The New Economics Of The Music Industry

Economics 2367

Ali Shaikh

October 31, 2014

The New Economics of the Music Industry

In view of the global economy’s current turbulence, music publishing has caught the eye of the financial world as an opportunity to acquire relatively certain long-term assets. The reason is simple. In most cases, well-known songwriters and their catalogs generate substantial income streams. With the start of the digital era, piracy has become an increasing concern for music artists, who earn their livings based upon the sales generated through their music. A counterforce against this illegal music downloading, have been cloud-streaming websites such as Spotify and Pandora Media, which have successfully increased U.S. digital music sales beyond CD and vinyl

This fall can primarily be attributed to the era of “Napster,” a file sharing digital distribution channel, which boast an incredible accessibility to various forms of media. Before it was shut down in 2001, Napster had approximately 51 million users actively using the website for downloading purposes (BBC News, 2001). Following this detriment to the music recording industry, the music economy faced many hardships. The Recording Industry Association of America (RIAA) estimates that piracy costs the industry approximately $300,000,000 dollars (Moser on Music Copyright, 2006). As recently as 2012, however, proposals of Congressional bills such as the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) claimed that online piracy costs the U.S. between “200 and 250 billion dollars per year and results in the loss of 750,000 American jobs”(http://freakonomics.com/2012/01/12/how-much-do-music-and-movie-piracy-really-hurt-the-u-s-economy/). Consumers learned to justify this illegal downloading because it seemingly had little-to-no effect on the musician’s luxurious lifestyle. Instead, with this increase in music pirating, musicians faced lower physical sales of their albums, and thereby receive a lowered portion of the total sales. When an album or song is sold, a portion must go to the composer, producer, and other important figures involved in the song development process, and

More and more people are escaping persecution for illegal music downloading due to the high costs and high time investment required to bring criminals to justice. Instead, countries worldwide, such as Germany and Britain, have adopted “graduated response laws,” adopting a warning approach. For example, if a person is caught downloading music illegally for the first time, their Internet provider may begin to slow their Internet connection. If these actions should so continue, the person’s provider has the right to completely shut off their Internet