I am currently writing a news commentary on music streaming services. My commentary is focused on demand and supply, consumer and producer surplus, externalities, and public goods. And there are a few things that I am kind of confused in some parts:

  1. Are music streaming services considered public goods? My teacher said they are public goods as it is non-rivalry in consumption. But don't users need to pay for the service and therefore excludable in consumption?
  2. Does music streaming create a negative externality to the producers? The producers are supposed to earn money through creating music but with music streaming they earn less than they should.
  3. Finally, why do artists still decide to put their music on the music streaming services even they earn less than they should?

Thank you all very much for helping me. I just started learning about externalities so the questions may seem dumb. Thanks a lot!


1 Answer 1

  1. Remember that rivalrous goods mean that someone else consuming it takes some benefit from other people using it--obviously not true for music unless you are a very spiteful consumer. Excludability means you can prevent others from listening to it. Once one person buys it and they start blaring the music, they can't stop others from listening to it, unless they have headphones or something. So it could be considered excludable, but music streaming is often used for parties and such. There is also the issue of torrenting and sharing music online, which makes you the music streamer. So the question to consider is whether music is turning into a public good, and what that means for music streaming.

  2. In any industry, there is always loss from resale transactions. Someone who buys a book from someone else isn't buying it from the publisher or the author. It's just that with music people really like to resale music for zero price (free), which seems odd in a way. Nevertheless, we still see people buy music from musicians because they can be assured of higher quality (so there is product differentiation between a ripped song and the original) and there is probably some weird intrinsic value we get from being a patron of the arts (think Kickstarter or GoFundMe). Is there a negative externality from music streaming services? Probably.

  3. Artists put music on streaming because some see it as better than the traditional way nowadays, just putting your CDs in stores or whatnot. If you get even "less than deserved" from doing that, well...

That's just skimming the surface of this issue probably, so hopefully others will be elaborate better than me.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.