Research Arc IV

RESEARCH ARC 4

The Economics of Music:

TSCHMUCK, PETER. The Economics of Music. Agenda Publishing, 2017. JSTOR, www.jstor.org/stable/j.ctv5cg90z.

A Short Economic History of the Music Business

· From phonograms to music cylinders to records to CDs to digital

· Music is an economic good

· 5 periods in the economic history of music

· “The era of music patronage from ancient times until the late eighteenth century”

· “The era of music publishing from the late eighteenth century until the 1920s”

· “The era of broadcasting from the 1920s to the 1950s”

· “The era of the digital music economy since 2000”

Music Publishing

- Commercial concerts were increasing throughout the world which “increased the demand for printed music and transformed the craft of music printing into an industry”

- Publishing led to “the imperial act [that] protected authors from unauthorized reprints by confiscating the pirated editions and by penalizing the publisher” àhappened 1450s

- History repeated itself with the copyright infringement and piracy rights

- The first copyright legislation was made by London

- Professionalization and commercialization of the music occupation: music was a huge demand during 1800s

- Late 1800s, music publishers were struggling with the recording industry

- Record companies were using music without paying them royalties

- For the current society, if that happened, not only are the artists pissed but also the labels

- “The new copyright legislation that went hand-in-hand with the establishment of collecting societies led to a new value-added network in which the economic interests of music publishers, live music promoters and record companies were inextricably interwoven. Thus, the modern music industry emerged in the first decade of the twentieth century”

- Major labels: Warner, Sony, and Universal

- CD sales helped grow the music industry

- The digital revolution in the music industry can be traced back to Napster

- RIAA (Recording Industry Association of America) sued Napster for copyright infringement

- It was a software that “allowed internet users to search music files directly on the hard discs of other computers”

- Napster was just the beginning

- Decentralized file-sharing applications “that did not use a central server”

- Basically, the “music industry’s bodies around the world declared war on internet ‘piracy’ and systematically sued providers of file-sharing software”

- Which is where the RIAA went crazy

- 2003 = iTunes became available to non-Apple users

- iTunes controlled more than 80% of rising digital music market

- Streaming services such as Spotify and Deezer rose around 2010 but they “were forced to pay two-digit million-dollar advances, recoupable with the streaming revenue, to the majors”

- The downloading market is dominated by Apple

- The importance of the live music business in the music industry should be focued on

- Involves promoters and venues

- The recording music industry was falling short but the live music industry was rising

- “The recorded music market lost its dominance in the digital music economy to the live music entertainment market. Whereas it was the record that was at the centre of the value-added network from the 1950s, in the age of digital music it is now the musicians who have become the main revenue source for the industry”

Economics of the Digital Music Business

Music Streaming

· The shift from ownership-based to access-based business model

· Negative effect of music streaming = the recorded music sales dropped

· Streaming services were actually helping independent record labels

· “the promotional effect is greater for music with greater exposure on Pandora”

· Video-streaming platforms “shares the advertising revenue from its freemium model with the right holders”

· “Video-streaming sites such as Vevo and tape.tv operate a different business model, which offers streams of licensed music videos but no user-generated content. Most of them are purely advert-supported”

· Cloud-based music services “enables users to upload their music files to a server in the so-called cloud”

Content Acquisition

· Business depends on content acquisition model and revenue model

· Content acquisition: two different copyrights

· 1 = “copyright of a musical work created by a composer and/or songwriter (musical copyright = MC)”

· 2 = “copyright for the sound recording (=SR) created by a performer for a record label”

· Streaming services need to acquire both from record labels before moving forward with the music

· Streaming services “pay upfront or guarantee fees both to the major record labels and also to the indie licensing agency MERLIN to get access to the sound recording catalogues”