Lunney - Copyright’s excess : money and music in the US recording industry

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Glynn Lunney 2018

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For my parents

In the United States, Congress has the authority to enact copyright laws for a single purpose: to promote the Progress of on which copyright has been built.

For more than 300 years, we have steadily expanded the duration, scope, and reach of copyright based on this premise. Where the first United States copyright act, the Copyright Act of 1790, Throughout this expansion, the reasoning seems to be: if some incentives are good, more must be better.

Nevertheless, although we have justified and expanded copyright based on the fundamental premise that more incentives will yield more and better original works, we have never tested it. To be fair, there has been very little opportunity to test the connection between revenue and creative output. In most of the copyright industries over the last three hundred years, there has been a steady increase in both revenue and creative output, but whether this parallel rise reflects coincidence, causation, or something else entirely is difficult to determine. One copyright industry, however, has experienced a sharp rise, followed by an equally sharp fall, in revenue over the last fifty years: the music industry. In 1961, the Recording Industry Association of America (or RIAA) reported just under $4 billion (in constant 2013 dollars, or $2013) in sales of recorded music in the United States. From there, sales of recorded music rose, more or less steadily, to a peak in 1999 of just over $20 billion ($2013). That more or less steady rise in sales ended, however, in 1999 when Napster opened its virtual doors. Since then, with the rise of file sharing, sales of recorded music in the United States have fallen steadily. For the year 2014, sales fell below $7 billion ($2013) a level not seen, on an inflation-adjusted basis, since 1967.

This rise and fall provides us with a unique natural experiment and an important opportunity to test copyrights fundamental premise: for the recording industry, did the increase in revenue from 1962 to 1999 lead to increased creative output? Did decreased revenue from 2000 to 2015 lead to decreased creative output? If copyrights fundamental premise is true, then music output, both in terms of quantity and quality, should, all else being equal, have risen steadily from the 1960s until the end of the 1990s, and then should have begun a steady fall.

Moreover, this should be an easy test for copyrights fundamental premise to pass. The revenue change is not a slow, steady, and barely perceptible rise and fall,

When we look at various measures of the quantity and quality of popular new music released in the United States, we find that the exact opposite has been true. According to SoundScan, despite the decline in revenue, the number of new albums released in the United States in 2012, at 76,882, nearly doubled the number of new albums released in 1999, at 38,857. When Rolling Stone magazine ranked the 500 greatest albums of all time, the list skewed heavily toward albums released in the late 1960s and early 1970s, when the revenue from the sale of recorded music was low, not toward albums released in the late 1990s, when revenue was high. Turnover on the Billboard Hot 100 chart peaked in 1966, when 743 new songs were good enough to make the chart. From there, as revenues rose, chart turnover fell, reaching a nadir in 2002 when only 295 new songs were good enough to make the chart. Thereafter, as revenue fell with the rise of file sharing, chart turnover started increasing. In 2011, 497 new songs were good enough to make the Hot 100 chart a level not seen since the mid-1970s. If we use Spotify worldwide play counts in 2014, and treat long-term playability as a measure of or proxy for music output in terms of both quantity and quality, we find no evidence that more money led to more and better music. Spotify consumers in 2014 did not, for example, disproportionately stream songs from the high-revenue 1990s, compared to the lower-revenue 1960s or 1980s. For each of these measures, there was either no statistically significant correlation between revenue and output, or the correlation was statistically significant and negative. Less money led to more and better music.