My new book “The Economics of Music” is now avaiable in the bookstores. “The Economics of the Music” is a concise, scientifically grounded textbook on the economic fundamentals of the music industry in particular and the music economy in general. It aims to highlight the economic principles that govern the music business by analysing music as an economic good that is protected by copyright law. The book therefore includes a chapter on the microeconomics of music as well as a chapter on the economics of music copyright that is mainly based on findings of institutional economics. The main parts of the book focus on the different sectors of the music industry – music publishing, sound recording, the live music market, and secondary markets such as media and advertising – in order to explain the network of actors in those sectors and how these markets are organised and linked. The music labour markets are treated in a separate chapter. It highlights different income streams for musicians, occupational careers in the music business, and music-related occupations in the wider music economy (education, advocacy, lobbying, etc.). Since digitization has a tremendous impact on the music business, a final chapter on the “Digital Music Business” highlights the new rules, structures, and processes that were established by the digital revolution in order to foreground the structural break the music economy underwent. The last chapter, therefore, refers back to the opening chapter on “A Short Economic History of the Music Business,” which provides an overview from music patronage to the current digital music economy.
Peter Tschmuck, 2017, The Economics of Music. Newcastle-upon-Tyne: Agenda Publishing.
Book review: The Economics of Music by Peter Tschmuck
Introduction: music industry – music economy
The introduction clarifies terms usually used to describe the music business as an economic sector by highlighting different concepts of the music industry (recording, publishing, collecting societies, and live music entertainment). It also offers a broader perspective of the music economy, which also includes music instrument manufacturing and trade, music education, music advocacy and lobbying groups, music export services, and the music media sector.
Chapter 1: A Short Economic History of Music
This chapter provides an historical overview of the music business starting with the beginnings of music printing in the 16th century. This survey includes a description of the opera and concert business as well as the flourishing music publishing business of the 18th and 19th century. It highlights the development of music copyright, starting with the Statute of Anne in 1709/1710, which led to a modern copyright system with elaborate Copyright Acts and collecting societies around 1900. The history of sound recording since Thomas A. Edison, who invented the phonograph in 1877, is also told (Tschmuck 2012), as is the development of live music entertainment from music halls and Broadway shows until the current international touring business controlled by large corporations such as LiveNation and AEG.
Chapter 2: Microeconomics of music: music as an economic good
This chapter lays the foundations for understanding music as an economic good. Based on microeconomic findings, it highlights music as a public good (Samuelson 1954) that can be partly privatized as a club good (Buchanan 1965) in the concert business and that is fully privatized by technological means, especially by sound recording. However, music unveils its fundamental characteristics as a public good in the course of digitization, which resulted in freeriding and online “piracy”.
Another approach to understand music as an economic good is Musgrave’s concept of meritorious goods (Musgrave 1957). This helps to understand music in the context of public broadcasting and as a form of expression of “high” art, especially in the classical music business.
Music can also be seen as an information and experience good (Shapiro and Varian 1999) that provides network externalities. The economics of the digital commons can be explained on these grounds. This leads to a treatment of music as a digital good that is different from music as physical product in form of vinyl discs and CDs.
Chapter 3: The economics of music copyright
The first part of this chapter explains the fundamentals of music copyright. It emphasizes that different concepts of copyright exist, especially in the US and continental Europe.
Copyright is the basis for contract law and contractual relations. Therefore, the second part of this chapter discusses the property rights approach (Coase 1937; Williamson 1975) as well as contractual economics (see e.g. Caves 2002) in relation to the music business. The findings on the economics of copyright and contracts are then linked to market forms, since music copyrights provide monopolistic competition resulting in oligopolies in the different sectors of the music industry (Tschmuck 2009).
Chapter 4: The markets for music: music publishing
This chapter discusses both the market volume of the international music publishing market as well as of some relevant national (US, UK, Germany) and different business models such as sheet music sales and music licensing. It also analyses the economic relevance of industry publishers such as Universal Music Publishing, Sony/ATV, and Warner/Chappell Music and highlights the role of indie publishers.
Chapter 5: The markets for music: sound recording
In a similar way, this chapter analyses the volume and organisation of the sound recording market. It delineates the change from a physical product market (vinyl record, MC, CD, DVD) to a digital market that is driven by music downloads and streaming portals, and it presents statistics on the recorded music sales for the global as well as for relevant national markets (US, UK, Japan and Germany). Next, it discusses the impact of “piracy” on the sales and explains the change from an album driven business to a single market. Empirical data highlight new consumption patterns and changing music consumer behaviour. Overall, this section analyses the broader shifts impacting the value network of the production, distribution, and consumption of music in the digital age.
Chapter 6: The markets for music: live music
While the recorded music market dramatically decreased in the past 15 years, the live music market boomed at the same time. This can be evidenced by statistics on selected national live music markets (US and Germany). In addition to changes in music consumption behaviour, the live music market also benefited from a structural reorganisation of the market by large and influential players. This chapter therefore tells the story of LiveNation’s rise to its current status as the world’s most influential music promoter and ticketing company in order to exemplify the shift the live music industry has undergone from being a highly decentralised business to becoming a global billion dollars business that is controlled by a tight oligopoly.
Chapter 7: Secondary music markets
Music does play an important role not only in primary music markets but also in secondary markets. Music is highly relevant for radio and music television, but it is also used in TV films and documentaries as well as motion pictures. Music plays an integral role in video games and is used in commercials as a means to appeal to audiences emotionally. Music licensing serves as the link to the primary music markets, and collecting societies play an important part in this respect. This section therefore explains all relevant secondary music markets as well as highly relevant income sources such as branding, sponsoring, and merchandising. Throughout this chapter, recourse to several case studies of branding and sponsoring co-operations between artists and large corporations will illuminate the overall analysis.
Chapter 8: Music labour markets
The music industry is not just a revenue source for artists and music firms; it is also a labour market. This chapter therefore takes a look at different occupations and careers in the sectors of the music industry. It presents statistical material on the music industry’s labour markets and describes the different revenue streams for musicians. Since artist revenues from music publishing and recorded music sales are modest, musicians also rely on labour markets in the wider music economy: music education, music advocacy/export, music lobbying, etc.
Chapter 9: Economics of the digital music business
The book closes with a chapter on the evolving digital music business. In-depth statistics on the international and several national digital music markets are provided to highlight the economic relevance of different digital formats (download, mobile music, streaming).
The chapter explains new business models such as music download services, music streaming platforms, mobile music providers, cloud music services, as well as music recognition and recommendation systems. It also assesses the economic relevance of some of the new players (Apple, Google, Amazon etc.) and discusses the driving forces behind the digitization of the music economy – media convergence, prosumption, disintermediation, etc.
Each chapter provides a list of recommended readings, and an index for persons, companies, institutions, technical terms, etc. concludes the book.
Peter Tschmuck, 2017, The Economics of Music. Newcastle-upon-Tyne: Agenda Publishing.
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