Why is Music Cheaper Now? It's as Simple as Supply and Demand
November 4, 2010
Brian Franke in Music, Music as a Business

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:

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.

Article originally appeared on Music Think Tank (https://www.musicthinktank.com/).
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