Written by: Devon Mayo
Music in the Economy
The music industry effects the economy in a gigantic way. First of all, the music industry pulls in $125 billion each year! This money is made through online purchases of music, music “gear” (t-shirts, posters, etc.), and from the live shows. The demand for this industry is universal and insanely large, almost all 7 billion humans on this planet listen to music. Likewise, the supply for this industry is equally big, new artists being born every year. 
With the progression of technology, the suppliers in the industry can fastly and easily supply the customer with their product. As seen in the graph, music sales are shifting from physical to digital sales. This ease of access with present-day technology is allowing this industry, as well as most other industries, an easier way to market to potential customers and an easier way to sell to them. This effect, in theory, would boost sales substantially. However, this is not the case.
The main reason sales are not skyrocketed is because of illegal downloads. Illegally downloading music, however innocent it seems, is actually hurting the economy in ways the average person would not imagine. Illegal downloads are robbing “the United States [alone] of $12.5 billion in economic output and more than 71,000 jobs annually” (Jones.) 71,000 jobs annually! Those jobs could drop Wisconsin’s unemployment rate to 3%. That $12.5 billion could provide homes and food for people, as well as recreation and entertainment. That money would be spent on goods, which would in turn be paid as wages for another family, which would be spent again and the cycle would repeat. But, due to the illegal downloads, that $12.5 billion just does not exist.
The music industry, even with the $12.5 billion loss, is still an extremely successful and profitable market. The industry itself is very close to being a perfectly competitive market. With millions of producers in the world, each of them must sell their product at a common price or risk not being able to sell it at all. However, the distribution of the songs themselves have been turned into an oligopoly. How, you might ask? This has to do with cell phones.
What do cell phones have to do with music distribution being an oligopoly? One might think that it is impossible for music to be an oligopoly because of simply how many recording artists there are. But let me ask this question, where do you buy your music? (if you buy it at all.) There are only a few answers: iTunes or Google Music. These distributors have taken over the music selling business by paring themselves with the major cell phone companies of Apple and Android. Most people now store music on their phone, and these apps make it easy.
Sources
Jones, K.C. "Music Piracy Costs U.S. Economy $12.5 Billion, Report Reveals." InformationWeek. UBM Tech, 22 Aug. 2007. Web. 30 Nov. 2015.
Http://www.riaa.com. RIAA. Web. 30 Nov. 2015.
I do agree that music is a huge industry. Back in the day artists didn't have to worry about people illegally downloading their music cause the internet wasn't a thing. Back then they had records/vinyls, mixtapes, and CD's. Now even though people are downloading music illegally most artists still don't care. Only because it gets them more publicity which will then turn into concert ticket sales and other merchandise. Most artists are already rich by all means so I don't think they would need that extra 12.5 billion. Overall a great topic because music is very big in everyone's life.
ReplyDeleteGreat topic to pick from. I knew the music industry was big, but I could never imagine it being this big. I'm surprised to see that there are that many jobs that could be employing people if not for illegally downloading. Even so, there will always be a demand for people to fill in these position, rather it be roadies, tech crew, or the musicians themselves for performing live.
ReplyDeleteDevon, this is a interesting topic to write about. I agree the music industry is very large, though lately I know they have been having a lot of troubles. Specifically, illegal downloading music has been a huge problem in the industry. When people can get music for free, they obviously don't have to buy the music, thus music artists are losing potential profits. In the future, the music industry is going to have to change the way they release music or they will start to make less and less money each year. Possibly the copyright laws might need to get more strict in order to solve this copying music issue. Overall, good job on this writing piece.
ReplyDeleteGood job on your piece, Devon! I would agree with you that the demand for music is high and in response, as is the supply. The market structure is nearly perfect competition in regards that the products are all music and songs, but you could even argue that it is monopolistic competition because they do differentiate in genre, artist, length, etc. I agree that the transition from physical to digital sales has helped the industry, but the oligopoly of Apple vs. Android doesn't necessarily affect the overall music sales--it helps them. The loss of the labor resource due to the illegal downloading is an issue, but there isn't necessarily a way to resolve this. Maybe the price equilibrium of the music market isn't $1.29, because people want to pay much less than that. I wonder if Apple or Google song prices will ever decrease. Great job!
ReplyDeleteI never realized how little amount of places there really are to buy music. Never having bought music myself before, I had only ever heard of Itunes. I guess that goes to show how little anyone really buys music anymore. I never really thought of music in an economic sense, seeing how it's always been around, and you can make it yourself if you want. But music is not free, as someone has to pay the producers of it in order for them to make it full time. I had no idea illegal music downloads rob people of 70,000 jobs, either. That's a huge unemployment rate increase.
ReplyDeleteIt is kind of sad that music stores are going out of business. I agree with you when you explained that illegal downloading is a more common thing, unfortunately. I never actually realized the effect it has on the economy. It is crazy that the economy is losing 12.5 billion dollars and costing 71,000 jobs annually. Illegal downloading is a substitute for products at a music store. By having a free price for illegal downloading the demand for music stores decreases and slowly they are going out of business.
ReplyDeleteIt's incredible how much illegal downloading music influences the economy of music. It is convenient for the consumers, however not so much for the producers. If they had found a way to use this to benefit them, the economy could be better off. However, since illegal downloading is a substitute for buying regular music, the demand for illegal downloading of music is higher since the price is lower for consumers.
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