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An addendum to the previous post about record label survival and album pricing: gas stations make higher profits at lower prices.
“We’re happy, our customers are happy,” says Jinger Duryea, president of C.N. Brown, which owns 108 gas stations in Maine and New Hampshire. “It’s not costing as much to buy the product and store the product.”
This could apply to MP3’s. They don’t cost as much to make and store as CD’s, and thus should be priced accordingly. I’ve said it before, and I’ll say it again: MP3 albums should cost no more than $5. Metal thrives on loyalty. With low prices, customers come in the door, and are happy to spend. A happy customer is a repeat customer. Someone with $10 to spend is more likely to buy two $5 albums than one $10 album of the same desirability. For a label, that buyer then potentially supplies two revenue streams instead of one.
I’ve seen this argument making the rounds on various listservs and tech blogs, but it just doesn’t hold water. If, as I said in my earlier comment, music is becoming an inelastic good, price won’t have much of an effect. If people were able to fill up 100+G iPods with music, chances are they weren’t paying for it in the first place, or were simply ripping existing collections to them.
Seen another way, the cost of music now amounts to owning a computer and having a high-speed internet subscription. It’s not free exactly, but it seems like a free good. It’s tough to get people to abandon that once they’re habituated to it, and for young consumers who’ve mainly spent time sharing music online, there’s no incentive to switch.
One aspect of this discussion that, well, hasn’t really been discussed enough is that there is a difference between your average 17 y.o. serial downloader and “collectors”. Moreso than other genres, I think serious metal heads tend to be collectors, if not outright “completists” (almost an anagram for “elitist”, eh?). Metal heads actually still buy CD’s and LP’s even at serious rates. Who knows, we may even be singlehandedly saving the physical format or at least prolonging its slow demise. No doubt in time everything will be online. Until that happens, I’m going to buy as many CD’s as I can afford. At least, when it comes to metal, I don’t think they’ll stop making them anytime too soon. Heck, every week we get new re-issues or re-masters of albums that are 25 years old, and there’s plenty more pent up demand (Morbid Saint fans – I’m talking to you!).
blackmail – If any price is too high for you, what do you propose to generate revenue? Albums usually don’t get made without label financing. Also, as I’ve pointed out, “free” is never “free.” Downloading comes with search costs and risks which people might be willing to avoid for the right price.
evanz – The serious collector is indeed a formidable force. But as blackmail commented above, that force is old blood. The new blood scoffs at physical media.
It’s a good question. The issue has been that tough enforcement hasn’t stopped people from ’sharing/pirating’ albums. It’s like any other kind of prohibition really, and the reward appears to be worth the risk to most consumers.
I don’t know what will work. What’s clear though is that the recording industry’s emotional plea hasn’t seemed to keep people from downloading music. Worse, it’s been shown that bands don’t have many options in the sort of economic environment we’re in now. The costs of touring are too great to turn a meaningful profit, if it turns one at all.
Worst of all perhaps is that music doesn’t have a champion in the corporate world. As we watch companies working online with music struggle or fail, no one is coming to bail them out. Music, and the costs associated with it, are viewed as radioactive. I’m not sure that the music industry will find a way to sustainable profitability. There are just too many risks.
What do I think happens? The music industry scales back considerably. Bands take on recording costs on their own (as many undoubtedly already do) just out of love for the work. I think people who want to make music will need to treat it as a quixotic pursuit with even less likelihood that it’ll become a full time job.
(For the record, I’ve been researching ways to break the whole music industry death meme to no avail. When I did the interview with Steve Gordon about the RIAA trials for Pitchfork (“Live at the Witch Trials”) some four years ago, I expected that the music industry would’ve found a product people would pay for. It turns out they spent the time making USB wristbands instead.)
I suspect that Blackmail is right. Lowering the price of actual CDs would lead to higher sales, but I can’t see the same applying to MP3s. Sure, people would be more likely to download two albums at $5 a piece than one at $10, but where’s the incentive to pay for the two instead of downloading them for free and spending the ten bucks on beer?
For what it’s worth, I don’t download music–either legally or illegally. I’ve owned enough shitty computers to understand that losing an entire music collection is a harddrive crash away so I’d much rather have physical media. I bring this up to point out that I’m probably not all that informed, especially in light of some of the comments in the thread below, which I hadn’t bothered to read until now.
blackmail – Interesting interview with Gordon, thanks for sharing. I’m not sure I trust bands to finance their own records. I wouldn’t want music creation to favor the wealthy any more than it does already.
Graeme – Your beer argument is quite valid. And owning physical media is fairly foolproof. Yes, digital storage is volatile, but that’s what backup hard drives are for. No, you’re not uninformed. None of us know what the right solution is re: MP3’s.
The other thing is that for archival purposes I absolutely would never rely on mp3 even at the highest bit rate. I rip every CD to FLAC. If metal labels sold their albums in FLAC or some other lossless format, I’d be much more inclined to download them.
On a somewhat related note, I recently purchased several CD’s from Nuclear War Now. $5 each! Tremendous deal. If CD’s were that cheap everywhere, I think they’d sell a lot better. The thing is the entire recording industry never really performed a “market test” like this on a mass scale. Could you imagine if Sony sold every CD for $5? I think they’d double sales overnight. But maybe I’m just old.
As a label, I can say honestly that as an obscure niche oriented label and artist, that people in that demographic *much* prefer to buy the actual release than to download it. They’d rather have the liner notes and the full experience.
I sell MP3’s, but they don’t sell very well. I’ve lowered the price on them, but it makes absolutely no difference.
Here’s the thing–MP3’s are, hypothetically and ideally–meant to augment physical sales. But physical sales, as a whole for most labels and bands, is drastically down from even ten years ago. So really, that leaves the MP3 as something that is, technically, a low cost thing to provide seeing as that there’s no pressing costs, but this would only work if the *physical* sales were still somewhat strong. It’s the same thing as going into WalMart for a loss leader sale–sure they may sell 10 thousand units of whatever it is, but they’re not *really* making that money if everyone only bought that and not the regular priced items.
That sort of arrives at the conclusion in that the MP3’s *still* have to pay for the artist’s intellectual copyright/ art, the engineering/ recording/ production/ mixing. And generally, they are not paying for it, because something has to take a hit–producers working on “spec” (or for free until the record sells). Artists taking a reduced royalty rate. Labels taking a much reduced profit, in which they can’t afford to promo and create the awareness for releases that they once had.
MP3’s hold back crucial subconscious *emotional* value, in that most people don’t think that they’re robbing themselves of an experience. They’re *hearing* it….but they’re not *listening* to it. The following discussion is with Greg Calbi–a world renowned mastering engineer—and other respected musical figureheads, as they struggle to find a way to keep quality high amidst this downsizing of the record industry’s finances from file sharing. This, to me, is absolutely mandatory viewing for anyone that values the old, disappearing way of making albums and the old, disappearing way of *listening* to albums.
http://philoctetes.org/Past_Programs/Deep_Listening_Why_Audio_Quality_Matters
They hit the nail on the head in almost every regard.