years in the music business.

In the entrepreneurship literature, this positive impact of an individuals network is highlighted by Calvo and
Wellisz (1980).
24

11

releasing and age.25 We use the artists general (non music related) education as a second measure
of human capital (EDUCGRAD).26 The effect of general education on self-releasing is also a priori
ambiguous. While more general education might allow the artist to acquire more managerial skills
or more information about business opportunities in the music industry, it might also reduce her
investment in creative or musical skills.
Social capital is often viewed as a positive determinant for entrepreneurship. In the music
industry, the artists network of relationships might allow her to access cheap labor or capital
(from friends who are musicians), productive information (self-release know-how from relatives),
etc. Therefore, we expect a positive relation between self-releasing and social capital. We measure
an artists social capital by the size of her entourage. The variable SOCIALCAP gives the sum of
three dummies, which indicate whether the artist has a manager, an agent and a live performance
organizer, respectively.27
Financial capital (personal wealth) is expected to have a positive effect on the self-releasing decision, since liquidity constraints may restrict an artists possibilities of starting her own business.28
On the other hand, a low income might push an artist to self-release her music to be more active
in the business (necessity-pushed entrepreneurship). We measure the artists personal wealth
by her annual income level, with two different dummy variables: INCOME0-15 =1 if the artists
annual total income is less than 15,000e, and INCOME60 =1 if it it greater than 60,000e.
Artists willingness to become independent from record labels are often restrained by their
limited managerial skills. Therefore, to the extent that an artist has multiple skills (i.e., is a jackof-all-trades,in the words of Lazear (2002 and 2004)), the likelihood that she self-releases her music
is higher. We measure whether the artist has multiple skills with the variable MULTIPLEACT,
which equals 1 if music represents between 25% and 75% of the artists income, and 0 otherwise.
Finally, we use some control variables which are specific to the music industry. LIVEPERF1 LIVEPERF4 measure the intensity of the artists activity on stage during the year before the
survey. We expect that for no-label artists the concert activity has a positive effect on the decision
to self-release, since artists who perform a lot on stage need a recorded album to serve as a business
25

E.g., see Miller (1984)s job-shopping theory.

The EDUCGRAD dummy variable indicates whether the artist has a degree at the graduate level. We also ran
our regressions with 6 different modalities for the education level, and obtained similar results.
27
We tested alternative specifications for the SOCIALCAP variable. We coded it as a dummy variable equal to 1
if the artist has a manager, an agent or a live performance organizer, and to 0 otherwise. We also ran our regressions
we a dummy equal to 1 if the artist has 2 or 3 of these assistants, and to 0 otherwise. These alternative specifications
led to similar results.
28
For example, Evans and Leighton (1989) and Blanchflower and Oswald (1998) find a positive effect of personal
wealth on the decision to become an entrepreneur.
26

12

card. GOLDREC and AWARD are two dummy variables, which indicate whether the artist has an
album which became gold29 and whether the artist received a French music award, respectively.
They control for a specific behavior of stars among both the label and no-label artists. We also use
the GOLDAWARD composite dummy variable, which indicates whether the artist has won a gold
record or a music award. CLASSICAL is a dummy variable, which indicates whether the artists
genre is classical music. We also control for the artists gender (FEMALE ).

Results

4.1

The effect of the home-studio on self-releasing

Table 2 below shows the rate of self-release in the two categories of artists (label and no-label),
depending on whether or not the artist owns a home-studio.30 As one can see, the proportion of
musicians who decided to self-release their music is higher among those who owned a home-studio,
whether or not the artist had the possibility of signing a contract with a record label.
Table 2: The impact of the home-studio on self-releasing.
All artists

Label artists

No-label artists

With a home-studio (%)

Number of individuals

55.5
167

64.5
49

52.4
118

Without a home-studio (%)

Number of individuals

44.5
134

35.5
27

47.6
107

Although this comparison does not control for any of the factors that can influence the selfreleasing decision, it suggests a positive relation between the adoption of digital recording tools and
self-releasing. To control for these factors, we now model the self-releasing decision as follows. Let
the indicator variable Yi = 1 if the artist decides to self-release her music, and let Yi = 0 otherwise.
The self-releasing decision is described by the latent variable model,
Yi = Xi + HOM EST U DIOi + ui ,
where Yi is the net benefit the musician i receives from self-releasing her music (which we do not
observe), Xi is a vector of individual characteristics, HOM EST U DIOi is the dummy variable
29

A gold record is awarded to an artist when the sales for a given album exceed 100,000 units.
For a few artists, we are unable to say whether they are label or no-label artists, which is why the total number
of self-released artists in Table 2 (301) is slightly lower than the total in Table 1.
30

13

which indicates whether the artist owns a home-studio, and ui is a normally distributed random
error with zero mean and unit variance. The musician will self-release her music if Yi 0, which
occurs with probability
prob [Yi = 1] = [Xi + HOM EST U DIOi ] ,
where [] is the evaluation of the standard normal cdf.
Maximum likelihood estimates of the self-releasing model are reported in columns (1) and (2)
of Table 3, for the no-label and label artists, respectively.
We begin by discussing the results for the no-label artists (column (1)). The musicians who are
the most active on stage are more likely to self-release their music, all other things being equal.
This result is consistent with the idea that for those musicians the album is a business card. In
the same vein, we find that younger artists, who need to get known from the industry and from
the public, self-release more. The stars who have earned a gold record in the past are less likely
to self-release their music when they do not have the option to sign a contract with a record label.
This suggests that stars prefer to wait for a new project instead of self-releasing music that
has not appealed to record labels, or looking for another job. As expected, the social capital and
having other activities than music (i.e., being a jack-of-all-trades) both have a positive effect on
the propensity to self release.
For the label artists, who have the opportunity to sign with a label, the results are different (see
column (2)), which is not surprising since the trade-off that these musicians face is also different.
Among these artists, self-releasing is less likely for women. Different from the no-label artists,
we find an income effect: the musicians who earn less than 15,000 euros per year are more likely
to self-release than artists who earn more. This result is consistent with the idea of necessitybasedentrepreneurship/self-releasing: artists with low income cannot wait for their next project.
Finally, for all artists, we find that self-releasing is less common among classical musicians.
For both label and no-label artists, owning a home-studio leads to a higher probability of having
self-released an album in the last three years. Our results show that the impact of the home-studio
is positive and significant both for label and no-label artists. Owning a home-studio increases the
probability of self-releasing by 0.15 for no-label artists and 0.20 for label artists.31 The effect of the
home-studio seems therefore stronger for the label artists, who are already inserted in the industry.
31

These probability changes correspond to average marginal effects.

14

Table 3: Main Probit regressions

(1)
No-label artists
HOMESTUDIO

0.472
(0.155)

(2)
Label artists

(3)
No-label artists

0.761
(0.268)

HOMESTUDIO*
GOLDAWARD
AGE

0.417
(0.165)
0.400
(0.431)

0.0186
(0.00710)

0.000343
(0.0143)

0.0193
(0.00717)

(4)
Label artists
1.078
(0.317)
1.152
(0.560)
0.00308
(0.0147)

EDUCGRAD

0.159
(0.150)

0.0316
(0.283)

0.160
(0.150)

0.0156
(0.287)

SOCIALCAP

0.178
(0.101)

0.155
(0.139)

0.180
(0.101)

0.144
(0.142)

INCOME0-15

0.00288
(0.154)

0.989
(0.328)

0.0130
(0.155)

1.029
(0.340)

INCOME60

0.743
(0.475)

0.516
(0.502)

0.755
(0.476)

0.483
(0.504)

MULTIPLEACT

0.373
(0.162)

0.0682
(0.288)

0.388
(0.163)

0.153
(0.295)

LIVEPERF2

0.284
(0.227)

0.659
(0.492)

0.269
(0.228)

0.735
(0.505)

LIVEPERF3

0.464
(0.237)

0.568
(0.449)

0.433
(0.239)

0.627
(0.465)

LIVEPERF4

0.728
(0.300)

0.745
(0.516)

0.699
(0.302)

0.764
(0.528)

GOLDREC

0.729
(0.231)

0.0489
(0.359)

0.977
(0.361)

0.605
(0.475)

AWARD

0.172
(0.281)

0.461
(0.355)

0.292
(0.316)

0.162
(0.384)

CLASSICAL

1.052
(0.214)

1.278
(0.432)

1.055
(0.215)

1.254
(0.442)

FEMALE

0.0116
(0.151)

0.883
(0.272)

0.0129
(0.152)

0.927
(0.277)

CONSTANT

0.330
(0.420)

0.631
(0.760)

0.390
(0.427)

0.722
(0.779)

219.93
0.0000
0.1835

68.79
0.0000
0.3195

219.49
0.0000
0.1851

66.63
0.0000
0.3408

Log likelihood
Prob> 2
Pseudo-R2

Standard errors in parentheses, * p < 0.10, ** p < 0.05, *** p < 0.01

15

4.2

Additional estimates

In the main Probit regressions, we assumed that the effect of the home-studio was the same for all
no-label artists, on one hand, and all label artists, on the other. One interesting question, however,
is whether the impact of the home-studio for music stars is the same among both categories of
artists. To answer this question, we interact the home-studio variable with the GOLDAWARD
variable. The estimation results are provided in columns (3) and (4) of Table 3.
For the no-label artists, we find that the effect of the home-studio is the same for the stars, who
already won a gold record or a music award, than for the non-stars. For these artists, owning a homestudio is associated with a 0.13 increase in the probability of self-releasing. For the label artists, we
find a positive effect of the home-studio for the non-stars, for which GOLDAWARD = 0. For these
artists, a home-studio increases the probability of self-releasing by 0.28. However, for the label star
artists, we find no significant effect of the home-studio on self-releasing: a Wald test cannot reject
the hypothesis that HOMESTUDIO + HOMESTUDIO GOLDAWARD=0 (Prob> 2 = 0.877).
Our results therefore suggests that the effect of the home-studio is lower (even absent) for the stars.
In our baseline estimates, the dependent variable states whether the artist has self-released an
album in the last three years. We then evaluate the effect of the home-studio variable on this
dependent variable. However, we do not know when the artist decided to acquire a home-studio.
To solve this problem of sequentiality between the adoption of a home-studio and the decision to
self-release, we also evaluate our model on the artists plans to self-release a current or future album
(SR-PROJECT ). The estimation results for these regressions are provided in Table 4. Our main
resultthat the home-studio has a positive effect on the propensity to self-releasestill holds. In
contrast to the main regressions, we find a positive effect of the home-studio for the label star
musicians.

4.3

Bivariate Probit results

Our results suggest a positive effect of digitization on the propensity to self release. However, we
might wonder whether this result is robust to a selection bias. For example, if musicians with
a strong preference for autonomy are more likely to turn digital, as well as self-releasing their
music, then a single equation model can overstate the effect of digitization. The main pitfall with
our empirical estimation is therefore the possible endogeneity of the HOMESTUDIO variable.
As our dependent variable SELFRELEASE and explanatory variable HOMESTUDIO are di-

16

Table 4: Robustness regressions

HOMESTUDIO

SR-PROJECT

SR-PROJECT

SR-PROJECT

SR-PROJECT

No-label artists

Label artists

No-label artists

Label artists

0.476
(0.161)

0.646
(0.269)

HOMESTUDIO*
GOLDAWARD

0.427
(0.174)

0.585
(0.305)

0.281
(0.390)

0.227
(0.554)

AGE

0.0239
(0.00705)

0.0184
(0.0142)

0.0242
(0.00708)

0.0182
(0.0142)

EDUCGRAD

0.0838
(0.154)

0.0535
(0.283)

0.0851
(0.154)

0.0432
(0.285)

SOCIALCAP

0.197
(0.0976)

0.0930
(0.133)

0.196
(0.0976)

0.0944
(0.133)

INCOME0-15

0.0588
(0.158)

0.245
(0.293)

0.0709
(0.159)

0.250
(0.293)

INCOME60

0.561
(0.504)

0.554
(0.504)

0.550
(0.503)

0.557
(0.507)

MULTIPLEACT

0.0907
(0.166)

0.0954
(0.272)

0.0858
(0.166)

0.0863
(0.273)

LIVEPERF2

0.481
(0.237)

1.169
(0.496)

0.473
(0.237)

1.157
(0.496)

LIVEPERF3

0.499
(0.245)

0.617
(0.437)

0.482
(0.247)

0.611
(0.436)

LIVEPERF4

0.353
(0.303)

0.315
(0.512)

0.327
(0.304)

0.314
(0.512)

GOLDREC

0.250
(0.232)

0.245
(0.367)

0.385
(0.301)

0.362
(0.468)

AWARD

0.268
(0.267)

0.613
(0.323)

0.360
(0.298)

0.668
(0.352)

CLASSICAL

0.994
(0.204)

0.704
(0.334)

0.991
(0.205)

0.709
(0.335)

FEMALE

0.355
(0.157)

0.663
(0.267)

0.357
(0.157)

0.660
(0.267)

CONSTANT
Log likelihood
Prob> 2
Pseudo-R2

1.457
(0.433)
204.80
0.0000
0.1761

1.496
(0.438)

0.704
(0.758)
73.96
0.0000
0.2327

204.53
0.0000
0.1771

Standard errors in parentheses, * p < 0.10, ** p < 0.05, *** p < 0.01

17

0.725
(0.759)
73.87
0.0001
0.2336

Table 5: Bivariate Probit regressions

HOMESTUDIO

No-label artists

No-label artists

Label artists

Label artists

SELFRELEASE

HOMESTUDIO

SELFRELEASE

HOMESTUDIO

1.355
(0.285)

1.577
(0.658)
0.528
(0.110)

INTERNET

0.634
(0.274)

0.0133
(0.00711)

0.00182
(0.00708)

0.00269
(0.0140)

0.0131
(0.0138)

EDUCGRAD

0.0558
(0.147)

(0.00708)
(0.150)

0.0119
(0.272)

0.0578
(0.267)

SOCIALCAP

0.149
(0.0987)

0.0246
(0.0944)

0.105
(0.140)

0.175
(0.128)

INCOME0-15

0.0292
(0.149)

0.128
(0.158)

INCOME60

0.664
(0.462)

0.272
(0.513)

0.407
(0.498)

0.319
(0.522)

MULTIPLEACT

0.336
(0.157)

0.122
(0.165)

0.0892
(0.276)

0.0735
(0.260)

LIVEPERF2

0.333
(0.218)

0.253
(0.229)

0.750
(0.478)

0.533
(0.468)

LIVEPERF3

0.504
(0.228)

0.283
(0.239)

0.562
(0.435)

0.261
(0.427)

LIVEPERF4

0.563
(0.296)

0.457
(0.301)

0.721
(0.500)

0.212
(0.506)

GOLDREC

0.869
(0.222)

0.596
(0.237)

0.129
(0.349)

0.277
(0.369)

AWARD

0.139
(0.274)

0.266
(0.280)

0.341
(0.361)

0.333
(0.330)

CLASSICAL

0.595
(0.265)

1.460
(0.248)

0.880
(0.563)

1.177
(0.347)

0.139
(0.150)

0.516
(0.154)

0.657
(0.354)

0.550
(0.249)

0.381
(0.457)

1.282
(0.544)

1.393
(0.921)

0.255
(0.961)

AGE

FEMALE
CONSTANT
Log likelihood
Prob> 2
Pseudo-R2

426.11
231.64
231.64

0.947
(0.328)

147.97
93.60
93.60

Standard errors in parentheses, * p < 0.10, ** p < 0.05, *** p < 0.01

18

0.173
(0.285)

chotomous, we estimate a bivariate probit model to account for the possible endogeneity of the
HOMESTUDIO variable. We use as instrument the artists Internet usage (INTERNET ).
Our estimation results with a bivariate Probit for the no-label and label artists are provided
in Table 5. The results suggest that the positive effect of the home-studio on the propensity to
self-release is robust to the potential selection bias.
From Maya:

Self-releasing is a common practice for all types of artists, whether they have or

havent access to the labels. Moreover, the cost of a home-studio averages at 4000 Euros and hence is
comparable to the cost of a music instrument. However, we must control for the possible endogeneity
of our main variable HOMESTUDIO and find a proper instrumental variable to correct for the
endogenity biais. To test for the exogeneity of HOMESTUDIO we use an instrumental variable: the
artists Internet usage (INTERNET) which is a good candidate. First, there is no reason to believe
that using internet could have a direct effect on the dependent variable (SELFRELEASE). Second,
INTERNET is correlated with HOMESTUDIO. A simple probit model with HOMESTUDIO as
the dependent variable and INTERNET as the independent variable shows that this is the case
at the 5% significance level. Hence we argue that the INTERNET variable satisfies exclusion and
inclusion restrictions.
Since our potentially endogenous variable (HOMESTUDIO) is binary, we cannot use an IV
procedure to test for the exogeneity of HOMESTUDIO using INTERNET as an instrumental
variable. As suggested by Wooldridge (2002), we run a bivariate probit with our structural probit,
and a second probit using HOMESTUDIO as the dependent variable and including our IV in
the covariates. A bivariate probit approach provides a test of exogeneity. Under the exogeneity
assumption, the error terms of both corresponding underlying equations included in the bivariate
probit are not correlated, that is, the null hypothesis of exogeneity can be stated as = 0. A
likelihood ratio test of the significance of is thus a direct test of the exogeneity of HOMESTUDIO.
If 6= 0, only the results of the bivariate probit have to be considered. But if = 0, it is appropriate
to use the univariate probit model.
Our estimation results with a bivariate Probit for the no-label and label artists are provided in
Table 5. The results suggest that the positive effect of the home-studio on the propensity to
self-release is robust to the endogeneity problem. The second column corresponds to the regression with HOMESTUDIO as the dependent variable, and includes the IV. It confirms that the
instrumental variable INTERNET is correlated with HOMESTUDIO. The estimated value for the

19

parameter is significantly different from zero for the sample of artists who dont have access to
a label. These results suggest that we reject the exogeneity of HOMESTUDIO, for the non-label
sample, using INTERNET as an instrumental variable.
(A rajouter dans le tableau, pour les labels = 0, 55 et Likelihood-ratio test of
rho=0: chi2(1) = .869331 Prob > chi2 = 0.3511 donc rho non significatif
pour les non labels = 0, 61 et chi2(1) = 5.49904 Prob > chi2 = 0.0190 donc rho
significatif )

Conclusion

In this paper, we argue that digitization increases artists incentives to self-release their music,
because it facilitates access to the assets that are complementary to entrepreneurial success (i.e.,
distribution and promotion).
Using a survey from French musicians, we analyze an artists decision to self-release her music.
For some artists, wich we refer as the label artists, this decision involves a trade-off: the artist
can either release her music on her own or sign a contract with a record label. However, some
artists have no such choice. For these no-label artists, the trade-off is between self-releasing and no
commercialization of their current music project.
We consider that an artist has turned digital when she owns a digital home-studio. Our empirical
analysis confirms the hypothesis that digitization (i.e., owning a home-studio) favors self-releasing.
This result holds both for the artists who have the outside option of signing a label contract (the
label artists) and for the artists without this outside option (the no-label artists).
This result supports the hypothesis that the lower control by major companies of the key
complementary assets in the music industry distribution and promotion due to the digitization
process, has led a larger number of artists to self-release their music.

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23

Appendix
Table 6: Description of variables.
Variable

Description

SELFRELEASE

Takes the value 1 if the artist has self-released an album within the last three years,
and 0 otherwise.

SR-PROJECT

Takes the value 1 if the artist has an on-going self-released project or intends to
self-release an album within the next two years, and 0 otherwise.

HOMESTUDIO

Takes the value 1 if the artist owns a digital home-studio, and 0 otherwise.

INTERNET

Takes the value 0 if the artist never accesses the Internet, 1 if she accesses it every
month, 2 if she accesses it a few times a week, and 3 if she accesses it every day.

AGE

Age of the artist (continuous variable).

EDUCGRAD

Takes the value 1 if the artist holds a master degree (at least), and 0 otherwise.

SOCIALCAP

Sum of 3 dummies, which indicate whether the artist has a manager, an agent and a
live concert organizer.

INCOME0-15

Takes the value 1 if the artist earned less than e15,000 euros in 2007, and 0 otherwise.

INCOME60

Takes the value 1 if the artist earned more than e60,000 in 2007, and 0 otherwise.

MULTIPLEACT

Takes the value 1 if the share of music activities in the artists revenues is between
25% and 75%, and 0 otherwise.

LIVEPERF1

Takes the value 1 if the artist did not perform on stage in 2007, and 0 otherwise.

LIVEPERF2

Takes the value 1 if the artist performed 1-10 times on stage in 2007, and 0 otherwise.

LIVEPERF3

Takes the value 1 if the artist performed 11-50 times on stage in 2007, and 0 otherwise.

LIVEPERF4

Takes the value 1 if the artist performed more than 50 times on stage in 2007, and 0
otherwise.

GOLDREC

Takes the value 1 if the artist has already won a gold record, and 0 otherwise.

AWARD

Takes the value 1 if the artist has already won a music award, and 0 otherwise.

GOLDAWARD

Takes the value 1 if the artist has already won a gold record and/or a music award,
and 0 otherwise.

CLASSICAL

Takes the value 1 if the artists main musical genre is classical music, and 0 otherwise.

FEMALE

Takes the value 1 if the artist is a woman, and 0 otherwise.

24

Table 7: Summary statistics

Variable

Mean

Std. Dev.

Min.

Max.

SELFRELEASE
SR-PROJECT
HOMESTUDIO
INTERNET
AGE
EDUCGRAD
SOCIALCAP
INCOME0-15
INCOME60
MULTIPLEACT
LIVEPERF1
LIVEPERF2
LIVEPERF3
LIVEPERF4
GOLDREC
AWARD
GOLDAWARD
CLASSICAL
FEMALE

0.496
0.603
0.397
2.606
47.808
0.366
0.590
0.475
0.038
0.280
0.157
0.329
0.381
0.133
0.121
0.111
0.194
0.189
0.445

0.500
0.490
0.490
0.801
12.29
0.482
0.874
0.500
0.191
0.449
0.364
0.470
0.480
0.300
0.327
0.315
0.396
0.392
0.497

0
0
0
0
18
0
0
0
0
0
0
0
0
0
0
0
0
0
0

1
1
1
3
90
1
3
1
1
1
1
1
1
1
1
1
1
1
1

689
682
701
691
710
692
684
659
659
650
693
693
693
693
710
710
710
708
710

Note: due to unanswered questions by some artists, N varies among

variables.

25