… fans who venture onto any of the pay music sites will not find the most popular band ever, the Beatles. They will not find other top-selling acts, such as the Dave Mathews Band, Garth Brooks, the Grateful Dead, AC/DC and the Cars.
They will find that top-selling acts Madonna and Red Hot Chili Peppers sell their songs by the album, but not as singles.
They will find some musicians on one service, but not on others. They will find puzzling choices: Led Zeppelin fans can buy a 47-minute spoken-word biography of the band online, but no Zeppelin songs because the band has not licensed them for sale on the Internet.
Why are these potential gains from trade not being exploited?
1. Some artists are holding out for a higher price or better terms. This can mean either a better cut for the artist, or the artist does not like the “all songs for 99 cents” model of iTunes.
2. Many artists feel that selling songs on an individual basis takes them out of proper context or cannibalizes sales for the album.
3. Pre-1998 contracts do not specify Internet rights to the songs. Assignment of Internet rights can require the underlying contract to be renegotiated.
4. Renegotiations must involve both the performer and the songwriter.
5. Often the relevant parties cannot be found or are otherwise difficult to deal with. One executive said: “You can be sure the heirs are a son and daughter who aren’t talking to each other and one of those two is getting divorced.”
Here is the full account. You will find stories of high transaction costs, poorly defined property rights, and stubborn holdouts, all the classic predictions of institutional failure theories.
The bottom line: Selection, not just price, remains a big advantage for non-legal downloading. If iTunes and related services are to make it in the long run, they will need to offer near-universal choice of music.