Rockonomics

by Alan B Krueger

  31. “Singer Shakira Under Investigation in Spain for Possible Tax Evasion,” USA Today, Jan. 24, 2018.

  32. Emily Farache, “Elton Loses Mega-Lawsuit,” E! News, Apr. 11, 2001.

  33. Jon Blistein, “50 Cent to End Bankruptcy Case with $23 Million Payout,” Rolling Stone, Jul. 7, 2016.

  34. Carlson Kyle, Joshua Kim, Annamaria Lusardi, and Colin F. Camerer, “Bankruptcy Rates Among NFL Players with Short-Lived Income Spikes,” American Economic Review: Papers and Proceedings 105, no. 5 (2015): 381–84.

  35. Astrid Baumgardner, “How to Take Charge of Your Finances as a Musician,” I Care If You Listen (blog), Nov. 11, 2014.

  Chapter 8: STREAMING IS CHANGING EVERYTHING

  1. Source: RIAA, U.S. Sales Database, https://www.riaa.com/​u-s-sales-database. Note that these are retail figures. See Michael D. Smith and Rahul Telang, Streaming, Sharing, Stealing (Cambridge, MA: MIT Press, 2016), ch. 6, for a comprehensive summary of the literature on the effects of piracy on music sales.

  2. Source: Josh Friedlander of RIAA, presentation at MIRA, Jun. 26, 2018, Los Angeles, CA. According to Friedlander, subscription-supported audio streaming accounted for 31 percent of all music streams in 2017, Internet radio accounted for 35 percent, ad-supported video accounted for 26 percent, and ad-supported audio accounted for 8 percent.

  3. Tim Arango, “Digital Sales Surpass CDs at Atlantic,” New York Times, Nov. 25, 2008.

  4. “Vinyl Still Rocks m/,” RIAA Music Note Blog, Mar. 23, 2016; Elizabeth King, “Why Are CDs Still a Thing?,” Motherboard, Apr. 8, 2016.

  5. Steve Knoppwer, “The End of Owning Music: How CDs and Downloads Died,” Rolling Stone, Jun. 14, 2018.

  6. Friedlander, presentation at MIRA, Jun. 26, 2018.

  7. Figures in this paragraph come from Ben Sisario, “After Driving Streaming Music’s Rise, Spotify Aims to Cash In,” New York Times, Mar. 13, 2018; Paul Resnikoff, “Apple Music Just Surpassed Spotify’s U.S. Subscriber Count,” Digital Music News, Jul. 5, 2018; “2017 Letter to Shareholders,” Amazon, Apr. 18, 2018; Erin Griffith, “Pandora Learns the Cost of Ads, and of Subscriptions,” Wired, Apr. 30, 2018; “Tencent Platforms Overview in Q1 2018; WeChat MAU Exceeded 1bn,” China Internet Watch, May 17, 2018.

  8. From Marc Geiger’s presentation at MIRA in Los Angeles, CA, 2017.

  9. Jem Aswad and Janko Roettgers, “With 70 Million Subscribers and a Risky IPO Strategy, Is Spotify Too Big to Fail?,” Variety, Jan. 24, 2018.

  10. Some further complications are that the mechanical rate component of royalties for interactive streaming services is set by the Copyright Board, and labels could negotiate for minimum payments. Also, as explained later in this chapter, the labels and streaming services can negotiate for promotion and other benefits in addition to streaming royalties. Some contracts also base royalties on a complicated formula involving the greater of a share of revenue, a per stream basis, and a per customer basis.

  11. Amy X. Wang, “Tidal Hits Back Against Rumors of Wrongdoing with Its Own Investigation,” Rolling Stone, May 18, 2018.

  12. See Colin Stutz, “Spotify Subscribers Demand Refunds over Too Much Drake Promotion,” Billboard, Jul. 2, 2018; Micah Singleton, “Drake’s Scorpion Pulls In over 1 Billion Streams in Its First Week,” The Verge, Jul. 8, 2018.

  13. Josh Constine, “Spotify ‘Sponsored Songs’ Lets Labels Pay for Plays,” TechCrunch, Jun. 19, 2017.

  14. See Nicholas Deleon, “Best Music Streaming Services,” Consumer Reports, May 18, 2018; “Amazon Music,” Amazon, https://www.amazon.com/​gp/​dmusic/​promotions/​AmazonMusicUnlimitedFamily. Accessed Oct. 16, 2018.

  15. “U.S. Music Mid-Year Report 2018,” Nielsen, Jul. 6, 2018.

  16. This is based on author’s calculations using BuzzAngle Music data for Jan. 5, 2018, through Jun. 28, 2018. This calculation understates the effect on other artists of removing Drake because the total number of streams was calculated just for the top four thousand artists.

  17. See, for example, Ben Sisario, “As Music Streaming Grows, Royalties Slow to a Trickle,” New York Times, Jan. 28, 2013.

  18. “Billboard Finalizes Changes to How Streams Are Weighted for Billboard Hot 100 & 200,” Billboard, May 1, 2018.

  19. These and other figures about Spotify come from Spotify Technology, “Spotify Technology S.A. Releases Financial Outlook for First Quarter and Fiscal Year 2018,” Mar. 26, 2018, https://www.sec.gov/​Archives/​edgar/​data/​1639920/​000119312518095067/​d560151dex991.htm; and Spotify Technology S.A., “Form F-1 Registration Statement Under the Securities Act of 1933,” Feb. 28, 2018.

  20. Brian Braiker, “Pandora Wants to ‘Evolve out of’ Autoplay Video Ads,” Digiday, Mar. 15, 2016.

  21. See Jason Huang, David H. Reiley, and Nickolai M. Riabov, “Measuring Consumer Sensitivity to Audio Advertising: A Field Experiment on Pandora Internet Radio,” working paper, 2018, https://davidreiley.com/​papers/​PandoraListenerDemandCurve.pdf.

  22. Shelly Banjo, “Yes, You’re Hearing More Ads on Pandora These Days,” Quartz, Jul. 24, 2015.

  23. Luis Aguiar and Joel Waldfogel, “Platforms, Promotion, and Product Discovery: Evidence from Spotify Playlists,” NBER Working Paper No. 24713, 2018.

  24. See Joel Waldfogel, “How Digitization Has Created a Golden Age of Music, Movies, Books, and Television,” Journal of Economic Perspectives 31, no. 3 (2017): 195–214, for an analysis of the growth in music production in response to technological change.

  25. “Database Statistics,” MusicBrainz, 2018.

  26. “Music Production,” Rehegoo Music, 2018, https://rehegoo.com/​music-production.html.

  27. Marc Hogan, “Uncovering How Streaming Is Changing the Sound of Pop,” Pitchfork, Sep. 25, 2017.

  28. My research assistant Amy Wickett listened to all of the songs that involved collaborations to determine the singers that appeared in the first thirty seconds or later in the song. This paragraph reports on her findings.

  29. For an early analysis of how digital downloading unbundled albums and reduced sales, see Anita Elberse, “Bye-Bye Bundles: The Unbundling of Music in Digital Channels,” Journal of Marketing 74, no. 3 (2010): 107–23.

  30. George Garner, “ ‘You Can’t Capture Lightning in the Bottle Again’: Rihanna Producer JR Rotem on the Key to Writing Hit Songs,” MusicWeek, Feb. 28, 2018.

  31. Abigail Tracy, “Jay-Z’s Tidal Music Streaming Service Says Goodbye to Another CEO,” Forbes, Jun. 23, 2015.

  32. Keith Caulfield, “Taylor Swift’s ‘Reputation’ Becomes Only Album Released in Last Two Years to Sell 2 Million Copies in U.S.,” Billboard, Mar. 21, 2018.

  33. Taylor Swift, “For Taylor Swift, the Future of Music Is a Love Story,” Wall Street Journal, Jul. 7, 2014.

  34. This paragraph is based on “Apple Music Changes Policy After Taylor Swift Stand,” BBC News, Jun. 22, 2015.

  35. Ian Courtney, “The Bob Lefsetz Podcast: Steve Boom,” Celebrity Access Encore, Jun. 27, 2018.

  36. Stephen Witt, “Billboard Power 100 Cover: Amazon’s Jeff Bezos & Steve Boom on Starting a New ‘Golden Age’ for Music,” Billboard, Feb. 9, 2017.

  37. This is based on Marc Geiger’s interview with Hannah Karp at the 2017 MIRA Conference.

  38. Quoted from Alan B. Krueger and David A. Anderson, Explorations in Economics (New York: Worth, 2013).

  Chapter 9: BLURRED LINES

  1. Williams v. Gaye, 885 F.3d 1150 (2018).

  2. Philip Caulfield, “Sam Smith Gives Tom Petty Songwriting Credit on ‘Stay with Me,’ ” New York Daily News, Jan. 26, 2015.

  3. Michelle Fabio, “Bruno Mars and Mark Ronson’s ‘Uptown Funk’ Faces (Yet Another) Copyright Infringement Suit,” Forbes, Dec. 30, 2017.

  4. Kory Grow, “Led Zeppelin Face Retrial in ‘Stairway to Heaven’ Suit,” Rolling Ston
e, Sep. 28, 2018.

  5. From an interview with Quincy Jones on Jan. 22, 2018, in Hollywood, FL.

  6. Kurt Dahl, “The 2 Copyrights in a Song (or the Most Important Concept in the Music Business),” Lawyer Drummer, Oct. 2, 2013.

  7. Paul Goldstein, Copyright’s Highway: The Law and Lore of Copyright from Gutenberg to the Celestial Jukebox (New York: Hill and Wang, 1995), 4.

  8. For an excellent overview of the economics of copyright, see Stan Liebowitz and Richard Watt, “How to Best Ensure Remuneration for Creators in the Market for Music? Copyright and Its Alternatives,” Journal of Economic Surveys 20, no. 4 (2006): 513–45.

  9. Alan Greenspan, “Statement re S. 31 Before the Subcommittee on Patents, Copyrights and Trademarks, Senate Committee on the Judiciary,” Oct. 25, 1983.

  10. Nilay Patel, “Metallica Sued Napster 15 Years Ago Today,” The Verge, Apr. 13, 2015.

  11. Todd Bishop, “Rhapsody Will Rebrand as Napster, Creating ‘One Global Brand’ for Longtime Music Service,” GeekWire, Jun. 14, 2016.

  12. See, for example, Joseph Plambeck, “Court Rules That File-Sharing Service Infringed Copyrights,” New York Times, May 12, 2010.

  13. Joel Waldfogel, “Copyright Protection, Technological Change, and the Quality of New Products: Evidence from Recorded Music Since Napster,” Journal of Law and Economics 55, no. 4 (2012): 715–40.

  14. Michela Giorcelli and Petra Moser, “Copyrights and Creativity: Evidence from Italian Operas,” SSRN Working Paper No. 2505776, 2016.

  15. Frederic M. Scherer, Quarter Notes and Bank Notes: The Economics of Music Composition in the Eighteenth and Nineteenth Centuries (Princeton, NJ: Princeton University Press, 2012).

  16. Questlove, Creative Quest (New York: Ecco, 2018).

  17. Quoted from email correspondence with John Eastman on May 30, 2018.

  18. Petra Moser, “Patents and Innovation in Economic History,” NBER Working Paper No. 21964, 2016.

  19. This point has been emphasized by the Nobel Prize–winning economist Paul Romer, who wrote, “When more people start prospecting for gold or experimenting with bacteria, more valuable discoveries will be made.” See Paul M. Romer, “The Origins of Endogenous Growth,” Journal of Economic Perspectives 8, no. 1 (1994): 3–22.

  20. See Lorie Hollabaugh, “Florida Georgia Line, Bebe Rexha Hit One Billion Streaming Mark,” MusicRow, May 30, 2018; Jim Asker, “Bebe Rexha & Florida Georgia Line’s ‘Meant to Be’ Breaks Record for Longest Rule in Hot Country Songs Chart’s History,” Billboard, Jul. 30, 2018.

  21. Quoted from Raney Schockne’s discussion at 2018 MIRA meeting in the Village Studio in Los Angeles, CA.

  22. Ben Kaye, “David Bowie, King of Turning People Down, Turned Down the Trainspotting Soundtrack,” Consequence of Sound, Feb. 26, 2016.

  23. Kelsey McKinney, “Songwriter Aloe Blacc Has a Plan to Save the Music Industry,” Vox, Jan. 22, 2015.

  24. Avery Avapol, “Steven Tyler Demands Trump Stop Playing Aerosmith at Rallies,” The Hill, Aug. 22, 2018.

  25. Steven Tyler (@IamStevenT), “This is not about Dems vs. Repub,” Twitter, Aug. 22, 2018, 2:20 p.m., https://twitter.com/​iamstevent/​status/​1032376949358788608?lang=en.

  26. Kory Grow, “The Last Word: Lars Ulrich on Metallica’s Darkest Times, Making His Own Rules,” Rolling Stone, Nov. 7, 2016.

  27. George A. Akerlof et al., “The Copyright Term Extension Act of 1998: An Economic Analysis,” AEI-Brookings Joint Center for Regulatory Studies, Brief 02-1, 2002.

  28. Megan MacGarvie, John McKeon, and Jeremy Watson, “It Was Fifty Years Ago Today: Recording Copyright Term and the Supply of Music,” working paper, 2017.

  29. International Federation of the Phonographic Industry, “Fixing the Value Gap,” IFPI Global Music Report 2018.

  30. These figures were generously provided by Barry Massarsky. The percentages of revenue reported in the charts differ from other estimates that are commonly reported because the revenue base is broadly defined for satellite music stations.

  31. AudienceNet, “2017 Music Consumption: The Overall Landscape.”

  32. Quoted from an interview with Marty Gottesman on Jul. 24, 2018.

  33. For more details, see “The Music Modernization Act,” SoundExchange, https://www.soundexchange.com/​advocacy/​music-modernization-act. Accessed Oct. 16, 2018.

  34. Ed Christman, “Music Modernization Act Passes Senate: Should End Confusion on Sirius XM Pre-1972 Settlement,” Billboard, Sep. 19, 2018.

  35. Peter DiCola and David Touve, “Licensing in the Shadow of Copyright,” Stanford Technology Law Review 17 (2014): 397.

  Chapter 10: THE GLOBAL MARKET FOR MUSIC

  1. Statistics in this section are based on author’s calculations using 2018 IFPI Global Music Market Data.

  2. Cherie Hu, “How India, the Global Music Industry’s Sleeping Giant, Is Finally Waking Up,” Forbes, Sep. 23, 2017.

  3. Mun Keat Looi, “Why Japan Has More Old-Fashioned Music Stores Than Anywhere Else in the World,” Quartz, Aug. 19, 2016.

  4. Helliwell, for example, finds that trade of goods between Canadian provinces was about twelve times greater than goods trade between Canadian provinces and American states of comparable size and distance apart. Interprovincial trade in services was twenty-five to thirty times as dense as Canada-U.S. trade in services. He also finds that national borders have a substantial, though smaller, effect on trade between EU countries: internal trade densities are about six times greater than international trade densities, and lower for countries that share a common language. See John Helliwel, How Much Do National Borders Matter? (Washington, DC: Brookings Institution Press, 1998).

  5. See Fernando Ferreira and Joel Waldfogel, “Pop Internationalism: Has Half a Century of World Music Trade Displaced Local Culture?,” Economic Journal 123, no. 569 (2013): 634–64; Luis Aguiar, Joel Waldfogel, and Estrella Gomez-Herrera, “Does Digitization Threaten Local Culture? Music in the Transition from iTunes to Spotify,” mimeo, 2018.

  6. Josh O’Kane, “The Other Stockholm Syndrome,” Globe and Mail, Jan. 12, 2018.

  7. From an interview with Quincy Jones on Aug. 11, 2017.

  8. John Seabrook, “Blank Space: What Kind of Genius Is Max Martin?,” New Yorker, Sep. 30, 2015.

  9. This draws from an interview with John Cappo on Mar. 19 and 20, 2018.

  10. This pieces together reporting from Wang Han, “Faye Wong’s Shanghai Concert: The Return, or Fall, of a Legend?,” Global Times, Jan. 4, 2017; Viola Zhou, “The Rise and Fall of Scalped Faye Wong Concert Tickets,” South China Morning Post, Dec. 26, 2016; and “Jack Ma Pays $32.5 Million for Faye Wong Concert in Shanghai: Report,” Asia One, Jun. 23, 2016. I assume a 6.9 yuan per dollar exchange rate, which was the rate at the time.

  11. This is based on Nielsen’s “Asia-Pacific Dance Music Study,” commissioned by A2LiVE, Oct. 2017.

  12. This paragraph is based on Fred Hwang, “Touring in China Remains Unpredictable as Gov’t Keeps a Watchful Eye on Music Industry,” Billboard, Sep. 18, 2018, and Jiayang Fan, “Why Justin Bieber Got Banned from Performing in China,” New Yorker, Jul. 26, 2017.

  13. See Hwang, “Touring in China Remains Unpredictable”; Laura Snapes, “Dua Lipa ‘Proud’ of Fans Ejected from Concert for Waving LGBT Flags,” Guardian, Sep. 13, 2018.

  14. Doug Strub, “John Cappo: Bringing Music to the Mainland,” Amcham Shanghai, Jul. 20, 2017.

  15. This and other quotes are from an interview with Eric de Fontenay on Mar. 18, 2018, in Beijing and email correspondence.

  16. “Headlines from China: China Media Capital Launches CMC Live,” China Film Insider, Jan. 10, 2018.

  17. “Midi Modern Music Festival to Leave Beijing,” China.org, Mar. 18, 2009.

  18. “Ultra Shanghai Forced to Cancel Only a Week Before Taking Place, Ultra
Beijing Dates Reconfirmed,” EDM Sauce, Sep. 3, 2017.

  19. This and other quotes are from an interview with Archie Hamilton on Mar. 20, 2018, in Shanghai.

  20. David Herlihy and Yu Zhang, “Music Industry and Copyright Protection in the United States and China,” Global Media and China 1, no. 4 (2016): 394. Other details in the next two paragraphs also draw on their article.

  21. From an interview with Sam Jiang in Beijing, Mar. 18, 2018.

  22. This draws on an interview I conducted with Tinko Georgiev, global business director at Kanjian Music in Shanghai, on Mar. 20, 2018.

  23. Lorraine Schmucker, “China’s Ban on Hip-Hop from Television Causes Many to Speak Their Minds,” IR Insider, Feb. 9, 2018.

  24. Mark Savage, “China’s Music Listening Habits Revealed,” BBC News, Feb. 2, 2016.

  25. This is based on data presented by Andy Ng, group vice president of TME, at the 2017 Midem Conference in Cannes, France. Source: “Keynote: Andy Ng, Tencent—Midem 2017,” YouTube, posted by Midem, Jun. 6, 2017, https://www.youtube.com/​watch?v=eCDPOkfpIYw.

  26. NetEase Cloud Music, “NetEase Cloud Music Hits 400 Million User Mark,” PR Newswire, Nov. 21, 2017.

  27. Marsha Silva, “Spotify Is Poised to Make Another $3 Billion—Thanks to Tencent Music’s Upcoming IPO,” Digital Music News, Jul. 8, 2018.

  28. Unless otherwise noted, information on TME in the rest of this section is based on my interview with Sam Jiang in Beijing, Mar. 18, 2018, and a subsequent email correspondence, or on TME’s prospectus filed with the Securities and Exchange Commission in October 2018.

  29. “Universal Music Group and Tencent Music Entertainment Group Enter into Strategic Agreement Significantly Expanding Chinese Music Market,” Universal Music Group, May 16, 2017.

  30. For an elaboration of Hamilton’s paradoxes, see Archie Hamilton, “Weathering Storms: The Paradox of China’s Music Industry in 2018,” LinkedIn, Feb. 26, 2018.