Depreciating Value(s)
I happened across this story following up some previous discussion of online digital music pricing schemes. A fairly light bit of discussion ensued both online and in the office about the prices of music (digital or otherwise). A specific observation jumped out at me from a couple of sources: Music doesn’t really depreciate in value due to age.
This is actually not a novel realization, but rather it bears mentioning because at least from my experience, it is one of the few types of consumer products that does not follow the standard older-is-cheaper cost model. Even other entertainment varieties like movies start off relatively expensive and flow downward into a less and less costly series of plateaus until they occasionally even end up free (in an edited form) on TV. Or at least free for the cost of a few commercials.
Take the Beatles albums I received for Christmas recently. Calculating inflation suggests that the current cost of the CD (roughly $15) means the comparable price in 1969 (when—say—Abbey Road was released) would have been $2.79. I can’t find anywhere that lists what an LP went for back then (and I wasn’t around so I have no first-hand knowledge), but I did find this economic flashback site that suggests milk was about a fourth the amount it is today. If that is roughly equal to the rate of inflation, you’d expect music to cost about $11-12. So in truth, music may have actually increased in price.
Normally you might expect something that has been around for nearly 40 years to have lost some of its marketing potential. In this case however it seems that supply and demand are operating on different-than-usual principles. The question I have is whether more units of Abbey Road could be sold if the price were universally dropped to, say, $4.00. I find it hard to believe that demand has remained constant for 37 years, no matter how good the product may be. Usually when demand slips some on an older piece the answer is to leverage the price to reflect the new, lesser demand but the record companies are leaving them the same (or perhaps increasing the price)… to what end?
I actually think the problem lies in the fact that the best advertising for a song is the song itself. Compare to the way movies are marketed and distributed, where a teaser or trailer and a series of reviews give consumers an idea of what movies they’d like to see. The movie is released in theaters (a relatively expensive way to watch a show), then to pay-per-view, then to home video, then to premium cable TV and perhaps eventually to network/broadcast television. All along the way the movie can make money (assuming there are enough people interested in seeing the film) without having to give away the entire experience gratis. With music the consumable product is commonly considered to be the packaged album itself, but while there is a set of critical avenues consumers can tap into to find out what the “experts” think and social networks operate as well (“Here, check out this CD I just bought…”) the primary industry-approved method of advertising the so-called product is via video play and radio spins.
The underlying problem there is that the consumer gets, for the most part, a consumable portion of the end product without charge. Theoretically they even get the best part of the end product free because the singles are supposed to be the highlights of the record. Motivating factors for album purchase are then relegated to play control and the off chance for added value in terms of additional non-singles tracks that might be worth listening to or some other semi-tangible like album artwork.
If it were up to me (and it isn’t, nor will it ever be) radio stations would hardly ever, if at all, broadcast anything resembling a playlist. Duplicate song broadcasts would be almost non-existent and raido would be more of an exploratory medium centered on the disc jockeys or on-air personalities… like a big collective of podcasters only with the blessing of the recording industry. You’d tune in to hear what Funky-J or Peter Spinz was playing tonight, not to see if you might catch your station playing that new Nickelback song or not. If you hear the song once and like it, you’d better go try and nab yourself a copy of the album because you might not hear it again anytime soon.
New release albums could go ahead and be marked at whatever the industry wanted them marked at. $15-20, whatever. But the sustenance of that price level would be determined solely by demand in terms of units sold in a given period of time. Once the threshold for price dropping had been reached, the albums would all be cut down to a different price level, like $10-12. And so on.
I realize that to a certain extent this already happens (ever seen a $5.00 bargain bin full of Bob Seger’s Greatest Hits and Belinda Carlisle?) but the problem is those bargian bins are usually only stocked with crap that most people don’t want. The demand for a particular album has to stoop to practically zero before something will be discounted to the level of reason for most people. You never see Metallica’s black album or Bob Marley’s Legend in there because those albums still sell decently even years after their release. But the key is that they might sell even more if the price were lower. Who wants to pay $18 for a replacement for your scratched and warped Under the Table and Dreaming?
Other Hits
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