About a month ago a blog post titled “Why Your Art is Cheaper Than a Latte” appeared on the Digital Music News blog. In it, the post focused on the singer/songwriter Sufjan Stevens, and the reaction he and his label had to the declining price of music (CD or digital). I’ll talk about Mr Stevens’ reaction later on here, but first discus why music has gotten cheaper these days.
Remember that economics 101 class you took back in college and the whole supply and demand graph? I know, it was boring, but it can explain this reality. If you never took economics, I’ll explain what I mean (I used to teach the class). To refresh any memory, I put what the supply and demand graph looks like below.
Here’s your economics 101 review. I’ll make this as simple as possible. The supply and demand graph represents what’s going on in any type of market–we’re talking about the market for recorded music. The demand curve represents music lovers, the ones buying music. And the supply curve represents the companies and artists putting music out there. And then you have quantity on the bottom and price on the left.
As the theory goes, a price for a product is determined by how much in quantity is being demanded and supplied over time. So for example, when there’s a lot of demand for something, people will pay more to get it (think about the housing market a few years ago) especially if there’s not a lot of it around. And the opposite is true from people supplying a product, the more of something you make, the less demand there is for it and people don’t want to pay a lot for it since they can probably find it cheaper elsewhere or wait out the market until the supplier has no choice but to drop its price to get rid of it.
How has the consumption of music been effected by this? Well, let’s go back 20 years or so to when everybody was buying CDs and the Internet was fairly new. Where could you buy your music in 1990? Not on the Internet. Most often your local music store or a chain retailer, sold music. Your choices where to go were limited. And depending on what music you liked, the store may or may not have had what you wanted to hear. And so people were willing to pay more for music, and we did–paying up to $18 for an album. I also think when the CD came out, there was a bit of a fad to it because it was the highest music quality one could hear, and so people bought into paying more for that benefit of the music.
Fast forward now to the last 10 years. The mp3 file was introduced, people could share music more easily with each other, smaller portable devices were able to store more music than ever before, and the Internet became a key hub for anyone wanting music or trying to distribute recorded music. Let’s quickly talk about each of these events and the impact on supply and demand:
- File sharing: Whether you admit doing it or not, millions of people have used and continue to use file sharing to download there music. When I was in college it started with a little piece of software called Napster. We all know what’s happened since then, Napster was shut down as a file sharing space, more of them showed up anyway, so the RIAA has gone after people for copyright infringement. But the logic from the music lover was: why pay the $18 for Hanson’s album when you could get it for free through some other means? This proved one thing and one thing only, people wanted to consume a lot of music. Lots of demand.
- Technology: From the consumer standpoint, if you didn’t have a computer, you couldn’t download music. And if you didn’t have access to the Internet, you couldn’t find it easily. More and more people have a personal computer and Internet access than they did in 1990 as they’ve become more affordable. Computers have replaced our CD storage units and the Internet is quickly replacing the local music store. From the standpoint of anyone making music–be it a studio or just someone at home–you could record top of the line recordings more cheaply and more quickly. Software like Apple’s Logic or Garage Band and plug-ins that emulate guitar sounds were at your fingertips. More people started creating music and putting it out there. This lead to more competition and a greater supply of music, so if you were selling your music, independently or not, you were more likely to sell it cheaper so it could get into people’s hands.
- RIAA Price Gouging: There is now ample evidence that that Hanson CD you bought for $18 was not actually worth that. The RIAA, who represents the now four major labels, was accused of price gouging/fixing consumers and had to settle in court. Which means that where that supply and demand curve intersect was actually smoke in mirrors. In other words, if the market determined the real price, you would have paid less than $18 during the CD-era. Due to that, there has been some backlash and likely a correction in the market to where prices should be over the last 10 years.
- Greater Access and more choices: iTunes came on the scene in 2003 and remains the largest catalog of songs to purchase for download. Amazon now has a store and there are hundreds of other stores for any level of artist. Musicians can sell their music off their website or use a widget to promote themselves that did not exist before. All of these methods of putting music out there has saturated the entire recorded music market as a whole, leading to (again) a greater supply of music. Which leads me to my last point.
- No more mass music market, Increase in niche markets: The way just about everything was sold, through the mass market, is dying. The mass market pretty much said, everyone needs to have product XYZ. In the mass marketing days of music, you had less choice so people more or less listened to a lot of the same types of things within the genres of music they enjoyed. Today there are niche markets for music and it’s not pumped out in a factory mindset for the masses to consume. This phenomena has made it difficult to know what the price of a song is actually worth. There may be 10,000 indie rock albums released in 2010 and 5,000 jazz albums. Two different levels of supply. But if you listen to indie rock, you may be willing to pay $1.50 per song because that’s how indie music lovers value music in that particular market. In jazz, you may be willing to pay $0.75 per song. The question has now become, is there still a standard price a song or album is worth? Standards is the old mass marketing thinking and it’s starting to not apply anymore.
To close this out, I’d like to go back to the Sufjan Stevens reaction that got this all started. He and his label’s comments pretty much say, it’s not fair that Amazon can offer his album for $3.99. Although they make a point that it will help attract new fans, they all but say to boycott Amazon. And he comes off as somewhat complaining that the album cost a good deal to make, so don’t short change him. What Sufjan Stevens fails to recognize is that this is the market talking. Sufjan Stevens does not entirely control even his own music market. It’s a two way street, supply (Sufjan Stevens) and demand (his fans and potential fans).
Considering all the new factors I hashed out, it’s not a surprise music is as cheap as a latte. And don’t think for a moment it’s going to go back to when albums were $18.