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Monometapoly or the Economics of the Music Industry

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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.

SKU: 0810-9028412950 Category: Tag:

Description

By Thierry Rayna

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.

page: 211 – 222
Prometheus: Critical Studies in Innovation
Volume 27, Issue 3

SKU: 0810-9028412950

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