Newspaper article The Journal (Newcastle, England)

Streaming Offers Music Industry a Chance of Stemming Tide; SHARE WATCH

Newspaper article The Journal (Newcastle, England)

Streaming Offers Music Industry a Chance of Stemming Tide; SHARE WATCH

Article excerpt

Byline: Thomas Smith

THE UK music industry has undergone a huge transformation in recent years.

The creation of the internet threatened the industry's ability to remain profitable after years of stability. Napster and various other illegal sharing music services served up an enormous threat to the long-standing business models which had lined the pockets of artists, producers and labels for many decades. The new world saw the internet create an environment where music essentially became a public good.

A public good is defined as having two characteristics.

The first is non-excludability (the inability to exclude an individual from the good or service once provision is made) and the second nonrivalry (the consumption by any individual does not affect the consumption by any other individual). An example of a public good is street lighting. Street lighting is a public good given that, once provided, an individual cannot be excluded from the use of enlightened roads and any individual's use of a lit street does not affect my own use of this lit street or anyone else's.

Sharing services placed the world's library of music online for free (with illegality as a deterrent) in a manner that is non-rivalled and non-excludable, no one could stop me from illegally downloading Sam Smith's latest album once it was shared and my consumption of the album does not affect the consumption of the same album by anyone else who had decided they wanted to listen to Sam's soulful tones.

Economic theory teaches us that the result of a public good is underprovision.

Individuals are theorised to simply free ride off the contributions of others and are able to do so given the goods' nature.

Over the past decade this theory has played out, until 2013. For many years the amount of revenue generated from UK music sales had been falling fast. However, 2013 saw a small uptick to PS730m, still two thirds below the PS1.2bn of sales in 2003.

The industry's turnaround is in part due to the popularity of the recent innovation of streaming services. Streaming services such as Spotify allow users to listen to music on its software for free for those who are prepared to put up with adverts or pay PS10 a month for its premium service. …

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