Exclusive Dealing and Its Effects: The Impact of Large Music Festivals on Local Music Venues

Rev Ind Organ (2014) 45:153175

DOI 10.1007/s11151-014-9428-x

Published online: 24 July 2014

Springer Science+Business Media New York 2014

Abstract This paper examines how local music venues are affected by exclusive contracts used by four of the United States most prominent music festivals. By utilizing a unique industry and multi-year dataset, as well as variation in the use of exclusive dealing across the country determined by the location of large music festivals, this paper adds to the paucity of empirical analysis of exclusive dealing and provides new insight into an ignored sector of the music industry. Results show that exclusive contracts correlate with a decrease in the number of venues in affected cities by 728% when compared to those unaffected cities, with smaller cities being disproportionately affected.

Keywords Competitive effects Exclusive contracts Exclusive dealing

Music industry

1 Introduction

In June of 2010 Illinois Attorney General Lisa Madigan opened an antitrust investigation into the popular Chicago music festival, Lollapalooza (Knopper 2010). The basis for the investigation is the exclusivity clause that artists playing the festival must sign, which restricts them from playing any concerts within 300miles of the festi-

Special thanks to my adviser, Scott Savage, as well as the rest of my dissertation committee: Donald

Waldman, Yongmin Chen, and Jin-Hyuk Kim. Thanks to Ania Aksan and Tom Murray for their helpful

comments, thanks to the participants of the 2012 International Industrial Organization Conference, and to

the editor and two anonymous referees for considerable guidance.

R. S. Hiller (B)

Department of Economics, Faireld University, 1073 N. Benson Rd., Faireld,

CT 06824, USA

e-mail: [email protected]

Exclusive Dealing and Its Effects: The Impact of Large Music Festivals on Local Music Venues

R. Scott Hiller

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154 R. S. Hiller

val for 180days prior to and 90days past the event. This is a common requirement among the four leading music festivals in the United States (Kot 2010). The concern is that festivals violate the antitrust laws and diminish the ability of local music venues to compete. This paper addresses that claim by empirically examining the effect of exclusive dealing on the number of venues in these cities.

The massive annual music festival is relatively new to the US. Despite the popularity of Woodstock, the model has largely not continued from...