Factors Influencing Cross-section Variation in CD Sales

Liebowitz (2003) reviews these factors for the US. In Peitz and Waelbroeck (2004), we find that the real price of music has not followed any significant trend over the recent years, so that factor will not play a significant role. Price differences across countries and other countries specific factors that have not changed over the period will be eliminated by talking first differences. Factor will be controlled by domestic GDP. Factor in will be partly captured by the household penetration of DVD and of Digital Music Player. Factor is unobservable and will be assumed to be uncorrelated with the Internet Piracy variable.

There are several factors in addition to internet piracy that could influence cross-country variable in music sale:

1. the price.
2. country-specific environment of the music industry, including offline coomercial piracy, taste for music, the distribution of income of potential users.
3. income and economic environment.
4. substitution with other media and other forms of entertainment; new distribution channels; new media such as DVDs.
5. the "quality" of music.   

Credit to : http://www.serci.org/docs_1_2/waelbroeck.pdf