The prices of classical recorded music: a hedonic approach

This paper is an empirical investigation into factors that are responsible for the differences in prices of classical music compact discs. Though prim arily a statistical exercise, the current work has implications for underst anding the structure, conduct and performance experienced by the classical music record industry. The major changes experienced by this industry are h ighlighted. We focus on the rapid technological change in recording technol ogies, format changes, the product heterogeneity that results from the simu ltaneous existence of incumbent and entering models with various technologi cal vintages, and the behaviour of firms of different kinds. Using an as-ye t-untapped French data source for the period 1989-1994, the results of hedo nic regressions indicate that new vintages are priced at a premium, reflect ing higher recording costs. Owing to contractual arrangements with supersta rs, this premium is even higher for recordings made by majors. The price ma rkups enjoyed by major firms have declined over time because of increasing competitive pressure. Independents and majors exhibit a distinct behaviour as to the location of classical music CD's recordings in quality space. The results favour the hypothesis that independents locate their recordings in 'empty' market niches. The nominal quality-adjusted prices for independent firms' CDs declined at an annual average rate twice that of the majors. (C ) 2000 Elsevier Science BN. All rights reserved.