From free to cheap… to free?

From free to cheap… to free?
: Music can’t catch a break. So music was expensive. Then it was free on Napster. Then Napster was killed and it was cheap on Apple. And now it’s cheaper at Walmart, which just undercut Apple et al with 88-cent songs. Walmart insists that it’s not a loss-leader at that price and that it will make a profit on music (and thus that it’s not dumping music on the market, in essence) — but even if that’s true, it’s probably true only for Walmart. So, once again, the profitability of music is sliced and the price of music slides back toward zero.

: Of course, good often comes out of disruption and the CBC speculates about the kind of music we’ll be listening to in five years, thanks to the age of the download. MIT Technology Review summarizes the questions:

Will lowering the barriers of entry to the music market encourage more grassroots participation? Will the ability to issue one song at a time enable musicians to become even more topical, serving, as Chuck D described it, as the black man

  • anne.elk

    I think that’s the price of music you mean, not the cost of music. And what’s the marginal cost of the next downloaded mp3? About zero. So what does economics tell us the price should be?
    The current alternatives are incredibly expensive concerts (owned and promoted by Clear Channel), and CDs that cost more than DVDs that contain crap the consumer doesn’t want.
    Hmm, let’s put our heads together and think about what artists could do to own more of their own hard work…. Thinking. Thinking. Thinking.
    I give up, just how could artists compete with Walmart or Clear Channel by selling their own music or finding alternative concert venues. It’s a real stumper all right.

  • Quite right. Just corrected “cost” to “price.” Thanks.

  • Since music is ubiquitous today, and indeed there are many millions of Americans paying good money for instruments and such to make their own music, it’s not surprising that the price of music approaches zero.
    Music is simply not a scarce commodity. Quite the opposite. Oh, sure, there’s only one Outkast, for example, but so what? If they weren’t popular today, someone else would be. For every virtuoso or great songwriter who becomes known and popular, there are hundreds of equal or greater ability who labor in perpetual obscurity.
    Under the circumstances, it seems unreasonable to think that music can be sold at a high price for the long term. There are simply too many suppliers, and the cost of production at the margin is very nearly zero.
    I predict the trend will continue.

  • Charlie (Colorado)

    The cost of the music, as music, ie, royalties, amortized cost of the studio time, etc, is around $4 per album. The marginal cost of a download is higher than 0, but in the 30-50 cents range. (It’s not the bandwidth, it’s not the storage space, but you need a load of servers to, um, service the load.)
    This suggests the real limit per song is in the neighborhood of 50 cents a song. When WalMart is selling downloads for 49¢ each, then it’ll be a loss leader.

  • Charlie (Colorado)

    Notice that this 50¢ per downloaded song pays the artists as much as they get paid now; there’s plenty of room for artists to do this if we can get micropayments really working right.

  • A_Reader

    One song at a time downloads are the “black man’s CNN”? Err…maybe I’m too old but I don’t get it.
    Your Channel 7 Eye-Witness News Squad:
    Today’s headlines from Ludacris, Local News with P. Diddy and Sports with Eminem! Later, Lil’ Kim brings you todays weather!

  • My grandfather was a master Scots Highland fiddler (even played with Hector MacAndrew on occasion, to give you an idea). And my uncle, no slouch fiddler himself, has played with Ally Bain.
    They never played for money. Didn’t need to. As people get more familiar with the Larry Lessigs and the Clay Shirkys of the world, we’ll start to see that “paid” and “rewarded” are two different things.

  • APEX

    Maybe musicians will go back to be “starving musicians”.
    Maybe musicians will be forced to produce good material?
    I can’t wait…
    There are certain artists who will always get my money for a proper CD release – but they consistently produce good material.

  • Buzz

    Yeah, but WalMart downloads them in the WMA format which only plays on Windows (according to the WalMart site.) What a scam. Is it antitrust is Micro$oft turns out to be subsidizing WalMart?

  • pb

    How is WalMart getting so much publicity for a service it launched 6 months ago and why isn’t anyone hounding them for sales numbers????

  • bob
      And what’s the marginal cost of the next downloaded mp3? About zero. So what does economics tell us the price should be?

    Marginal cost?
    In music, marginal cost tells us the cost to create a duplicate, not the cost to create the original. And as with all intellectual properties, the cost of duplication – be it a book, or a program, or a song – is a pittance compared to the upfront costs.
    After all, upfront costs include the cost of music education, time spent on each song, and equipment to practice and record. Far from insignificant, those costs create a barrier to entry. And that means nothing to established musicians, but leaves unestablished artists out in the cold.
    With all of the hype in the music sharing discussion, consumer price expectations are being driven below what unestablished artists will be able to handle. Consider, sales at $0.88 might be fine for the established artist, since it would mean millions in profit. Makes up for quite a few stinkers, right? But the new artist could sell at $1.50 and even 20 thousand sales wouldn’t bring them close to the black. Twenty-thousand sales indicates very high interest, but even those musicians would be dropping out.
    So we could face a situation no better than what we’ve got now: corporations subsidizing talent for first-born contracts, and pre-established McMusic. That’s not what we want.

  • TMH

    I was initially very startled at the comment (quoted in Jeff’s quote) about “the black man’s CNN” — but once I reversed it, I kind of liked it. You know how CNN plays the same news story over and over, so watching for more than about 20 minutes is like listening to the same song over and over; you could call it “the liberal establishment’s rap”.