Thesis Excerpt: The Price and Value of Music

Just heard a great audience comment on the livestream of the Rethink Music Conference in Boston:

Value is not price. Price comes from value but u have to think of redefining value outside of price.

Thanks to Eric Hellweg for eternalizing it.

In trade group IFPI’s Digitial Music Report 2010, the following quote can be found:

We are in danger of creating a world where nothing appears to have any value at all, and the things that we make… will become scarce or disappearing commodities.

- Stephen Garrett, Chief Executive, Kudos (source)

The concept of something becoming free (or feeling like free) decreasing the value of it is an often repeated logic in the music business and needs to be addressed. A lot of the common medicine we use now, used to be a lot more expensive, but their value has remained the same or perhaps even increased due to their availability. It has not become scarce or disappearing as their costs fell; they became abundant and more widely used.

A report by the trade group Recording Industry Assocation of America reveals that as (physical) CD prices dropped 9% between 1996 and 2006 (inflation-adjusted), concert ticket prices rose 86%, suggesting that that which is easy to reproduce reduces in (commercial) value and that which is not easily reproduced has actually gained commercial value. This has very important consequences for the marketing mix and will be discussed in the solutions section (thesis coming very soon, I promise).

Some are even suggesting a more radical drop in price for that which is easy to reproduce (this is where the financial cost versus mental cost discussion comes back). Rob Dickins, former boss of Warner Music UK and former chairman of the British Phonographic Industry (BPI), suggested that album prices should be slashed to about 1 euro, arguing that:

If you’re a fan of REM and you’ve got 10 albums and there’s a new album coming out, you’ve got to make that decision about whether you want it or not. If we lived in a micro-economy, that wouldn’t be a decision. You’d just say ‘I like REM’ and you’d buy it.

Music manager Jonathan Shalit retorts:

Right now if you buy a bottle of water it’s £1. A piece of music is a valuable form of art. If you want the person to respect it and value it, it’s got to cost them not a huge sum of money but a significant sum of money.

Again, the cost/value point is made, but refuted by San Francisco Weekly’s music editor, Ian S. Port:

Several have argued that selling an album for less than a cup of coffee or a bottle of water would devalue the art of music. But people — at least, young people who don’t buy much music anyway — don’t judge the artistic value of music by what it costs. If they did, they would look down on artists who give away free MP3s and whose albums were obtainable on file-sharing sites. They don’t.

The devaluing-the-art argument misses two other important points: First, coffee and water bottles can’t be downloaded quickly and anonymously at no cost, while digital music can. Second, paying $3 or $4 for a tangible good (i.e., a cup of coffee you watched a person make especially for you) seems intrinsically reasonable in this day and age, even, I would guess, to a 13-year-old. But paying $10 to download a digital file that’s a copy of a copy of a copy — all of them made at no additional cost — somehow doesn’t.

And that is basically how I feel about this whole discussion.

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4 Responses to “Thesis Excerpt: The Price and Value of Music”

  1. Jeff Shattuck Says:

    So, you’re arguing that price and value are different and not necessarily co-dependent? I can buy that. But, what all of these discussions about what music should cost miss the point, especially the whole tangible good angle. When you buy music you don’t buy anything more than a right. When you download it for free or share it, you are violating copyright law (unless the copyright owner has granted you permission), and just because music can be copied easily doesn’t mean we should all just give up on copyright law. I mean, you realize that movies, books, microprocessors, software and on and on and on are all protected by copyright law, don’t you? Why should we ignore this and attempt to rationalize and excuse illegal behavior?

  2. Bas Grasmayer Says:

    Hi Jeff,

    Thanks for stopping by and leaving a comment. While I’m very tempted to go into the ethics and values of copyrights, piracy, etc. I will refrain from it, because in this case (and in the case of my thesis) it’s besides the point.

    Unless it’s election time or you have enough money to run a major lobby, you’re not going to be able to influence the reality of copyright enforcement. Therefore in my thesis, I encourage to focus on what you do want, instead of on what you don’t. I start off with a few premises – a couple of realities that come with the digital age. They might not always be here, but they will be here for the next decade at least.

    One of these realities are that you have to compete with free. Plain and simple; if you’re popular, people are going to share your music and make it available for free. I don’t care so much about the ethics part, I care much more about what this means for business.

    This price versus value section helped build-up this part about the assumptions, premises, realities, etc. The model I developed takes into account all these realities, acknowledges them and builds upon them.

    Sometimes I call it a ‘piracy-neutral’ model, meaning that if everyone would download your music for free instead of paying for copies; it wouldn’t matter. Actually, I think it would benefit (when using this ecosystem model), although I do not have the statistics to back that up.

    Anyway, the whole ethical discussion about this is very interesting, but for most artists it’s really not efficient to focus on this, when they could put that same energy into developing their work, their products, services, business models, relationship with fans, etc.

    If I had to choose a vision, it would probably be Falkvinge’s:
    http://www.youtube.com/watch?v=OPEO-u_c0t0 (short version)
    http://www.youtube.com/watch?v=08gfh_6sbQI (long version – close to 1 hour)

  3. Jeff Shattuck Says:

    Bas,

    Thanks for your thoughtful response. To me, though, it’s not as simple as accepting that people are going to violate copyright law. You’re right, they are, but to just fold and accept seems premature. Would you say the same for patents? I mean, right now, music is in the forefront of the discussion because copying it is so easy, but other things will soon become easy to copy, too. As this happens, do we we just give up on the whole notion of ownership? I don’t think so. I wish I had a clear, concise, convincing solution to this mess, but I don’t.

    Jeff

  4. Bas Grasmayer Says:

    For me as a business consultant the law and “how it should be” is really unimportant.
    Adjusting to the reality of the playing field is.

    Anyway, you’ve raised an interesting concept. I do believe the concept of ownership will change.


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