14 Economics of rock ’n’ roll Simon W. Bowmaker, Ronnie J. Phillips and Richard D. Johnson The unique features of the music industry oﬀer an opportunity for the economist to answer the basic questions of who gets what and why. At the level of the ﬁrm, the industry is characterized by the entrepreneurial spirit of the creative musician who seeks to produce music eﬃciently and of high quality in order to satisfy consumer demand. At this level, the production of music has much in common with a highly competitive market. However, the perfectly competitive model found in textbooks ultimately fails to explain the allocation of resources in the music industry because a distribution system that contains elements of monopoly stands between the producers and consumers of music. Added to this mixture is rapid technological change that promises to bring new proﬁt opportunities for those willing to take risks and be entrepreneurial, whilst at the same time undermine the traditional way of doing business. This ﬁnal chapter proceeds as follows. Section 1 provides a brief overview of the history of the music industry, revealing how technology has always been both its friend and foe. Next, Section 2 illustrates the size and scope of today’s global music market. Section 3 examines, ﬁrst, the complex relationship between the major record companies (the ‘Majors’) and the independents (the ‘Indies’), second, the economics of recording contracts, and third, how technological change is aﬀecting the record label/artist relationship. Section 4 analyses the...
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