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Monometapoly: the economic impact of the recording industry on the music market

Thierry Rayna, Ludmila Striukova

Technical Report
May, 2008
DIME Working Papers on Intellectual Property Rights
Issue 56

With four major companies sharing more than 85% of the market share, the recording industry is one of the most concentrated industries. While this market concentration has been traditionally linked with high barriers to entry, recent technological changes have made these barriers almost disappear. Nonetheless, market concentration remains, mostly due IPRs protecting major companies. This has traditionally been considered acceptable due to the high sunk costs of music recording that prevent an efficient outcome in competitive environment. This article calls this traditional wisdom into question and demonstrates that majors are not only monopolies but also monoposonies: they are monometapolies. Using analytical methods it is shown that the negative effects of a monometapoly are worse than those of a simple monopoly and that the loss of welfare indirectly caused by IPRs is likely to be much higher than what is usually expected.

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