Stricter regulation of music platforms: A balancing act for artists and the industry

User-generated content platforms such as YouTube and TikTok have become immensely popular. Policymakers in the US, Europe, and other countries are therefore considering stricter regulations for sharing content on these platforms. This debate centers around the current “safe harbor” regime that protects platform operators from liability for copyright infringement and facilitates content sharing. A recent study carried out at WU (Vienna University of Economics and Business) shows, however, that stricter regulation may also have unintended consequences.

Nils Wlömert, professor at the WU Institute for Retailing & Data Science, and his co-authors conducted a study from the perspective of music artists. Their goal was to analyze how music that is freely available on platforms like YouTube affects demand for the respective artists’ content on other, more lucrative streaming services like Spotify. The results of this study show that lesser-known songs benefit from their presence on YouTube. For current hit releases, however, free availability on user-generated content platforms leads to fewer clicks on other platforms.

“It’s important that policymakers keep a close eye on the potential impact that stricter regulation of user-generated content platforms may have,” Nils Wlömert points out. “Such regulation could limit the diversity of the content that’s available to users, and, as an unintended side effect, it may increase market concentration by limiting the reach of lesser-known artists,” says Wlömert.

Impact on music industry revenues

The results of the study also show that weaker demand for hit releases on other platforms, such as Spotify, has a significant impact on the revenues of the music industry. Even though these hits only represent a small fraction of the content offered, they generate a large proportion of the total revenues. This aspect would be especially significant if music labels were to use the revenues from hit releases to promote new artists. “Against this background, it’s very important to find a balanced approach to regulation in this area to ensure that in addition to copyright considerations, the interests of artists and fans are also taken into account,” says Nils Wlömert.

Detailed research results and further information

Wlömert N, Papies D, Clement M, Spann M, 2023. The Interplay of User-Generated Content, Content Industry Revenues, and Safe Harbor Provisions: Quasi-Experimental Evidence from YouTube. Marketing Science, forthcoming.