Digital Distribution Of Independent Music Artists An Economic Analysis Of Rights Costs And Market Potential

Diploma Thesis from the year 2012 in the subject Communications - Media Economics, Media Management, grade: 1,3, University of Cologne (Seminar für Allgemeine BWL, Medien- und Technologiemanagement), course: Medienmanagement, language: English, abstract: This thesis considers the influence of digital distribution on the independent music artists’ position in the value chain with respect to rights, costs, and market potential from the perspective of an economic analysis. It begins by delineating the relevant terms and providing a research background about the digital distribution of independent music artists. Ongoing, a new analytical framework is introduced in order to guide the economic analyses from rights and costs to the market potential, whereas direct and indirect distribution are compared from the independent music artists’ point of view. It is found that digital distribution encourages independent music artists to enter the music market without the necessity of a major label. Furthermore, digital distribution seems to be an attractive way for unpopular artists to increase their awareness regardless likely copyright infringements.

Chris Anderson's initial `Long Tail' analysis was released in 2004 just as the wave of mergers and acquisitions was sweeping the music publishing and radio industries. Music industry executives began looking for Anderson’s ‘Long Tail’ effect and with it the implied redistribution of royalty income from popular songs to long dormant and forgotten works in their catalogs. These music publishers had hoped to further maximize the value of their copyright assets (lyrics and melody) in their existing music catalogs as the sale of compact disks diminished, and consumers switched their purchasing and listening habits to new digital formats in music technology such as the iPod. This book deals with the measurement of skewness, heavy tails and asymmetry in performance royalty income data in the music industry, an area that has received very little academic attention for various reasons. For example, the pay packages, including signing bonuses, of some `superstars' in the sports world are often announced when they join a team. In the art world, the value of an artist's work is sometimes revealed when the work is sold at auction. The main reason it is difficult to study art and culture from a royalty income perspective is that most of the income data at the individual level is often proprietary, and generally not made publicly available for economic analysis. As a Senior Economist for the American Society of Composers, Authors, and Publishers (ASCAP) using both internal and licensed external proprietary data, the author found that the so-called `superstar effects' are still present in performance royalty income. Success is still concentrated on a relatively few copyright holders or members who can be grouped into `heavy tails' of the empirical income distribution in a departure from Anderson's `long tail' analysis. This book is divided into two parts. The first part is a general introduction to the many supply and demand economic factors that are related to music performance royalty payments. The second part is an applied econometrics section that provides modeling and in-depth analysis of income data from a songwriter, music publisher and blanket licensing perspective. In an era of declining income from CD album sales, data collection, mining and analysis are becoming increasingly important in terms of understanding the listening, buying and music use habits of consumers. The economic impact on songwriters, publishers, music listeners, and Performance Rights Organizations (PROs) is discussed and future business models are evaluated. The book will appeal to researchers and students in cultural economics, media and statistics as well as general readers and professionals in the music publishing industry.

​This book discusses the economics of the music industry in the context of the changing landscape brought about by innovation, technological change, and rapid digitization. The ability of digital technology to reduce the transaction costs of music copyright licensing has all but destroyed the traditional media business models of incumbent Performance Rights Organizations (PROs), music publishers, record labels, and radio and television stations. In a climate where streaming services are rapidly proliferating and consumers prefer subscription models over direct ownership, new business models, such as direct licensing, are developing. This book provides an overview of the economics of the traditional music industry, the technology-induced changes in business models and copyright law, and the role of publishers, copyright holders and songwriters in the emerging direct licensing model. In Part One, the author examines the economic aspects of direct licensing as an alternative to the traditional blanket license for copyrighted musical compositions, with an emphasis on the often monopolistic nature of PROs. In Part Two, the author focuses on the music publisher and the role direct licensing and competition may play in the changing business models in the music industry and the potential benefits this may bring to copyright holders, such as songwriters. To compliment this model, the author proposes a maximum statutory fixed-rate for musical performances to further streamline the royalty process, especially where distributors such as Google and YouTube are concerned. This book adds to the growing body of literature on the economics of music licensing in the digital age. It will be useful to those in the fields of economics and law, as well as music executives, musicians, songwriters, composers, and other industry professionals who are interested in understanding how technology, innovation and competition have reshaped the music industry.​

In response to piracy and online file trading, the music industry has begun to adopt technological measures, often referred to as digital rights management (DRM), to control the sale and distribution of music over the Internet. Previous economic analysis on the impact of DRM implementation has been overly simplistic. A careful analysis of copyright law and the microeconomic principles governing the music industry demonstrates that commentators have failed to account for factors relevant to the measure of social welfare within the music industry. This paper develops a more refined economic model that is better suited to accurately assessing how legal or technological changes like DRM will affect the music industry. Utilizing a refined economic model, the analysis suggests that the economic effects of implementing DRM technology are generally negative, albeit uncertain. While DRM implementation may inhibit piracy, facilitate price discrimination, and lower transactional costs, it will likely decrease social welfare by raising barriers to entry and exacerbating a number of existing market failures. Specifically, DRM implementation may facilitate the extension of monopoly pricing, decrease the amount of information available to potential music consumers, diminish the number of positive externalities, and raise artistic and informational barriers to entry into certain genres of music.

This book analyzes regulatory models established in the field of online music distribution, and examines their consistency with the overarching objectives of copyright law. In order to do so, the book takes a deep dive into the provisions of international treaties, EU Directives as well as the German and US copyright systems and case law. It subsequently scrutinizes the identified regulatory models from the standpoint of the copyright’s objectives with regard to incentives, rewards, a level playing field, and dissemination. Lastly, it endorses the improved market-based statutory license as a preferable instrument in the online music field. The book is intended for all readers with an interest in music copyright law. Part I will especially benefit copyright scholars and practitioners seeking in-depth insights into the current legal situation regarding streaming and downloading. In turn, Part II will above all appeal to scholars interested in “law and economics” and in the theoretical foundations of online music copyright. Policy recommendations can be found in Part III.

In November 2014, pop music icon and New York City's recently anointed 'Global Welcome Ambassador' Taylor Swift, perhaps the year's most ubiquitous American public figure, made headlines by absenting herself from a hip and increasingly popular venue: the Spotify streaming music service. Swift, whose popularity and income were unquestionably propelled by avid listening on terrestrial radio, YouTube and services like Spotify, had fired a warning salvo with a July Op-Ed in the Wall Street Journal, in which she stated unequivocally that 'music should not be free,' because, in her words, 'Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for.' This one-two punch set off a firestorm among musicians, music industry executives and music fans, who promptly divided themselves into two opposing camps: Swift's supporters, who view Spotify and its ilk as exploiters of artistry and debasers of culture, and Spotify's supporters, who view the service as an exemplar of media economics in the age of digital ubiquity and a bulwark against the deleterious effects of online piracy. Although both camps seem genuinely motivated by a principled love of music and a fundamental belief in some notion of 'fairness,' neither side got the story right, though each version contains elements of the truth. In order to understand fully the role of streaming in the evolving recorded music economy and to evaluate whether it's 'good' or 'bad' for musicians and fans, it's necessary to take a broader and more historical perspective, and to understand streaming in contrast to other modes of distribution and market exploitation. Since its inception, the recorded music industry - composed of recording artists, composers, record labels, publishers and a myriad of other stakeholders - has been a tumultuous, ever-changing economic battle royale. Each new law, technology or market shift has presented strategic threats and opportunities enabling some to gain a 'larger piece of the pie' while others divvy up the dwindling remains. Yet the market disruptions introduced by digital media at the turn of the twenty-first century have introduced a degree of volatility and uncertainty that makes the previous century's ups and downs look stable and placid by comparison. One effect of these disruptions has been to intensify the ongoing battle - legacy stakeholders seek to protect their margins and market dominance, rival upstarts wish to carve out their own slices and creative professionals see a long-awaited opportunity to exert some financial autonomy and creative control over the product. To the extent that these disruptions are covered in the press or understood by the general public, the situation is often depicted monochromatically, from the perspective of a given stakeholder. In addition to Swift's campaign against Spotify, other examples include calls for broadcast royalties for recording artists by musicians like Blake Morgan, campaigns for parity between online and off-line radio royalties by organizations like Pandora and, of course, campaigns for and against peer-to-peer distribution platforms by record labels and technologists. In this chapter, I present a nonpartisan analysis of past, current and proposed methods of 'slicing the recorded music pie' in the US marketplace,1 with the aim to clarify exactly what's at stake, and for whom, and to correct and counteract some of the more vitriolic and less accurate rhetoric that has governed the public debate of these issues thus far. I shall also provide a side-by-side comparison, in the form of a table, depicting the economic rewards for creators, as well as the cultural rewards and economic costs for consumers, of music distributed via various channels. It should be abundantly evident even without such analysis that there is no 'silver bullet' utopian scenario in which every party concerned, from artists to labels to consumers, benefits without a corresponding expense on the part of some third party - in other words, there can't be an infinitely large pie with an infinite number of slices. Nor can there be a single organization or sector that wins out at the expense of all the rest; compromise is inevitable, and the challenge is in shaping its contours, rather than avoiding it. Yet, while no single stakeholder in the recorded music economy can expect to see new laws, policies, economies and technologies conform exclusively to its worldview and agenda, there are still more and less equitable ways to divide the industry's wealth, and to develop methods to insure its continuing growth and innovation. Consequently, this chapter will conclude with a brief analysis of pending policy proposals, outlining what's really at stake and for whom.

ABSTRACT: This study presents an economics analysis of Internet music file-sharing in peer to- peer environments. Prior research examines the problem from the perspective of either copyright owners, artists or the public, at the expense of the interwoven relationship of these parties in achieving the purposes of copyright and protecting the interests of the public in new technology, free speech and privacy. This study, by comparison, applies a law and economics analysis to this market, specifically identifying market failures associated with peer-to-peer environments as opposed to traditional music markets. At its core, this study addresses whether the traditional economic rationale for copyright, exclusive property rights-based copyright law, is proper in the digital environment and answer the following questions. How is the MP3/P2P market different from the traditional music market represented by the music industry's compact disks creation and distribution model? What market failures or irregularities are present in the MP3/P2P market? What are the characteristics of a compulsory licensing system that would address these market failures?

Over the course of several decades, copyright protection has been expanded and extended through legislative changes occasioned by national and international developments. The content and technology industries affected by copyright and its exceptions, and in some cases balancing the two, have become increasingly important as sources of economic growth, relatively high-paying jobs, and exports. Since the expansion of digital technology in the mid-1990s, they have undergone a technological revolution that has disrupted long-established modes of creating, distributing, and using works ranging from literature and news to film and music to scientific publications and computer software. In the United States and internationally, these disruptive changes have given rise to a strident debate over copyright's proper scope and terms and means of its enforcement-a debate between those who believe the digital revolution is progressively undermining the copyright protection essential to encourage the funding, creation, and distribution of new works and those who believe that enhancements to copyright are inhibiting technological innovation and free expression. Copyright in the Digital Era: Building Evidence for Policy examines a range of questions regarding copyright policy by using a variety of methods, such as case studies, international and sectoral comparisons, and experiments and surveys. This report is especially critical in light of digital age developments that may, for example, change the incentive calculus for various actors in the copyright system, impact the costs of voluntary copyright transactions, pose new enforcement challenges, and change the optimal balance between copyright protection and exceptions.

The music industry is going through a period of immense change brought about in part by the digital revolution. What is the role of music in the age of computers and the internet? How has the music industry been transformed by the economic and technological upheavals of recent years, and how is it likely to change in the future? This is the first major study of the music industry in the new millennium. Wikström provides an international overview of the music industry and its future prospects in the world of global entertainment. They illuminate the workings of the music industry, and capture the dynamics at work in the production of musical culture between the transnational media conglomerates, the independent music companies and the public. The Music Industry will become a standard work on the music industry at the beginning of the 21st century. It will be of great interest to students and scholars of media and communication studies, cultural studies, popular music, sociology and economics. It will also be of great value to professionals in the music industry, policy makers, and to anyone interested in the future of music.