The Music Industry in the Digital Era: Toward New Contracts

Abstract

Digital piracy, although negatively altering the recorded music market, has a positive impact on other segments of the music market, such as live music or ancillary goods, because it generates a positive externality benefiting those activities. Through a 2-player strategic game between a record company and an artist, this study shows that a renegotiation of music contracts could allow the internalizing of this positive externality, while being welfare-improving for both record companies and artists. This study also shows, however, that pervasive piracy is not desirable for an artist.

"Selling Out" and the Impact of Music Piracy on Artist Entry

“…Publisher contracts generally consist of three elements (a) an upfront payment to artists; (b) a share of revenues (royalty) to the artist, α; and (c) decision rights as to who gets to set price, p (see Caves, 2000 and also Curien and Moreau, 2009). There may also be other conditions related to the promotion of artist's work but, in what follows, I will assume this is contractible and hence, optimised to whatever other decisions are taken and so set it aside as a background issue.…”

Is the music industry stuck between rock and a hard place? The role of the Internet and three possible scenarios

“…There is of course considerable revenue to be gained from all such forms of advertising. Similarly, Curien and Moreau (2009) stated that record companies should look to re-negotiate contracts with artists in order to increase the welfare of both parties in all areas; not just in merchandising and live show tickets, but music sales as well.…”

Artist autonomy in a digital era: The case of Nine Inch Nails

“…While appearing disheartened, Reznor comments positively on the fact that over five times as many people sought out Williams' album than the previous one and that there was no money whatsoever spent on marketing (Idolator, 2008). Here, Reznor is effectively adhering to Curien and Moreau's (2009) recommendation that record companies could accommodate piracy by making the most of its main positive feature -mass access to music at a very low cost. In discussing the increased number of people now familiar with Williams' music, Reznor also appears to be addressing the previously defined relationship between recorded music and live music, where recorded music essentially sells live music.…”

“…In practice however, an existing audience must be in place for such a strategy to work for new and emerging bands where relentless touring is no suitable alternative to profits made from recorded music. It is possible, to address Reznor's use of Creative Commons licensing to distribute GHOSTS I-IV and The SLIP, that by sidestepping traditional routes of distribution by ignoring intermediaries, that a greater profit can be generated where as Curien et al (2009) outline, utilising the Internet provides the ability to ensure extensive access to music at very minimal expense. Once more however, the importance of an already existing audience emerges as crucial where bands such as Nine Inch Nails or Radiohead are able to adopt risky distribution methods as they are still riding the wave of commercial success throughout the 1990's; before the onset of piracy.…”