An article I read the other day brought up another reason the music industry may be suffering. The author argues that the ability to download (and pay for) individual songs may be more to blame for the drop in overall sales. In lecture, we discussed the merits of price bundling. The music industry used to price solely by bundling, charging a certain amount for a CD with multiple songs. Now that it is so easy to download individual songs, people are rarely buying entire albums, and they are spending less as a result. I would also argue that this makes it more difficult to develop a fan base and following for an artist. For example, someone that hears Kesha's "Tik Tok" may like the song and choose to buy it, but it's unlikely that they will buy her entire CD. They wouldn't be likely to want to pay to attend her concert if they don't know more than one of her songs, etc.
You can't deny that piracy has hurt the record industry, but it may not be the only reason for its demise. The move away from price bundling may be another reason, but there are also a lot of people who have purchased songs for $0.99 that would not have paid ten times that for a full CD if it were the only option.
I'm not sure what the next move for the industry should be. Universal Music Group recently announced that they will be lowering prices on all of their physical CDs, but I'm not sure if this will make a significant difference. At what price will people be willing to buy a physical CD rather than downloading it (illegally) for free or purchasing only the few songs they know and like? Is there any such a price? What do you think?
(For those who are interested, here is a link to the post I read: http://torrentfreak.com/is-piracy-really-killing-the-music-industry-no-100418/ and to an article about UMG's pricing announcement: http://www.billboard.biz/bbbiz/content_display/industry/e3i56ed42b9a46f8554e2671afccecca01b)
This is a really interesting concept from a pricing point of view, I agree.
ReplyDeleteCool thoughts on bundling. I think this is a consumer trend - information flows more freely today. It's easier for consumers to find out about specific things that match their tastes, and it's easier to shop for those specific things. And, from the seller's side - especially with digital goods - it's just as easy to sell and "ship" specific items, too. We're much more inclined to jump on opportunities to buy exactly what we want. Makes you wonder if this is the future of cable tv, too.
I don't know what the next step is for UMG, etc., either. Labels used to be so important - to find talent, to distribute music, to publicize. Today there are all kinds of firms focus on those specific angles. The entire landscape of the industry has changed. It's good to see UMG changing their pricing policy, but I totally agree - why purchase the CD at all?
The drop in CD sales due to illegal sharing has been a major concern for the music industry, particularly for rap artists. In response and in attempt to target the downloading audience, artists have recently started releasing their music for free through peer-2-peer networks intentionally to increase demand for CD's sales. When this strategy was first implemented, artists "leaked" the songs, but now they do so publicly. As a results, sales have climbed.
ReplyDeleteLast year, I took the course BPUB 250-Advanced Microeconomics with a professor who conducts research on the effects of P2P and illegal downloading on the music industry. According to my professor, the industry will continue to use these P2P networks to their advantage rather than combatting them through the legal system
Jeffrey-
ReplyDeleteI think you may find this article interesting: http://www.emtm.upenn.edu/insite-fall2007/feature-industryinsights.html
It discusses how P2P platforms may have been beneficial to the music industry had the labels not fought their existence. The Wharton professor the article references (Peter Fader) also wrote an expert report for the Napster trial arguing that Napster did not hurt the music industry. I'm a little suspicious, but the points (i.e. sampling music with an illegal download may encourage a purchase) are interesting.