IE Focus | By Enrique Dans, Professor at IE Business School

The barriers to entry that have plagued the music industry for decades have made it the perfect example of an imperfect market. The internet can put an end to this situation, but there are plenty of people who don’t want it to happen.An imperfect market is when the supply and demand are conditioned or altered so as to prevent normal development. Imperfect markets are often the result of monopolies, exclusivity, obstacles, blocks, etc. caused by many situations that usually lead to inefficiency.

One typical example is the music market. For many years the supply was conditioned by the “selection” process that a small number of leading record companies applied to talent. You could be a genius, propose something that was original and interesting or sound incredibly good, but if you did not pass through the record company´s filter, it was more or less impossible to access the market. The filter could depend on the mood of the person listening to your demo, your sponsors, all kinds of commercial criteria or even what you were willing to do to pass the first stage of the selection process, but if you did not pass it, your possibilities were very low indeed. The capacity for self-production was minimal, the capacity for distribution was almost zero and for promotion it was just pie in the sky: demand was also controlled and manipulated through access to the media.

The Internet changed all that. All an artiste or group has to do to make their music available to the world is a little effort in self-production, which is available to anyone (even though record companies look down from above and say “that doesn´t sound as good as mine”), a couple of clicks to upload it to different sites on the network and a few more to give it a social push and see the response immediately. Distribution is not necessary and promotion is done through social systems that are available to everyone.

Everyone is aware that the new system provides many more opportunities to many more participants, overstepping intermediaries, generating a fairer share-out of profit margins and favouring the development of an efficient market. But let´s move onto the next stage: what happens with copyright management? In Spain, the institution that manages copyright is a de facto monopoly, which conditions a market that is tremendously unfair and in need of transparency. It consists of an obscure share-out of profits, voting rights assigned by personal recommendation and a status that is strangely halfway between public and private, between the absence of profits and enrichment through associated enterprises, the purchase of premises under privileged terms and conditions and spectacular donations of real estate assets. Market control is absolute: passing through their filter is obligatory. Even if an author wants to give his or her music away, he has to speak with them. Entering foreign markets is extremely complex. Selling outside the country is an absolute odessey with different conditions in each country and there is a clear barrier to setting up a European market. The European Commission´s attempts to generate a competitive market have come up against the claims filed by the corresponding institutions in each country, since they are the first to be interested in maintaining the inefficiency of their markets.

Spain is a “good example” of this. Its copyright management institution is the envy of the entire copyright world. Its relations and proximity to the chambers of power mean that it can exercise an all-reaching influence. We want a royalty? We ask for it and there it is. If we don´t get it straight away, we have our artistes demonstrate in the streets. While in markets such as that of the United Kingdom we have seen recent and repeated falls in the percentages accrued as copyright in order to enable emerging business models, in Spain we are going in the opposite direction.

That and nothing else is what the government seeks to protect with the final provision of the bill on the sustainable economy. The umpteenth example of the influence of copyright institutions on government. It is not about protecting culture, creation or copyrights: it is about protecting an imperfect market of which only a few take their masterly advantage. Nothing less.