Seminar: Unbundling and the Music Industry
In October 2019 the department of Strategy and International Business were delighted to host a seminar given by Assistant Professor Sungyoung Chang from London Business School (LBS) entitled: “Does Unbundling Facilitate Experimentation and the Discovery of New Talent?”
The seminar examined unbundling as a type of innovation. Digitalization has brought forth a fundamental unbundling of creative goods. In the music industry, for instance, digitalization has enabled music to be purchased as an individual song (i.e. a single) as well as a bundle of songs (i.e. an album). The seminar explored whether unbundling facilitates firms’ experimentation and the discovery of new popular and creative artists. Assistant Professor Sungyoung Chang discussed a model of unbundling and the discovery of new talent and test its empirical implications in the music industry. Consistent with the theoretical predictions, research findings indicated that unbundling lowers the cost of experimenting with new artists. In contrast, as information on artist’s talent from a one-shot unbundled experimentation is less accurate than that from albums, single-producing firms make more omission errors and commission errors. Overall, results suggest that the positive effect from the decreased cost of experimentation outweighs the negative effect from the loss of information quality on talent. Thus, single-producing firms discover more popular artists and artists who create a new market (genre) than album-only-producing firms. These results suggest that digitalization may facilitate firms’ experimentation and the discovery of new talent.