The Economics of Music Production: The Narrow Paths for Record Companies to Enter the Digital Era

Communications & Strategies, No. 72, p. 131, 4th Quarter 2008

23 Pages Posted: 8 Apr 2009

See all articles by Eric Brousseau

Eric Brousseau

Université Paris X Nanterre - Department of Economics

Date Written: December 31, 2008

Abstract

On the basis of an in depth analysis of the flow of revenues within the music industry and of the emerging practices, we attempt to understand the logic at play in the current evolution of the structure of the industry. We claim that the record companies used to play a role that was useful for the dynamic and for the quality of music production, and analyze whether it can be maintained despite the impossibility for them to further control the formation and distribution of revenues generated by recorded music. Two antagonistic strategies, corresponding to different segments of the market, are highlighted in this paper. One targets the mass market and relies on the recognition by the on-line distributors of the mutual dependency between them and the record companies. It also admits that this music is characterized by short commercial life cycles and that it should be marketed as a consumer product. Moreover revenues are not necessarily generated by sales, but by the value of temporally exclusive release in some channels. The second model targets the wide number of niches at the fringe of this mass market and relies on the building of communities of customers sharing common tastes and values and on the development of their loyalty. The model is commercial, but relies clearly on the cooperation among the various stakeholders that build a common safe harbor enabling specific types of music to sustainably develop. Value added services funded by subscription have to be developed.

Keywords: economics of culture, cultural industries, digital business model, P2P, industrial organization

JEL Classification: L22, L82, C50, Z10

Suggested Citation

Brousseau, Eric, The Economics of Music Production: The Narrow Paths for Record Companies to Enter the Digital Era (December 31, 2008). Communications & Strategies, No. 72, p. 131, 4th Quarter 2008. Available at SSRN: https://ssrn.com/abstract=1374327

Eric Brousseau (Contact Author)

Université Paris X Nanterre - Department of Economics ( email )

Nanterre Cedex, 92001
France
+33140975922 (Phone)
+33140975907 (Fax)

HOME PAGE: http://economix.u-paris10.fr/

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