The biggest problem with the online music revolution is that so far it hasn’t been very revolutionary. CD sales are still by far the largest chunk of music sales.
Scratch that. There was an online music revolution. It started with Napster 1.0. The problem is, making the whole thing “legal” isn’t much of a revolution. It’s hardly even noteworthy.
The biggest problem I see is that the recording industry refuses to accept basic economic truths. They insist on this antiquated notion that people trade music on the internet because they don’t want to pay for music any more. What’s really happened is more of a cultural change. I’ve bought about the same number of CDs each successive year for that past 7 or 8 years. In fact, I think the actual numbers, if anything, have gone up. But what has changed is how much music I have.
According to Windows, my Music folder has 60GB and 8,944 files in it right now. And that’s not including my lossless SHN and FLAC collection (all of which, by the way, is entirely legal). Most of my friends have collections somewhat smaller, though some are certainly larger. In general, though, everyone I know has a pretty respectably sized music collection on their hard drives and/or portable players.
Many of the tracks I have are ripped from CDs that I’ve purchased. Far more are legally recorded bootlegs from bands that allow taping at their concerts. But plenty of them came from, well, you know where.
So let’s see… subtract 1,357 all legal Dave Matthews Band tracks, plus another 1-2k. I’ll use 6,000 since it’s nice and round. That’s a lot of $.99 tracks. In fact that’s significantly more than I pay per year on my Audi. Even with insurance!
The total percentage of expendable cash that an individual is willing to spend on music content really hasn’t changed very much. It’s still probably in the $200-300 a year range for most. That’s a healthy 15-30 CDs per year.
That individual’s appetite for music, however, has increased by an order of magnitude.
Many of us with large music collections on our hard drives have plenty of tracks we’ve never even listened to! Just multiply my file count by 4 or 5 minutes and you’ll quickly realize that it would take a very long time to listen through that collection. What’s more, there are some tracks I listen to all the time. The play lists that are most often on my computer, Xbox, mp3 player, and car certainly don’t have 8,944 tracks in them. And the hundreds of tracks they do have are mostly the same throughout. Though I may have different lists depending on my mood and such, there’s a vast amount of music I only have for rare occasions. What’s more, many people have taken to having large collections of stuff that other people will want to listen to. For instance, I don’t listen to Blue Oyster Cult very much in my regular play list, but when someone makes a cowbell joke or brings up “Don’t Fear the Reaper” at a party, I can pull it up in seconds.
That’s not something I would pay a dollar for… but it’s something I’ll certainly take if I can get it.
That brings me to another point… ease-of-access. We live in an age where people are increasingly impatient. If someone tells me about a great new song/artist/album, I’m not going to rush off to the store to buy it and find out what they were talking about. I wouldn’t have before, and I won’t now. I might listen for it on the radio, I might ask them to play me something the next time I see them… I might forget about it altogether. Nowadays I get an IM and someone says “Check this out,” and provides me a link to some new song I may or may not like.
What the record industry needs to realize is that they can continue making the same total income as before (with the same growth as before) while adapting to the massive changes in demand. What they can’t do is a get a dollar for every mp3 on my computer. Never. Going. To. Happen.
Another problem beside the price is artificial limitations on the technology. If I can check a box that says “Don’t artificially restrict access to my files” in media player when ripping a CD, I’m damn well going to check it. If you ask me to pay significantly more for something that’s in any way more limited than something I can get for less or for free, I’m damn well not going to buy it from you.
From an economic standpoint, Quantity Demanded has increased massively. Through P2P networks and simple file sharing, we (the consumers) have been able to increase Quantity Supplied without any change in price. That’s because files are so intangible. It’s information. It is by nature portable and cost-free. So the basic economic model breaks down. In the end, placing artificial price boundaries on Quantity Supplied (when it can expand infinitely at no cost to the supplier) only harms the customer. It provides no benefit to the supplier in this case.
It comes down to this… The record companies, via the internet and P2P distribution, have been given an opportunity to maintain their current income levels while simultaneously shifting Quantity Supplied through the proverbial roof. Instead, they want to fix the quantity supplied right where it is, keeping the price per unit the same.
So why, despite all this, did I purchase music from MSN Music and Napster yesterday? It’s because I was interested in procuring a CD, but was too lazy to actually go to the store. I looked in a common P2P location for the Trey Anastasio disc I wanted (his self-titled release from a couple years ago). It was a CD that I’d long wanted but had never happened to find while it was on my mind. Upon doing a search through MSN Music I found that he had a new CD out. I purchased the album for $6.93 on MSN Music. Unfortunately, they didn’t have the album I was originally looking for. But Napster did. So I bought them both.