Thursday, February 16, 2012

Music as a Public Good

Anti-ACTA meeting, Nuremberg 2012-02-11
Internet seems to have thoroughly changed the playing field for the music industry. The previous attempts to introduce anti-copying measures or improve the legislation (from the music industry's perspective), have not been of much help. Below I compare the current situation of intellectual property-related industries with some other parts of the economy. Perhaps a little exaggerated, but I hope this helps to make the point.

Today, Music is Non-Excludable

Due to the new technology, it is not possible any more to limit the potential audience of a song (or a movie, or a book). This is what non-excludability means. Through most of the history it was possible to grant the access only to those who pay. Today, this does not work.
To create a non-excludable product may be something new for the recording industry but this is far from a unique situation. Much is produced around us with no way to keep the free-riders away. The examples include traditional public goods, such as street lights or clean sidewalks, open-source software, or research results. As there is no way to limit access to these goods (or, in some cases, narrowing the access is not desired), all this is given away for free.

How Does this Influence the Music Industry?

Part of the industry is probably not affected. Orchestra music, for instance, is highly subsidized anyway, and the target audience is not going to substitute an exclusive evening in the noble music-hall for a internet download. In some cases, an unknown (or even a well known) band may make most of their income from live concerts or from being invited to play at parties or other events. For this group, the new world may not look too different either.
But there are also authors who earn most of their income by selling their recordings for a fee. This is the group who may fare substantially worse. How well they do, depends on how easily they can shift to a different revenue source. Unfortunately, I do not have any data here, but I believe that any serious policy proposal should include this analysis.

Do We Need a Fat Government?

Non-excludable music is essentially a public good: once recorded, it is accessible to everyone. Public goods are typically financed through taxes (like street construction), donations (like public concerts), grants (research) or simply enthusiasm (community gardens). In particular, this suggests that government financing will play a more significant role in the future music industry. Many books, plays, and movies are created through various scholarships and grants already today.
Note that various taxes on empty CD-s or broadband internet should be seen in this light. Free music must be financed somehow, including through higher taxes. You pay CD-tax even if you never use it for copying music, exactly as you help to finance all kind of public services, even those you never use, through your income tax. This may not be all that good news for the indebted Western governments. But here we have an example of a technological change which leads to larger government role.

Would it Be Worth of It?

It seems like most people are quite happy with the new world. Unauthorized downloading seems to be overly popular and tougher rules, such as proposed by SOPA, PIPA and ACTA, cause a large-scale public outrage. It seems that most of us would rather sacrifice the recording industry than our internet-freedom. Democracy is very much about choice. By choosing free music and other intellectual products, we also get a little higher taxes and perhaps somewhat poorer choice, as there will be less money and less players in the industry.