March 19, 2024
Okay, I’m not really defending private equity, but I do have to point out that Marc Hogan has badly misrepresented the problems in the music industry in his New York Times column this morning.
Hogan would have us believe that we have a thriving music industry that is being swallowed up by money-grubbing private equity companies that now lay claim to a large share of artists’ recordings. While private equity companies undoubtedly engage in many sleazy practices, the fact is that the industry is hardly thriving. Hogan gets the story completely wrong.
He tells readers:
“The music industry’s revenues recently hit a new high, with major labels raking in record earnings,”
The link is to an industry publication that reports revenue from recorded music for the first half of 2023 at a record $8.4 billion. That would translate to $16.8 billion on an annual basis. If we go back to 2000, before streaming or digital downloads were common, sales were $19.1 billion. In nominal dollars, the economy is more than two and half times as large today as in 2000.
This means that if recorded music was as large a share of the economy today, as at the start of the century, revenue would have to be almost $45 billion a year. Relative to the size of the economy, streaming revenue is just over one-third as large today as in 2000. (Some of the revenue in 2000 went to the manufacture and distribution of physical discs, but this would have been a small share of the total.) This loss of revenue is the core problem with the music industry, not the dealings of private equity companies.
As a practical matter, rapacious corporations or promoters ripping off musicians is not exactly a new story. It’s possible that it is worse today, but it is absurd to imagine a golden age where most musicians could count on being paid well for their work.
Hogan inadvertently gives away the story when he cites Spotify’s decision to stop sending out royalty checks for songs with fewer than 1,000 streams in a year. People who follow his link would find that 1000 streams would net a performer $3. Things would have to be pretty bad indeed if that is going to make a noticeable difference for “artists on the lower rungs.”
The real problem is that we need to find ways to get more money to musicians and songwriters. The current system is not working and that would be true even if private equity didn’t exist.
There are alternatives that can do the trick, such as individual tax credits to support creative work. I have suggested a similar route for reviving local journalism, another area where the NYT is badly out to lunch.
There is an old saying that intellectuals have a hard time dealing with new ideas. The New York Times opinion section seems determined to demonstrate its truth on a regular basis.
Comments