THE ECONOMICS OF DIGITAL MUSIC STREAMING

Digital Music Streaming has seen an astronomical rise since lockdown hit the world in 2020. The number of people using music streaming services like Spotify and Apple Music rose dramatically during the Covid -19 Lockdown due to the absence of live music events. These services provided a way for music fans to listen to their favourite artists within the comfort of their own home and on the go, therefore their usage increased dramatically However, within this industry, there has been much scrutiny over the way the revenues received by these streaming services are split up between the different parties involved, specifically the artists themselves. This article will explore this aspect of the economics behind music streaming services, as well as others

The music streaming industry has been competitive for years with many apps fighting for the spot of being the ‘Number 1’ music streaming app However, over the past few years, this has undoubtedly been occupied by Spotify, which boasts a massive 236 million free monthly users and 182 million premium users This is huge in comparison to other apps like Apple Music which has 78 million users and Amazon Music with 68 million users

Spotify also has a 31% market share in the global music streaming market compared to its nearest competitor, Apple Music, with 15%, which further shows Spotify’s dominance in this market. However, with this, comes a danger that Spotify can hold a monopoly in the music streaming industry. This occurs when a single seller or producer holds a dominant position in an industry or sector, and controls the supply chain, which means there is a lack of competition. This can lead to price changes and barriers for new competitors to enter the market This is not entirely applicable to this industry as there are still competitors within the market and Spotify is not the sole producer of digital music, but it still holds a monopoly over the other streaming services in the sense that it is so dominant in comparison to the others. As well as this it controls the different ways to listen to music, as streaming on the go has become the preferred way compared to CDs or Vinyl This is seen as an advantage for consumers as it has improved the consumer experience due to more songs and artists available. However, inevitably someone loses out when a company like Spotify monopolises and, in this instance, it is the artists

To understand how the artists are the losers amongst all this, it is important to first understand how revenues are split up within this industry. Usually, the streaming services don’t pay the artists but instead they pay the rights holders, who are the record labels, publishers, and distributors of the music. So, for example, Spotify takes a 30% cut of the subscription fees, and the remaining 70% is divided up among the rights holders These rights holders then pay the artists based on their contract These payments are known as royalties, which in simple terms, is a recurring payment in exchange for permission to use something, which in this case, is the artist’s music. The normal royalty rate is between 15% and 25%, which, when compared to the 70% that record labels receive, is quite a small amount Furthermore, streaming decreases the equitable remuneration that artists receive. Equitable remuneration is a basic performer right where performers must be paid shares in revenues of a song, regardless of royalty rates This includes performers such as back-up singers, who may not be featured on the song. Therefore, artists are receiving a very small share of revenue, considering how vital they are to the creation of the songs

The difference in revenue is further widened when we see that two of the biggest record labels, Universal Music Group and Sony Music Independent, have shares in Spotify. This further shows how these major record labels are in fact profiting massively from artists’ work using streaming services, creating an imbalanced business model, which is very damaging for artists’ revenues, showing how they are losing out from the music streaming industry when it could be argued that they should be the ones profiting.

Due to this unsustainable model, the British government’s Digital, Culture, Media, and Sport Committee launched an inquiry into the economics of music streaming in 2021, after seeing that ‘music streaming in the UK brings in more than £1 billion in revenue ’ but ‘artists can be paid as little as 13% of the income generated.’ Fiona Bevan, a singer, and songwriter, said how ‘everybody who is further down the chain, like songwriters, are not getting any income’ and that ‘music has been utterly devalued’ which shows the state that the music streaming industry is in. The committee suggested a few solutions to the government to try and solve this fundamental problem, which included improving legislation to enforce the right to equitable remuneration and restoring revenue equality for artists in general. Hence, there are solutions to this widespread problem of artists losing out in the music streaming industry

Overall, from the evidence shown, the music streaming industry is slowly becoming a monopoly dominated by big record labels and apps like Universal Music Group and Spotify, who have sizable shares in the market. Hence, disparities in revenues have been created between the rights holders, which are the record labels, and the artists, like the songwriters and singer, which are causing artists to be unfairly treated and not get the income and revenue they deserve. Therefore, the only solution to all this is to balance out the venues shared and create a more competitive arket within the music streaming industry.

Aaryan Beri

WHAT EXACTLY IS GLOBALISATION? IS IT IMPERATIVE FOR DEVELOPMENT?

Globalisation, put simply, is the connection of different parts of the world An economics definition instead would be globalisation is a process in which businesses, organizations and countries begin operating on an international scale. It is a transition into a state of increasing interconnectedness and interdependence due to a rapid increase in cross-border movement of goods, services, technology, and capital. Generally, globalization can be seen as an economic process, but it can also be affected by politics and culture. Even though there is a trend that can be seen where the standard of living tends to increase in developing countries during globalisation, but some analysts also warn that globalization can negatively impact emerging economies and individual workers. Is it only the newly industrialised countries such as the BRICS and MINTS which benefit from globalisation and the developing countries in the “bottom billion” which suffer from it

Since the start of human civilisation, people have traded goods with their neighbours. And with cultural advancements, people were able to travel farther afield to trade their own goods for other desirable produce elsewhere.

For thousands of years, Europeans traded glass with the Chinese for spices and silk, where both continents traded goods from far away. Sooner, globalization occurred or a much larger scale where there was a rich transfer of goods like plants, food, animals, ideas and cultures forming the Columbian exchange A process which followed, known as the Triangular Trade network saw ships carrying manufactured goods from Europe to Africa which enslaved Africans to Americas. This revealed the social manacles impinged on people and the damage demonstrated by globalization, showing its true double nature; it can hurt people as much as it connects people.

Globalization does generate many benefits, especially in the environmental sector. There has been an increase in ecological awareness as globally the world has become more consciousness of problems faced within countries. This can be seen in the recent ‘debt for nature swaps This new settlement initiates a reduction in a country’s debt to another country in order for the debtor country to ensure the conservation of the natural rainforests. This happened in 2018 between the United States of America and Brazil

Globalisation has also led to an improvement in the quality of life in many nations as it can trigger rapid economic growth. For example, many businesses in the United States outsource their call centres or IT (Information Technology) services to companies in India because of cheaper land and labour As part of the North American Free Trade Agreement (NAFTA), U.S. automobile companies relocated their operations to Mexico, where labour costs are lower. This was similar with the UK and China; there was a shift in manufacturing from the East to the West because of the same reasons as well as looser environmental regulations. In the UK in 1900 the secondary sector took up 20% of employment, however by 2006 this fell by 2%. This shows the shift in importance of the secondary sector, to the tertiary and quaternary sectors which focus on the development of the service industry and technology industry This in turn creating the knock-on effect of allowing other countries to profit and develop, and boosting the rate of economic growth by outsourcing manufacturing. Globalisation has positively impacted the world as their increase in their concentration towards the quaternary/hightech sector has led to innovations that have improved standards of living world-wide. Advancements in the quaternary sector through R&D (research and development) like the rapid mass-production of the COVID-19 vaccine, saved millions of lives and saved the economy too from a heavy 10-year long-term hit which could have occurred if there hadn’t been enough focus towards the quaternary sector.

Globalisation has also led to millions of new jobs in LDCs and NICs because of multinational companies. Since 1980, global foreign direct investment has been increasing, peaking over $3 trillion in 2007. And, in the whole of sub-Saharan Africa, the average real growth in GDP of all countries has increased from less than 1% in 1992 to over 5% in 1996.

From an economic standpoint, capital inflows supported by TNCs have created higher output and jobs, which increase national consumption. The inward investment from multinationals creates much needed foreign currency for developing countries, raising expectation of what’s possible Politically, globalisation also creates the foundation for a more rounded global partnership where international problems are dealt with in an organized way. For example, the UK committed a £427 million package of direct support, and the USAID spent a total of $2.4 billion to assist West Africa in treating and controlling the Ebola outbreak in 2017. This upheld healthcare as well as helping Liberia and Sierra Leone in their loss of education and food security.

Globalisation does create many benefits But any change does have winners and losers. Free trade can harm developing countries as they struggle to compete with developed countries, as free trade helps developed countries more. The 'infant industry' argument says, that "developing countries are justified to put tariffs on their imports of they are seeking to develop new industries and diversify their economy." which gives them a comparative advantage There is also the huge impact of subsidising the agricultural industry high tariff protection policies initiated by the US. Hence, globalisation could be argued rather as an attack on free trade Developing countries do not benefit from being taken advantage of plus the additional costs from developed countries because of their useful primary products.

Another cost of globalisation is the environmental costs involved. Globalisation has led to an increase in trade and the consumption of goods. They can boost economies readily but quickly lead to rise in pollution through the emissions because of transporting goods. Carbon dioxide emissions from transport alone are expected to increase by 16% by 2050.

This puts stress on the environment as well as human health Air pollution is cause over 6.5 million deaths each year, and this number is increasing rapidly There is also an increase in the use of non-renewable resources which is another leading factor towards higher rates of air pollution. There is a failure to set satisfactory environment standards which is causing firms to outsource production to where environmental standards are less strict And their quality of life is improving due to an increase in the average national income. Many of these countries, in the long term, are facing an environmental breakdown which, long-term, will impact people's health and livelihoods

It's clear that globalisation appears to benefit MDCs and NICs which have strong and growing economies, as they have the ability and opportunity to outsource much of their manufacturing and laborious jobs to LICs and LDCs to increase their annual profits and boost their economy quickly. Globalisation's costs are mostly borne by developing countries, contributinb to a greater wealth divide and a dip into absolute poverty. Primary product exploitation has been a problem for a while now, and if there aren't any solutions soon, we might find ourselves looking at an even more dire situation.

Rishi Shah