-7 12. market prices and revenues is spurious and it is ludicruous to argue that this phenomenon suggests that demand for radio advertising is inelastic. The Copyright Office Study of recording artists' a) Recording artists are classified according to general population. This comparison is relevant b) The study attempts to evaluate the financial Given remuneration of recording artists. The focus on -8 c) considered, the incomes of recording artists are as high or higher than for other professional groups. The Copyright Office Study considers the fact I. INTRODUCTION The recording industry has, over the last quarter of a century, become a major entertainment medium. With annual sales of over three billion dollars, only the television industry dominates in economic terms. Indeed, retail sales have been steadily increasing from less than 200 million dollars in 1950. Even in constant dollars, after accounting for inflation, real annual expenditures have risen about 600 percent since that time. Adding to the recording business importance is its status as a major input to the broadcast media. That is, radio stations depend on recorded music for the major proportion of their programming. Surely, the continuing dominance of television as a supplier of variety entertainment has meant that radio relies on music formats to attract audiences. Thus, the rapid growth in popularity and sales of recordings can be directly linked to the ability of radio to survive in the increasingly competitive media marketplace. One observes a 400 percent rise in nominal AM radio revenues since 1950. Even more dramatically, independent FM radio stations have experienced phenomenal growth recently. This growth is correlated with the development of technologies capable of transmitting the high fidelity sound of recordings. What follows is an initial effort to describe and analyze the economics of the recording industry. Section II begins by describing, in general terms, the economic characteristics of the recording industry product. Further, the implications for market structure and performance will be considered. In addition, the markets are described, with special emphasis on the links among participants. 2 Section III is a brief summary of data relating to the recording industry. Measures of concentration and historical trends will be described. Finally, Section IV serves to identify and analyze some of the major economic issues pertaining to the recording industry. Specifically, the impact of the proposed expansion of performance rights on the radio industry will be considered as well as the effect on recording artists. The last section of the paper will also discuss issues involving the changing nature of distribution and trends in concentration. Of course, this paper is not intended to be a definitive study. Its scope and depth have been constrained by the paucity of previous research as well as by limited resources. However, to the extent that we have identified the interesting issues and, though not having resolved them, suggested directions for further research, we hope that we have been successful. |