Since no firm motivated by profit would want to produce a good it couldn't charge for, one would expect a sharp decline in the supply of music.
Internet also lowers an independent producer's cost of distribution.
The smaller cost of entry should positively affect the number of releases. An elementary model of monopolistic competition with entry can adequately capture these two opposing effects and can provide a first approximation of their relative magnitudes. We find that there exist reasonable calibrations of our linear model under which the number of releases can increase despite a sharp price reduction. Introduction By virtue of its unpredictability, the Internet's impact on the music industry's future prospects has found much resonance in the popular press. Surely, the recording industry must be expending considerable resources towards understanding the issues at hand, and one should expect its own assessment of the situation to be inferable from its actions.