Are you interested in ideas to liberalize the music industry? Do you ever wonder why it is so difficult to get airplay or make a meager living as a musician? Do you shake your fist and curse at the skies because it seems like the only artists signed to the largest music labels have sub-par talent that is appealing mostly to tweens worldwide? Do you believe, as Mick Jagger does, that making money in music was just a passing fancy for about 40 years and that the Internet, piracy, cheap recording and publishing technology, and the difficulties of being a touring musician means you are doomed to never be recognized financially for your talents, and your ego will just have to survive on accolades from your mom and best friends forever?

If you answered “Yes” to any of these questions, I highly suggest you read this July 2010 discussion paper written by Ivan Reidel of Harvard Law School, “The Price of Fame: The Antitrust Law and Economics of Broadcasting, Music, and Advertising.” He makes this complex topic accessible (seriously, just skim the jargon-y parts if you feel lost), his arguments are well thought out, and he provides concrete solutions. For example, he suggests that radio advertising takes valuable airtime away (and therefore earning potential) from hopeful musicians,

Indeed, that global leisure time [spent listening to the radio] is impoverished by ads also means that valuable talent that would have otherwise replaced those annoying commercials is instead squandered by societies’ inability to reward it. If ads could be replaced by the content audiences enjoy the most—songs for instance—the incomes lost and impoverished livelihoods of countless songwriters—the vast majority of which currently can’t make a living out of the public performance of their songs alone — would be able to receive a substantial boost from all the freed airtime.

While I have little knowledge of antitrust law, I am wary of supporting Reidel’s approach to using such laws as a defense against government regulation of the music industry. Although I wholeheartedly agree with the claim that musician and audience welfare is reduced by government intervention in pricing music licensing agreements, it would seem any call for removing government infringement upon the rights of artists to set their own prices for music can stand (strongly) on its own, without looking to another set of arbitrary rules which could one day be overturned. In other words – if we can agree a man owns himself, it follows he owns the product of his creative labors, and he therefore has the right to price that product as he wishes – end of story.

In any case, Reidel presents a thoughtful and thorough introduction to this topic as well as analysis of how the Department of Justice (DOJ) and the Federal Communications Commission (FCC) have created a government-enabled monopoly in the music industry. He identifies important roadblocks and inefficiencies as well as suggests solutions – and they are all things most artists are probably unaware of.

His chief complaint is that government-mandated use of blanket license fees effectively “prices fame no differently than obscurity.” How is this so? The blanket fee sets an artificial price floor for all music licenses, regardless of what the artist wishes to charge or what a consumer wishes to pay. This creates a system many artists cannot compete with because they wouldn’t mind pricing their music lower and others won’t buy at a higher price, and there is simply no recourse to change the system given the current restrictive laws ironically meant to protect musicians. What is really happening is pricing everyone but the most lucrative performers out of the market. I think it could be agreed upon that the most lucrative performers tend to be the most watered down artistically because they need to have the widest appeal to the largest buying population, which is usually teenage girls. Sigh.

The other unwanted outcome of this system most people do not consider is that these artificially high blanket prices make advertising (the other airtime component of broadcasting) artificially cheap by comparison, which is why consumers are then subjected to a disproportionately larger share of advertising than entertainment if the market was liberalized. This may not sound significant, but think about it – how irritated do you get that you either have to sit through tons of commercials on radio or TV or pay extra fees for services that remove them for you?

Reidel calls this diminished audience welfare, and I agree,

In the U.S. alone for instance the average person listens to 19 hours of radio each week, and radio reaches 93% of U.S. consumers each week,14 and 72% every day. By 1999 Anderson and Coate report that non-programme minutes exceeded “20 min per hour on some network television programs and 30 min per hour on certain radio programmes.” Multiply those ad spins by the number of listeners times the number of hours they spent on such unpleasant an activity, and this massive waste of time by audiences provides not only dramatic measure of diminished audience welfare but a proxy for the large toll imposed by ads on songwriters in the case of radio, and an even bigger pool of artists in the case of television.

He gives the example of record-breaking pop-phenom Taylor Swift’s 19,361 spins (number of times played) of her song “You Belong To Me” in 2009. He then points out that she was actually out-spun – but no one seems to have taken note.

As much as audiences like Swift however, when counting the number of plays of all performances on those same radios, Swift hardly even makes the top ten list of those with the most “spins” or plays. During the first week of August 2009, it was insurance company “Geico” that took the number one spot, with 42,544 spins or more than twice the number of plays Swift received. Home Depot came in second with 41,371 and Mac Donald’s third with 34,593. In that week, in fact, Swift only scratched the number ten spot slightly behind AT&T which obtained 19,574.

Reidel argues that the main factor stifling much-needed competition and liberalization of the music industry as well as the over-emphasis on advertising has been caused by government-enabled monopoly in favor of copyright “collectives,” and anti-payola laws which bar musicians from competitively pricing their music to gain radio play. Reidel supports auction-style platforms in place of the conventional “collectives” to create,

…a truly competitive payola market), where the price of songs can be determined through auctions as either negative or positive, solely on the basis of competition between radio stations offering airtime (advertising spots) and songwriters offering songs—which are simultaneously an input for broadcasters and a form to promote CDs, song downloads, concerts, and the like, for songwriters.

This paper is so good I’d end up just quoting the whole thing, so here is the link for your own reading pleasure.

This entry was posted on Monday, August 16th, 2010 at 9:28 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.