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The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies.
Napster (1999)
Online Music Sharing Site
Low sales = Fewer artists being signed
The Pirate Bay & Kim Dotcom's Megaupload
"The more revenues slump, the less labels are willing to sign new and innovative acts."
Able to provide free file downloads to consumers on the Internet
HOW: Make money by selling ad space to companies (Google)
Evaluating economic profit
Loss of hard-copy sales (records/CDs) = Stores closing
RIAA
Hurting music executives and musicians
Decreases royalties for artists
(Financial Profit decreases - TR decreases,TC remains the same)
Affects legal businesses (ie. Spotify)
Pays artists $0.004 per play
Live music decline
How does illegal file sharing affect the music industry?
Illegal downloads have essentially no negative effect on number of legal downloads
Legal purchases would be about 2 percent lower without illegal downloading available
Technology is constantly evolving, making it a challenge to police piracy over the internet
Illegal downloaders were active in music consumption during more than twice as much of the year as legal-only consumers
(including being more active on legal sites)
Number of Buyers
Determinant of demand
Competition promotes a healthy market
Remove monopoly service
How does illegal file sharing affect the music industry?
Negative - hurting musicians, executives, and music businesses
Positive - increasing number of buyers and consumption (publicity)
Regulation
"I think there is a place for regulation too, in order to make piracy an even worse experience and more hassle than it’s worth"
Trying to increase opportunity cost of consumers (increase hassle of piracy)
Artists - some looked into giving away songs (rely on increasing publicity for tours/live)
Increase use of legal music websites
Spotify, iTunes