(Note: I am not making a claim that this is an EA cause candidate.)
Music is an “information good”. It is “nonrival” and infinitely and freely sharable. Any positive price leads to “allocative inefficiency”.
But a zero price obviously gives no incentive to produce and share music. The best solution is to separate what consumers pay from what musicians receive. The music (and all media and info) would be free to access, but the creators would get a payment equal to the value the listeners and users took from it.
But it’s hard to
Know what that VALUE is and
Coordinate a way to get the FUNDS and compensate the creators.
For point 1 (measuring VALUE), the number of plays or amount of time spent listening seems like a possibly OK, but imperfect measure. E.g., ‘listening in the background’ has less value than ‘listening and really getting into it. Still the ‘compensation per stream’ seems like the best feasible measure.
However, perhaps because of the market structure and lack of competition, it seems creators are given very little per stream, not enough to motivate the right amount of content to be produced.
For point 2 (getting the FUNDS), an international government mandated tax and funding would be efficient but there are all sorts of difficulties there. (Compulsion, coordinating across governments, is it fair for non-listeners, etc).
Private streaming services seem like a good second-best, but the inefficiency comes when the streaming service charges customers too much, so not everyone joins. (Why: society could give these people access to ad-free music to these people at no extra cost, but they don’t access it.)
Perhaps the best solution would be some sort of streaming service that pays creators more (should that be subsidized?) and offers more differentiated prices to capture the true value consumers are getting. Hard to do, though.
The main point, I think, is that the ‘classical economic model’ really doesn’t work well for information goods, which are becoming more and more of the economy.
As one data point, I’d gladly pay an extra $5-15/month for a “tier” of Spotify that passed along, say, 90% of that extra money to artists. Spotify being mostly private makes it hard to get good digital bling from a higher-tier option, but maybe artists could offer extra rewards to people in that tier?
Much more simply, I’d love to have a “tip the artist” option next to any song, so that when I was especially appreciating something, I could tip the artist a dollar. I’d probably use that option 100-200 times/year.
This seems like it should be a win for Spotify — I see few people angry about Spotify making/keeping too much money, lots of people angry about artists being underpaid. And I think it should be possible to design a tier/tip option that sends the message “you’re funding artists” without “we’re not”.
From some brief research, Spotify paid out over $5 billion to “rights holders”* in 2020 and grossed about $9 billion (they claim to pay out 70% of all revenue). And they have 6500 employees. All of these seem like reasonable numbers, and even boosting artist revenue by 20% would probably feel tiny to critics — now it’s half a cent per stream instead of 0.4 cents, hooray — while being a pretty sharp cut for their staff/technical infrastructure.
*Note that this includes record labels; for many artists, Spotify’s rate isn’t nearly as problematic as the % their record labels take.
On music streaming services
(Note: I am not making a claim that this is an EA cause candidate.)
Music is an “information good”. It is “nonrival” and infinitely and freely sharable. Any positive price leads to “allocative inefficiency”.
But a zero price obviously gives no incentive to produce and share music. The best solution is to separate what consumers pay from what musicians receive. The music (and all media and info) would be free to access, but the creators would get a payment equal to the value the listeners and users took from it.
But it’s hard to
Know what that VALUE is and
Coordinate a way to get the FUNDS and compensate the creators.
For point 1 (measuring VALUE), the number of plays or amount of time spent listening seems like a possibly OK, but imperfect measure. E.g., ‘listening in the background’ has less value than ‘listening and really getting into it. Still the ‘compensation per stream’ seems like the best feasible measure.
However, perhaps because of the market structure and lack of competition, it seems creators are given very little per stream, not enough to motivate the right amount of content to be produced. For point 2 (getting the FUNDS), an international government mandated tax and funding would be efficient but there are all sorts of difficulties there. (Compulsion, coordinating across governments, is it fair for non-listeners, etc).
Private streaming services seem like a good second-best, but the inefficiency comes when the streaming service charges customers too much, so not everyone joins. (Why: society could give these people access to ad-free music to these people at no extra cost, but they don’t access it.) Perhaps the best solution would be some sort of streaming service that pays creators more (should that be subsidized?) and offers more differentiated prices to capture the true value consumers are getting. Hard to do, though.
The main point, I think, is that the ‘classical economic model’ really doesn’t work well for information goods, which are becoming more and more of the economy.
As one data point, I’d gladly pay an extra $5-15/month for a “tier” of Spotify that passed along, say, 90% of that extra money to artists. Spotify being mostly private makes it hard to get good digital bling from a higher-tier option, but maybe artists could offer extra rewards to people in that tier?
Much more simply, I’d love to have a “tip the artist” option next to any song, so that when I was especially appreciating something, I could tip the artist a dollar. I’d probably use that option 100-200 times/year.
This seems like it should be a win for Spotify — I see few people angry about Spotify making/keeping too much money, lots of people angry about artists being underpaid. And I think it should be possible to design a tier/tip option that sends the message “you’re funding artists” without “we’re not”.
From some brief research, Spotify paid out over $5 billion to “rights holders”* in 2020 and grossed about $9 billion (they claim to pay out 70% of all revenue). And they have 6500 employees. All of these seem like reasonable numbers, and even boosting artist revenue by 20% would probably feel tiny to critics — now it’s half a cent per stream instead of 0.4 cents, hooray — while being a pretty sharp cut for their staff/technical infrastructure.
*Note that this includes record labels; for many artists, Spotify’s rate isn’t nearly as problematic as the % their record labels take.