Washington Monument

Big Content: The Dodo in the Evolution of Music

I think there is general consensus that things are screwy in the media and entertainment industry and have been for a while. Take for example the current battle of music enthusiasts vs. the recording industry.  Not since prohibition has there been such a complete disregard for the law.  Society has complete contempt for copyright protection.  And the businesses are suing their customers en mass in retaliation. Why is that? Are the darker instincts of human nature at play? Or perhaps consumers are responding to correct a market problem caused by collusion in the music industry.

I typically ask a few questions every time I run into a new person that is sharing music of or videos.  Basically to satisfy my curiosity, but also because I'm nerdy like that.  The responses for most of the questions I ask as to why vary.  But one question I ask always gets the same response. "If all your songs where only 10 cents, unencumbered and available legally, would you give up piracy".  Typically, the response is either "of course" or "probably".

This isn't very scientific, but it does make one think.  Assuming that the responses are valid, what do they mean?  They appear to say that the consumers perceived value of music is much lower than the market price.  And that could be what is driving this grand display of civil disobedience.  Is $.10 the proper price for a song?  I don't know, but the fact that there appears to be a price lower than free says that the current pricing model is based on corporate demands and not consumer expectations.  If this is true, this imperfection in the pricing model has led to a market discontinuity.

So assuming that the perceived market price for a song has fallen, what reasons can we dig up for this?  Here is a short list:

  • Cost of Manufacture
  • Perceived Quality
  • Competition

Cost of manufacture is obviously a factor as digital downloads have no incremental costs of production.  However, actual manufacturing costs were already pretty low and we are looking for something a little more drastic to explain the current situation.


Perceived Quality

I've often wondered why sculptures and paintings vary so greatly in price while music is typically $9.99 a CD or movies $14.99 a DVD. I think we all agree they are art forms. Yes, there are the box sets and super duper collector's editions, but the new release is always the same price.  No boutique music or films, so to speak.  It speaks volumes relative to the craft.  A/V media has high demand and a very evolved commercial distribution channel.  Far more than any other art form, and commercial concerns have completely altered it.

Don't get the idea that I'm anti-business.  I love corporations, but I fully understand that they are soulless money making machines if ran correctly. That's their purpose and they way it should be.  But, art is the exact opposite.  It is the representation of one's dreams, imagination  and soul without restraints.  The process of trying to combine these two is where problems occur.

When an MBA starts telling an artist how modify their work or when it has to be done by, what type of art are you creating?  You're not.  You're putting out a product. An artist is a poor name for a musicians in today's corporate world.  Manufacturer seems more appropriate.  The problem is magnified when the artist is actually a figment of marketing's imagination, bonding songwriter and spokes-model with the alchemy of a little autotune.  Instant top 10 hit, just add water.  In the movie industry, this exists as Scary Movie 8, the second Hulk or anything by Uwe Boll.  These are products that exist less for novelty and expression and more for incremental financial returns. Thus we have “Business Art”, the root of the quality issue.

Business art is financially profitable, otherwise it wouldn't be sold. But by creating and marketing such products, the recording industry dilutes their brand. The consumer recognizes this, either consciously or unconsciously and responds by devaluing the products in the industry as a whole. Thus we have a situation where the media currently available is considered too expensive and less appealing.
In a normal market, the problem would be resolved in the following way. The lowering in perceived value would result in a drop in consumer demand. A drop in demand would be met by a shift in industry pricing to compensate. However, no shift has occurred. Demand has has been shown to be steadily declining for the last decade without a corresponding shift in media prices. In a perfectly competitive market, this wouldn't happen. But the entertainment sector is anything but.



The recording industry as a whole works as a unit.  I previously stated that prices were fairly uniform, as are most decisions concerning technology.  While uniform pricing would occur in perfect competition, this industry is an Oligopoly with similar yet unique products. As such there should be varied price structures due to these differentiated products.  Given that, this industry sector apparently colludes or operates as a single entity with respect to the market.  Thus we have a monopoly in both pricing and content.  Monopolies themselves are not always bad.  As long that they are efficient relative to market demand, they will produce a fair product, albeit at a higher price.  However, once the monopoly stops responding to the demand of the market, cracks start to form and competitors enter.

New technology is treated with distrust universally in the recording industry, so it is always slow to embrace it. However, technology pushes along without them. New and novel distribution channels allow space for the formation of startups.  And these startups are placing more control back in the hands of the artist MySpace is morphing into a one stop shop for all of your music artist needs. This model adapts well to the artist because of the scale.  With enough artists, there is less reliance on any particular one.  Therefore, the pressures of deadlines are far reduced.  Art can flow naturally, rather than be forced.  The quality of the product can be much better.

Additionally, artist owned websites are popping up removing the corporate distribution channel and allowing full expression of their talent without the interference of big picture corporate strategies.  While they don't have the marketing budget of the industry, they do keep a much larger percentage of the profits.  There is the additional impact of community where fans can more closely interact with the artists and vice versa.

The music scene has embraced this fully as the typical album can be created by a handful or musicians or even one person.  But film is a much larger undertaking requiring artists from many different disciplines and hasn't found a home, yet. But as technology progresses, the movie industry could be ripe for such a disruption as well.


Side Effects

So what we have here is the first true competition that the recording industry has really ever faced outside its cozy little family.  Combine that with a perceived drop in quality of the content. In a normal market, this would have forced media prices down, but because the industry colludes, the consumer has responded through "liberation" of the desired product. To counter this, the recording industry has resorted to political and civil means to protect their pricing structure. Things get extra weird to the degree that they are actually suing their potential customers.

It sounds a little desperate and in all honestly is it. The industry knows that in the long term they will have to compete in a new market that they don't control or close up shop.  Thus their actions are to use scare tactics to stop short term bleeding and conserve profits.  Either to hold the line until a better solution can be found or ultimately squeeze all the profit out of a sinking ship.

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