Streaming music services have changed the way we listen to music. Spotify, Pandora, Tidal, and Google Play are some of the more popular services. These companies offer free access to music. For a small monthly fee users can purchase premium access and listen to millions of songs on demand and ad free. But not all artists are fans of free streaming music. In 2016, Taylor Swift’s move to prevent Spotify from playing her new release, 1989, for free, made national headlines. ‘When Spotify refused to restrict access to only paying customers, Swift would not allow the company to play her music for free. She is not alone. Adele, Dr. Dre, Garth Brooks, and Coldplay have all had runins with free streaming services.

a. If music lovers obtain music and video content via free music streaming services, instead of buying it directly or paying for premium access, what would the record companies’ producer surplus be from music sales? What are the implications for record companies’ incentive to produce music content in the future?

b. If Taylor Swift and other artists were not allowed to pull their music from the free streaming services, what would happen to mutually beneficial transactions (the producing and buying of music) in the future?