68 Finance & economics The EconomistOctober 5th 2019
N
othing inspires German newspaper
illustrators like the European Central
Bank’s monetary policies. Bond-buying is
represented as a tsunami of cash. An uptick
in inflation becomes a euro-gulping great
white shark. After Mario Draghi, the ecb’s
outgoing president, pushed deposit-rate
cuts and a promise to restart quantitative
easing (qe) through its governing council
last month, Bild, a tabloid, depicted him
cloaked and fanged, as “Count Draghila”.
German complaints are long-standing.
The ecb’s Strafzinsen(“punishment rates”)
expropriate savers. Banks suffer from neg-
ative rates they cannot pass on to custom-
ers. Cheap money fuels housing bubbles.
The ecbis stealthily extending its mandate
beyond price stability to redistribution.
This week Oliver Bäte, the boss of Allianz,
Europe’s largest insurer, joined the attack,
lambasting the ecb in an interview with
the Financial Timesfor “multiplying risk”.
Some fear such attacks risk weakening
support for the single currency in its larg-
est economy. But criticism from main-
stream German politicians is now more
muted than in 2016, when Wolfgang Schäu-
ble, a former finance minister, blamed easy
money for the rise of far-right populism.
Inside the ecbcouncil, the idea of some-
times using unorthodox monetary tools is
no longer contested. On the big questions,
Mr Draghi leaves office vindicated.
Yet his tactics are increasingly ques-
tioned. At least seven council members are
reported to have objected to restarting qe.
Dissenters worried that additional uncon-
ventional stimulus might do more harm
than good. Several central-bank governors
took their concerns public. On October 2nd
Jens Weidmann, the Bundesbank’s hawk-
ish head, said he would oppose any effort
to lift caps on bond-buying which the ecb
will probably eventually hit. For his part Mr
Draghi fears that airing dirty laundry dam-
ages the bank’s credibility.
Mr Draghi has consistently urged gov-
ernments with fiscal space to relieve the
pressure on the ecbby spending more. In
Germany public debt is low, borrowing
costs are negative, investment needs are
acute and recession appears imminent. Yet
the coalition clings to its “black zero” prin-
ciple of no net borrowing. A serious down-
turn would probably inspire some sort of
stimulus, but it could come too late.
Henrik Enderlein of the Hertie School of
Governance in Berlin fears that the ecb’sstimulusgives Germany’s politicians an
excusenottoact.“Itgivesgovernmentsa
signalthatwearetheretorescueyou,”he
says.ButFrederikDucrozet,anecb-watch-
eratPictetWealthManagement,notesthat
lowerinterestpaymentsmakeiteasierto
loosenfiscalpolicy.TheBundesbankreck-
ons low rates saved the German state
€368bn($402bn)inthedecadeto2018.
LaterthismonththeGermanfinance
ministrymustnamea replacementforSa-
bine Lautenschläger, a monetary hawk
whounexpectedlyresignedfromtheecb’s
executiveboardinSeptember.Onefavour-
iteisIsabelSchnabel,amemberofGer-
many’sadvisoryCouncilofEconomicEx-
perts.Shehascriticisedtheshrilltoneof
the country’s monetary-policy debate.
Suchachoicewould signaltheGerman
government’sdesiretocoolthetempera-
ture.ChristineLagarde,whoreplacesMr
DraghionNovember1st,wouldsurelybe
grateful;threedaysafterthat,shegivesher
firstspeechasecbpresident—inBerlin,at
aneventtohonourMrSchäuble. 7BERLIN
Germans object to the ecbrestarting
stimulus. Can they cool down?European monetary policyCalming the hawks
“W
here thestreets have no name”,
the first song on u2’s blockbuster
1987 album, “Joshua Tree”, begins with 40
seconds of ambient noise. A guitar arpeg-
gio enters and accelerates into the driving
rhythm of the drums and bass that arrive
around 1:10. Nearly two minutes pass be-
fore Bono breathes the first lyrics. Such lei-
surely intros are no more, says Justin Kali-
fowitz of Downtown Music Publishing, a
rights manager. Streaming platforms like
Spotify have reshaped the music busi-
ness—and pop songs. The gist of it: song-writers now get to the good stuff sooner.
From sheet music to mp3s, technology
has long influenced the form of music.
Ever since songwriters have been paid roy-
alties, however, one thing was constant:
compensation was tied to sales. But last
year streaming accounted for almost half
the industry’s revenues of $19.1bn. In
America, the share was 80%.
Artists are paid per play—provided the
listener stays tuned for at least 30 seconds.
Each stream earns a tiny fraction of a cent.
And just 13% of that goes to the songwriter,
says David Israelite of the National Music
Publishers Association, an American trade
group. To make half-decent money, a song
needs millions of plays.
The pressure is greater since overall rev-
enues are lower than in the music indus-
try’s heyday around the turn of the millen-
nium. Global revenues are at least recover-
ing from a low of just $14.3bn in 2014, when
piracy was rampant and business models
had yet to adapt to the digital age.
It helps to be included on a streaming
company’s playlist. These account for
roughly a third of all streams. Tracks are se-
lected by opaque algorithms, but by analys-
ing performance data you can work out
what the bots like, says Chiara Belolo of
Scorpio Music, a boutique label. Compos-
ers are adapting to what they think is being
looked for. Hit songs are shorter. Intros
have become truncated, says Mr Kalifo-
witz, “to get to the point a bit faster”.
Choruses are starting sooner (see
chart). Take this year’s most-streamed
Spotify track. The first notes on “Señorita”,
by Shawn Mendes, preview the refrain,
which arrives 15 seconds in and is a fixture
throughout the playing time of 3:10.
The dominant model splits streaming
revenues between artists in proportion to
their share of total streams. Some think
this is overly generous to superstars. They
prefer a “user-centric” alternative, in
which revenues brought in by a particular
customer are doled out in proportion to
streams, but only among the artists that
customer listens to. The difference is that if
two users bring in the same revenue, each
stream by the lighter user is worth more to
the artist.
Deezer, a French streaming service, is
planning to move to a user-centric system
next year. A Finnish study in 2017 suggest-
ed that would boost the earnings of artists
of middling popularity—though Spotify’s
former director of economics thinks it ne-
glected to account for higher administra-
tive costs. To the extent that playlists are
filled with blockbuster songs, and are dis-
proportionately popular with the heaviest
listeners, the study is probably right. “Until
we try, we will not know,” says Alexander
Holland of Deezer. But one thing is a near
certainty: long, atmospheric intros are un-
likely to make a comeback. 7The economics of streaming is
changing how pop songs are writtenMusic revenuesDon’t stop me now
Don’t bore us, get to the chorus
Hit songs* with chorus within first 15 seconds,%Sources:Billboard;Genius;
Spotify;TheEconomist*MainstreamBillboard
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