The economics of music exports
This chapter analyses the economic distribution of global music exports and the implications of new developments in music technology for the career choices of artists and government music policy. First, we examine the scale and scope of global music exports; global music flows between countries and the distribution of export income within the industry. Then we examine the impact of new technologies on existing industry strucmres, business models and artists’ careers in the music industry and possible implications for government music export policies.
Exports are defined as goods or services produced in one country and sold to a customer in another country, and although economists differ on whether trade deficits (where the value of imports exceeds the value of exports) are necessarily bad, export figures are commonly used in assessing the economic strength of a country. A trade surplus is beneficial in increasing a country’s foreign currency reserves and in creating employment for local workers in the exporting industries as well as supporting industries that provide goods and services to the exporting industries. Hence, export figures are often quoted by economists and policy-makers as an indicator of the comparative advantage of a country and its industries relative to other countries. This has been accompanied by a greater emphasis on economic analysis in cultural policy generally in many countries (Throsby, 2010).
The music industry has been similarly affected by the need to demonstrate economic value. This is despite the music industry's relatively small size compared to other industries in most countries. (In the US, the world’s largest music market, it represents less than 0.1% of GDP and 0.2% of employment. Globally music consumption was only 0.06% of world GDP in 2017.) However, as Krueger (2019) has pointed out, the music industry’s importance is greater than might be suggested judging purely by its economic value. As one of the main creative industries in a country, like the film and book publishing industries, the strength of the music industry exports of a country is often seen as a key indicator of the importance of the national culture on a global stage.
The popular music industry is also interesting from an economic perspective fox- several reasons. We can do no better than repeat the comments made by Connolly and Krueger (2006) in explaining the importance of studying the economics of the popular music industry. Firstly, popular music is an important cultural industry in its own right, which sheds light upon global and national culture. Secondly, because non-traditional economic concerns such as emotion play a significant role in the industry, the industry can provide new insights into the role of these factors in economics. Thirdly, as a “superstar” industry in which the financial rewards are heavily skewed towards a few individuals, the popular music industry provides a testing ground for some important economic theories, for example, about the relationship between financial rewards and creativity. Fourthly, as the music industry and associated media industries have been profoundly affected by several technological changes (such as radio, TV, records, cassette tapes, CDs, MP3 players and the Internet), which continue to this day, the music industry provides a unique setting to understand how rapid technological change affects an industry. Finally, the popular music industry is, by definition, very familiar to the general public and, consequently, it provides interesting examples that many people can relate to.
With respect to music exports, there is also an increased interest owing to the growth in sales of recorded music globally in developing countries, and the increase in music streaming services which promise increased global markets. According to the IFPI (2019), the global recorded music market grew by 9.7% in 2018, the fourth consecutive year of growth, fuelled mainly by rises in streaming revenues, which grew by 34.0%, more than offsetting a 10.1% decline in physical revenue and a 21.2% decline in download revenue. The growth has been strongest in developing countries, with Latin American markets showing an increase of 16.8% while markets in Asia and Australasia grew by 11.7%. Similarly, according to a report by consulting firm PricewaterhouseCoopers (PwC), the live music market was expected to show a compound annual growth rate (CAGR) of 3.33% from S21.256bn in 2018 to $25.036bn in 2023 (Chappie, 2019). There are, therefore, significant differences between markets for music worldwide. As will be explained in more detail later, although the markets for much music are global there are significant differences in local markets and an elaborate system of interconnected institutions has developed to collect and distribute income to artists and other players in the industry at global and national levels.