Abstract
This section will cover the supply and demand model and basic consumer theory, including budget constraints, indifference curves, utility maximization, and constrained optimization. It will be useful to apply economic theory to the changes in the music industry as they relate to goods that are perfect substitutes and perfect complements. Technology has eroded copyright protections and enforcement, and pirated music became a substitute for legal (purchased) music. Now streaming services are the predominant way to consume music.
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Notes
- 1.
- 2.
Of course, open air amphitheater concerts could be considered a public good, since music lovers can still (mostly) hear the music without paying for a ticket.
- 3.
Tschmuck (2021).
- 4.
Orpheus (2017).
- 5.
In standard microeconomic theory, we assume that consumer preferences are complete, reflexive, transitive, continuous, and strongly monotonic, and strictly convex. These are technical details not particularly relevant to the main point of this discussion, but interested readers can see Varian (1992) for more details.
- 6.
Liebowitz (2007).
- 7.
- 8.
Krueger (2019).
- 9.
IFPI Digital Music Report 2014.
- 10.
Ibid.
- 11.
Ibid.
- 12.
Recording Industry Association of America Annual Survey.
- 13.
Forde (2022).
- 14.
Cohen (2009).
- 15.
- 16.
- 17.
See the Youtube video “Napster Bad”, https://www.youtube.com/watch?v=VIuR5TNyL8Y.
- 18.
“Music Streaming Revenues Worldwide from 2005 to 2021”, https://www.statista.com/statistics/587216/music-streaming-revenue/.
- 19.
“Streaming Drives Global Music Industry Resurgence”, https://www.statista.com/chart/4713/global-recorded-music-industry-revenues/.
- 20.
Year-End 2020 RIAA Revenue Statistics.
- 21.
“IFPI Digital Music Report 2014: Lighting Up New Markets”.
- 22.
Laricchia (2023).
- 23.
Boyd (2015).
- 24.
IFPI (2015).
- 25.
“Music Streaming—Europe”, April 2023 (most recent update). Statista, https://www.statista.com/outlook/dmo/digital-media/digital-music/music-streaming/europe#revenue.
- 26.
“Music Downloads—Europe”, May 2023 (most recent update). Statista, https://www.statista.com/outlook/dmo/digital-media/digital-music/music-downloads/europe.
- 27.
“About the Music Genome Project”, https://www.pandora.com.
- 28.
- 29.
Langer (2003).
- 30.
IFPI Digital Music Report 2023.
- 31.
Stern (2012).
- 32.
“Music Streaming Tackles Internet Piracy”, https://www.statista.com/chart/13652/music-streaming-vs-peer-to-peer-sharing/.
- 33.
Ingham (2015a).
- 34.
Ingham (2015b).
- 35.
“The NPD Group: Music File Sharing Declined Significantly in 2012”, The NPD Group’s Annual Music Study 2012, https://www.npd.com/wps/portal/npd/us/news/press-releases/the-npd-group-music-file-sharing-declined-significantly-in-2012/. Accessed August 17, 2015.
- 36.
Van der Sar (2011).
- 37.
Page (2013).
- 38.
Harrison and Kjellberg (2012).
- 39.
Ahrens and Kreidenweiss (2012).
- 40.
Ibid.
- 41.
Chatterley (2021).
- 42.
“Stream-Ripping: Its Role in the UK Music Piracy Landscape Three Years On”, September 2020, PRS for Music.
- 43.
“Stream-Ripping”, PRS for Music, https://www.prsformusic.com/what-we-do/influencing-policy/stream-ripping.
- 44.
- 45.
Peitz and Waelbroeck (2004).
- 46.
Madden (2009).
- 47.
Peitz and Waelbroeck (2004).
- 48.
Stassen (2022b).
- 49.
Moss (2020).
- 50.
GitHub DMCA Takedown Notice, Oct. 23, 2020, https://github.com/github/dmca/blob/master/2020/10/2020-10-23-RIAA.md.
- 51.
“For Radiohead Fans, Does ‘Free’ + ‘Download’ = ‘Freeload’?”, Comscore Press Release, November 5, 2007.
- 52.
Forde (2017).
- 53.
Krueger (2019).
- 54.
Krueger (2019).
- 55.
Sisario and Bowley (2018).
- 56.
See reporting on the Fyre Festival scam of 2017 in Baggs (2019).
- 57.
Krueger (2019).
- 58.
Ibid.
- 59.
Sisario and Bowley (2018).
- 60.
Ibid.
- 61.
Kreps (2018).
- 62.
Ganz (2011).
- 63.
Ibid.
- 64.
Connolly and Kruger (2006).
- 65.
Ibid.
- 66.
Scott Welch, manager of Alanis Morrisette and LeAnn Rimes, quoted in Kafka and Powers (2003).
- 67.
Nielsen Music 360: 2014.
- 68.
Wolfe (2023).
- 69.
Steele (2022).
- 70.
Arbitrage is the purchase of an asset in one market and resale in another, to take advantage of price differences in each market. See “Arbitrage: How Arbitraging Works in Investing, With Examples”, https://www.investopedia.com/terms/a/arbitrage.asp#toc-what-is-arbitrage.
- 71.
For more information on rent seeking, see “Rent Seeking” by David R. Henderson, Econlib, https://www.econlib.org/library/Enc/RentSeeking.html.
- 72.
These sites are technically clearinghouses for ticket sales, where sellers and buyers can conduct transactions for ticket sales. They take a commission for each transaction, charging a fee to both the buyer and seller. While clearinghouses like these technically don’t make use of computer bots or other such practices to buy up large quantities of tickets, they have an indirect influence on sellers who have an incentive to scoop up as many quality tickets as quickly as possible and resell them on these sites.
- 73.
Beitsch (2018).
- 74.
Swofford (1999).
- 75.
Krugman (1999).
- 76.
Swofford (1999).
- 77.
Kenney (2013).
- 78.
Ibid.
- 79.
“Kid Rock vs. the Scalpers”, Planet Money Episode 468, National Public Radio.
- 80.
Kenney (2013).
- 81.
For example, Tom Petty, Bruce Springsteen, Adele, Metallica, AC/DC, Radiohead, the Foo Fighters, Pearl Jam, Rage Against the Machine, and many others. See Roth (2007) for a discussion on “repugnant transactions”, which include payment for organ donations, eating horse meat, and reselling concert tickets.
- 82.
Kenney (2013).
- 83.
“Everything You Need to Know about Ticketmaster Verified Fan”, May 10, 2020, Ticketmaster.com.
- 84.
Juwiak (2017).
- 85.
Farley (2017).
- 86.
Hann (2017).
- 87.
“Taylor Swift Leads New Push Toward ‘Slow Ticketing’ Model”, December 15, 2017, theticketingbusiness.com.
- 88.
Kaplan (2015).
- 89.
“Ticket Challenge: Getting the Price Right” by Bill King, Sports Business Journal, March 19, 2012.
- 90.
Garman (2000).
- 91.
Greene (2022).
- 92.
Irwin (2017).
- 93.
Kenney (2013).
- 94.
Kahneman et al. (1986).
- 95.
Ibid.
- 96.
- 97.
The Beige Book, Federal Reserve of Philadelphia, June 2023.
- 98.
Pisani (2023).
- 99.
Rolli (2020).
- 100.
Steele (2019).
- 101.
Eggertsen (2020).
- 102.
Ibid.
- 103.
Knopper (2022).
- 104.
Ibid.
- 105.
Caulfield (2014). Note: this is starting from 1991, the year when SoundScan began collecting data on vinyl sales.
- 106.
About Us: Record Store Day, http://www.recordstoreday.com.
- 107.
“Manufacturers Struggle to Keep Pace with Vinyl Record Demand”, The Associated Press, June 24, 2022.
- 108.
Ibid.
- 109.
“Sony Music Goes Back to Vinyl”, BBC News, June 29, 2017.
- 110.
“MRC Data’s US 2021 Year End Music Report”.
- 111.
Radde (2023).
- 112.
Sisario (2021).
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Byun, C. (2024). Consuming Music. In: The Economics of the Popular Music Industry. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-49899-2_2
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