Monometapoly or the Economics of the Recording Industry

Abstract

With four major companies sharing more than 85% of the market, the recording industry is one of the most concentrated industries. While this market concentration has been traditionally linked with high barriers to entry, recent technological changes have made these barriers almost disappear. Nonetheless, market concentration remains, mostly due to IPRs protecting major companies. This has traditionally been considered acceptable due to the high sunk costs of music recording that prevent an efficient outcome in a competitive environment. This article calls this traditional wisdom into question and demonstrates that the majors are not only monopolies but also monoposonies: they are monometapolies. It is shown that the negative effects of a monometapoly are worse than those of a simple monopoly and that the loss of welfare indirectly caused by IPRs is likely to be much higher than is usually expected.

Finally, this articles challenges the widespread idea, among cultural economists, that artists are the only ones to be blamed for their poor living conditions. Indeed, it is demonstrated that oversupply on their part is a merely a sign of the monometapolistic structure of the industry and not the root of the problem, as it is usually thought.

Keywords: music industry, monopoly, monopsony, monometapoly, Intellectual Property Rights

JEL Classification: D21, D43, J42, L12, L13, L82