Small Firm Start-up in the Record Industry

JEL Classification L82, L30, M13

Andrew E. Burke

Department of Economics, Trinity College, Dublin 2, Ireland


This paper examines new record company formation by musicians. In particular, it addresses the decision by composers to release a record i.e. either to contract their music to record companies or to start their own company. In so doing, the research entails the collection and analysis of new data on the behaviour of musicians in the intermediate market for music. The research finds that musicians regard incumbent record companies to have a first mover advantage and generally aspire to secure a record contract than to set up their own company. Composers who start their own company usually do so because of "push" rather than "pull" factors so that such new firm formation is mainly artistic enterprise rejected by incumbent firms. In this manner, new firm formation by composers does not generally represent the seeds of future industry growth.


The author would like to thank the Irish Music Rights Organisation for financial support. He would also like to thank Ian Minch for research assistance and Mark Casson, Charles Feinstein, James Foreman-Peck, and Joep Konings for useful comments. A disclaimer applies.