Technological developments create an economic environment for traditional players in the music industry that is highly uncertain. Information technology and the Internet allow musicians to offer their music directly to their ‘customers,’ and it creates opportunities for new intermediaries to enter the market and offer a mix of new and already known services. It also allows people to buy music conveniently and cheaply, in digital or physical form. Such developments pose a threat to existing intermediaries in this industry such as music publishers, record companies, and retail outlets.
One of the main reasons for the threat to be real and worrying is that the existence of what might be called the constitutive institution of copyrights on which this industry, as it is presently configured, is founded is called into question by current developments in information technology. Copyrights, in their present form, require the relative impermeability of geographical boundaries. However, where the use of IT is increasing rapidly, such as in the case of music, geographical boundaries start to dissolve, and with it the current basis for the institution of copyrights.
According to Vogel “Recorded music readily pervades virtually every culture and every level of society. As such, it may be considered as the most fundamental of the entertainment businesses.” Besides cultural effects, this industry has important economic effects. With a share of around 50 percent, pop music is the most important kind of music at this moment. It is unfortunate, of course, that these data do not present value added but sales instead. In addition to these direct effects, there are important indirect economic effects of pop music. The institution of copyrights has been created in order to capture part of these indirect economic effects, since copyright is claimed to benefit creative artists. Copyright has become an important constitutive institution for the music industry. In fact, present structure of the industry cannot be understood without consideration of copyright.
Currently technological developments and a liberal, free market ideology are working together to create a global economic sphere. In this paper I will concentrate on the effects of developments in information and communication technology (ICT) on the music industry. Studies in technology dynamics indicate that social actors can and often do steer technological developments, or mediate its effects. One important arena where parties try to mediate or minimize the effects of ICT on the music industry is the World International Property Organization or WIPO in Geneva. More music globalization information is found at MSU EDU.
Vested interests represented in WIPO, and lobbying at the EU, in the U.S. Congress, and the World Trade Organization (WTO) try to ensure that the system of copyrights — that is of fundamental importance for the way in which the industry is presently structured — will not alter profoundly. In terms of the ‘speculative economics‘ argued for by DeLong and Froomkin most recently and others, these attempts can be interpreted as efforts to maintain excludability and rivalry in the consumption of music products. Negotiations about the exact form and scope that copyrights should have for the Internet will directly affect the distribution of income between different parties in the music industry.
In this paper I analyze the effects of the existence of copyrights for the present and future music industry. I will argue that transactions involving music (as well as, for that matter, other kinds of digital information) on the Internet are best exempted from copyright. Since the institution of copyright primarily has ceremonial features and is mainly instrumental in creating substantial profits for intermediaries such as record companies and music publishers, this will not in itself be a deplorable development.
My assumption is that a market for industrially produced and distributed music will continue to exist, whatever happens, and so the question arises what the music industry will look like in the near future. Before concluding, therefore, I will venture some thoughts on the way in which the music business might change. My analysis will be institutionalist, a theoretical approach which is thought to be best suited in understanding the changes that the music industry is going through as well as its changing relation to society in general.