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September 14, 2003


Dave F

of course, the music will die too (the guitar punk thing) since its success is 99.99999% marketing and 0.00001% talent and originality. Good thing. I despise "big music" (the record conglomerates) and the endless regurgitation of rock and roll's past to keep the gravy train rolling.

It's all over now, baby blue.

I used to be a rock drummer (in the 60s). Like most musos I know, I would rather listen to jazz or classical music, although there are obviously rock artists I still listen to. These forms will now start with something closer to a level playing field.

Classical music has already had to grapple with declining support (marketing budgets included). So today's leaner and meaner orchestral outfits, now opting in numbers for their own labels, are ready for the revolution, more so than the pop industry, which exists mainly to keep the industry fatcats in Armani.

The people who download "tunes" are not interested in music. They support the fad of the moment.


Let's be extra conservative and say that, without the promotion, this band only sells five times as many albums when the price drops 90-99%. I believe that is not too optimistic a sales figure.

This is always the engine of this kind of analysis; "conservative assumptions" that ain't. Your implied price elasticity of demand is -4.4; estimates for the media industry are usually closer to -2, which would have the sales increasing from 250k to 700k in response to a 90% price decline. And there are enough "specialnesses" in the characteristics of media consumption to suggest that even this could be an overestimate.

Think about it this way; if you owned 100 times as many albums as you do today when would you listen to them all? An album isn't really a consumption good; analysed at the most fundamental level it's a piece of capital equipment specialised to the task of home production of musical enjoyment. Which is a production process which needs inputs of capital, labour (pressing play) and *time*. And there is no substitutability between the time input and any of the others; it's going to take you the same three minutes to listen to "I Wanna Be Sedated" no mater how much it cost.

Add to that the fact that there are most likely increasing returns to listening to the same songs over again (for a fairly important part of the curve, anyway) and you begin to suspect that there is not anything like the degree of pent-up demand that you're assuming. A band which sells 250k copies is a band that 250k people like, would be my guess.

I also think that you're massively, massively, underestimating the importance of producers in recorded sound. And finally, you left out the main role of the music industry; it's actually part of the financial services industry. The main role of music companies is to provide equity finance for producers of music to tide them over that irritating period when they haven't got a product to sell, but they still need to eat.


Caught this post linked via Crooked Timber.

I largely agree with what you wrote. If big record labels die, all the better. The upshot of this is, I suggest, that there will be less rubbishy music, less crap on radio, and less big-label oriented music programming. As it is, Singapore radio plays tripe and kids grow up listening to tripe, thinking they like it very much. This cycle is reinforced when commercial radio and record labels point to the popularity of sundry 'N Syncs and Westlifes as justification for why radio continues to play the bilge it plays. "Because it's what the audience wants."

Yeah, way to go. Of course kids, having not heard better, listen to what 'cool' radio tells them to listen to. Not surprisingly the musical dollar flows in the same direction .. compounding the cycle. It was that way for me (I was stupid once). It was that way for many of my peers. And it will be that way for generations to come until and unless (a) radio finds a backbone (not likely) or barring that, (b) we somehow realize the Hayekian/Holbosian paradise through means foul or fair..

Considering that radio and labels are, in the main, responsible for such atrocities as Ms. Spears, assorted teen princesses, boybands, and the intolerable cheesiness of manufactured pop .. they have a lot of cheek to be suggesting that the audience want what they want as if they had no hand in it.

It seems to me that people are getting rich promoting an industry of bad music. Just picture in your mind's eye the nightmare image of aforesaid corruptors of youth laughing all the way to the bank. I say the sooner big labels die, the better.

Gee, there you have it: the sooner the better. So much for Cowen Volokh's 'premise'.


Lads, your utopia exists, or at least it does in my part of London. Pirate radio, independently produced micro-budget music, the lot. It's called "UK Garage". It's fucking appalling.


Perhaps this is the level at which piracy finally becomes less convenient than just paying for what you want.

I can't imagine any for-pay music distribution scheme being more convenient than something like Napster or Kazaa. It's not like you have to hunt down dealers in back alleys (though a situation of this sort could maybe be produced by aggressive legal action against file-sharers, the same way it works with stealing physical goods). The "conscience" motive will kick in and motivate buying over stealing before the "convenience" one will. And I'm not sure how much conscience music consumers will have by the time this new music industry structure is in place, if they're raised to feel that they're entitled to free music.


Hi, Dsquared. You certainly do know more than I do about all this. I was just making it up off the top of my head (obviously). It's interesting to me that anyone has any good idea about how a 99% price drop would affect a record's sales. I would be curious to hear an elaboration of what the relevant evidence and reasoning is behind your claim that my conservative estimate isn't.

Moving right along, I would certainly own a hundred times as many albums because I would buy them if it only cost pennies just to try them out. Then they would sit forever and I wouldn't listen to them. I think lots of other people would do the same, but I do appreciate that not everyone is a music buff. All the same, I think lots of people who have 10 CD's wouldn't mind having a 100. And people who have a 100 might not mind having a 1000. Again, I'm just making this up. Do you have any specific evidence to cite to the contrary? I'm not saying it's rational to own more than you can listen to. But people like to own things. I do.

I'm quite sure that a band that sells 250K at $16 a pop isn't a band that sells 250K at $1 a pop. That just doesn't make sense. I own hundreds of CD's and there are definitely hundreds of CD's I don't own that I would buy for $1. I'll bet people who own dozens of CD's would buy dozens more for a dollar. There are always people who like bands but don't own their music because CD's are sort of pricey.

You're right about the producers. I do know enough to know that the change I'm hypothetically exploring would create albums that just don't sound as good. I sort of didn't talk about that enough in the post. Musical culture would be very different if such radical changes happened. It would be a lot worse in some ways, a lot better in others. Like me owning 100 times as many albums with slightly lower productions values.

The financial industry angle is valid and I certainly should have mentioned it. I was thinking about it but thought I'd rattled on enough. Which is a silly thing to do when it means omitting essential points. Anyway: it's obvious that there would be smaller scale financial support available for smaller scale musical offerings. Small advances from small companies that have legitimate expectations of being recouped in penny sales. Maybe most people would only release their first albums on the internet, sounding kind of rough, and if they did OK, someone loans them the dough to make actual CD's. I guess I think if there's money to be made, someone will figure out how to make sensible bets for a cut.

I was thinking as well about other things artists could do: releasing a lot more material because there's less concern about flooding the market. Selling recordings of live concerts to pay for tours because collectors will want to collect. Just lots more product swimming around in the market, driving up those penny sales.

I realize these sorts of suggestions don't make a lot of sense for certain sorts of music and artists and so forth. But they make lots of sense for others.

I guess I should have emphasized more that the music business would totally change, and so musical culture would change. It isn't that the same stuff would get produced on a different financial footing. (More units for less profit per unit.) Obviously it would be the end of an era and the start of a new one. It just isn't obvious to me that the average consumer, or the average artist, should look to the new, very different era with a feeling of aversion. And if not, then why care if the industry dies?

Meanwhile, while I've been writing this, another commenter opines that there is no level at which piracy because less convenient than paying. I guess I doubt that. If you sold CD's for $1 you could make them impossible to copy (or inconvenient to copy.) If someone wants them on their computer, they buy the download. It's only pennies. And make the downloads inconvenient to copy as well. If you want them on two machines, pay twice. (It's only pennies.) If it's cheap to buy and inconvenient to copy, we're back to the word of making tapes and swapping them. It's just not worth the trouble for enough people to wreck the industry by doing it.

Yeah, if the industry could do that, they'd do it already. I guess I think people would complain less on copy restrictions if the stuff was so cheap. It's paying a lot for a thing you can't copy that leads people to complain. And I trust the industry to find ways to make copying slightly inconvenient. Which is all you have to achieve to get a few pennies out of someone.

I should add that I don't think this thing I'm talking about is going to happen. I think the industry will limp along as is. It's just a thought-experiment.

Dave Heasman

Records of "UK Garage" promoted by pirate radio, with massive distortion and innumerable "shoutouts" to discourage taping, are only available from a couple of specialist shops, and are not only appalling they're bloody expensive.

The classic Blue Note albums were made by groups of 4 to 6 grownups, largely with families to feed, who were paid for one day's rehearsal and one day's recording, at about $100 per day per man. This was in the early 60s. The capital cost of the studio was fairly high for the times I think, but could be duplicated now for $1000 per day. Not in Manhattan, probably, but (still) in Englewood Cliffs NJ.
These records are now available at about $6, and are still selling. To me, at least. In the early 60s I paid £2 1s 6d. each, but I only bought about 20. Now I have 250+.

So the Blue Note model might well still work. The Vienna Philharmonic model probably wouldn't, but then it currently doesn't. And I'd gladly surrender the Vienna Phil if it meant the death of Capital radio.


The most intersting aspects of this analysis are those that point out that the technology for marketing and distribution has radically changed. More than anything else, this is what will change the music industry.

Even if nobody ever pirated a song on the net, the ability to disseminate songs on the net will have an impact on the music industry similar to, but larger, than the effect radio had on it.

Prior to radio, the music industry looked nothing like it does today. That was because radio gave them a marketing arm that was orders of magnitude cheaper, easier and more powerful than they'd had previously.

Computer networks will revolutionize both marketing and actual product distribution in very much the same way. The new music industry will have to move most of its product on the net, regardless of the copyright debate.

And this same tech effect will be mirrored in the art itself. In the same way that an entire genre of music sprang up around the holy 3-4 minutes of a 45 single and the 40-50 minutes of an LP, new genres and revisions of the old ones will accomodate high-speed always-on data hookups and virtual storage.

I'm no futurist, but I'd guess that in a few years, the very idea of a physical medium for music storage will seem quaint. High-bandwith wireless will morph radio into a much more personalized service, with much lower startup and maintenance costs, and storage will be entirely virtual and fungible.

As it is, the industry exists mainly as a capitol renter, providing the front for the artists to produce, and the manufacturers and distributors to make and ship units. When all that's left of that model is the production costs. . .


Computers have made dishonest people way too lazy. What I hear in all these arguments about record companies' inflated profits and overpriced CDs and crappy music is a bunch of whiners too lazy to steal the old fashioned way, by passing it on from person to person.


dsquared, think about how many people have collections of more than 6000 mp3s vs. people who have more than 600 cds. 6000 mp3s works out to about two solid weeks of music, if you listened 24 hours a day. Of course, you won't do that. But if you listen all day at work, to drown out your yammering co-workers, you might have 8 weeks worth of music without repetition. Of course, you won't do that. You'll be in a black mood one week, and will listen to the Johnny Cash (RIP) cover of NIN's _Hurt_ twenty times. But even so, people have and enjoy collections as large as 600 CDs or 6000 mp3s. And more people would have collections that size, if it didn't involve an expenditure sufficient to buy a decent used car.


What I hear in all these arguments about record companies' inflated profits and overpriced CDs and crappy music is a bunch of whiners too lazy to steal the old fashioned way

Oh impugn my motives already. Please. Rooting for the demise of industry-propagated crappy music from death-by-piracy does not entail that I myself indulge in file-sharing shenanigans. In fact, I don't. So spare us the cliches about moaning, etc. It's old hat. I just don't like what the music industry is like now, and I'm happy to see it torpedoed one way or another. That is all.

Rich Puchalsky

Your proposed economics don't appear to match likely upcoming reality to me. Mostly because you seem to assume that people are going to be buying CDs.

Why would anyone buy a CD when they have an iPod equivalent device that can hold their entire music collection? All you really need is a single storage / playback device, and a fast Internet connection to feed it.

So, if that's the case, then the cost of a download is zero -- fast Internet connections are not priced by how much you download, they are generally a fixed monthly fee. Once you've paid for your storage device, and paid the monthly fee for your Internet connection, there is no more money to be made off of you by your purchase of recorded music. It's now all free.

If that happens, then recorded music just becomes an advertisement for your purchase of concert tickets and T-shirts.

Ted Barlow

I've got a post brewing on this, but I've got to say that I think that dsquared is right about everything (especially UK garage.)

Let me make two brief points that I hope to expand on:

- The $1 CD model already exists as the free CD model. You can go to mp3.com and download more free music, legally, than you could listen to for the rest of your life. There are about 20,000 CDs worth of music there, mostly from struggling artists trying to get their music out there. And yet, the vast bulk of file-trading is copywrited material from established artists.

I love music, but I've never downloaded a song I hadn't heard of from MP3.com. My time is worth more to me than this music, even free. If I've never heard it, heard of it, or given a reason to believe it's worth my time, I'm not going to download this music. And the download rates show that there are a hell of a lot of people like me.

- It's really easy to dismiss the value of marketing, promotions and advertising, because we're all sure that we're not affected by it. But we are.

Example: Prince has a long history of hit music and critical acclaim. He's a household name/ symbol. He moves from Warner Brothers, which has great marketing, promotion and distribution, to his own NPG label. Quick- name the last album that Prince released.

(Answer: NEWS. It came out in July of this year. I had never heard of it, either.)


It's interesting to me that anyone has any good idea about how a 99% price drop would affect a record's sales. I would be curious to hear an elaboration of what the relevant evidence and reasoning is behind your claim that my conservative estimate isn't

OK think about it in this ludicrously oversimplified way (note that here I am using all the ludicrous assumptions of neoclassical economics with none of the mathematical rigour. For a mathematically rigorous treatment, look up "Slutsky decomposition" in the index of your favourite economics textbook. For a realistic treatment, feel free to reinvent economics; I think things went went wrong about the time of Jeremy Bentham).

Let's take some semi-realistic numbers. Say that after tax you have $1000/month, and you spend $100 on CDs every month when they cost $10 each. So your consumption bundle is equal to $900 of non-CD stuff, plus 10 CDs.

Now the price of CDs drops to $1. You can now afford your old consumption bundle, and have $90 spare. There is a "wealth effect"on your consumption of CDs because you can now afford more.

Also, the tradeoff between your CD consumption and non-CD consumption has improved in favour of CDs. You might therefore be tempted to allocate more of the $900 non-CD budget to CDs. This is the "substitution effect".

Note first that the wealth effect can't really get you very far at all. You currently spend 1/10 of your income on CDs, so we'd assume that you would spend 1/10 of the gain from cheaper CDs on them (if this weren't the case, why weren't you buying more CDs before?). Your CD purchases only increase by $9 or 90% because of this effect.

So all the hard work has to be done by the substitution effect. In order to get to your fivefold estimate, you have to assume that a change in the terms of exchange of non-CD goods for CDs from 10:1 to 1:1 will motivate you to switch a further $31 or 3.4% of your non-CD budget from non-CD goods to CDs. That's a much larger substitution effect than is really plausible; to what extent are CDs really substitutable for non-CD goods? Say they started selling baked beans for 1p a tin (as my local supermarket did a couple of years ago). What percentage of your income would you devote to beans ...?

The point is that you're assuming that a 90% price change would result in a 500% volume change. If you think about it that way rather than "a tenth of the price -- ten times the volume", the numbers look less reasonable.

Your other points seem sound, but this one had a flavour of "If we sell a toothbrush to every person in China", "If we capture just 5% of the potential online funerals market" and other golden oldies from my brief involvement with the venture capital industry.

Russell L. Carter

DD doesn't understand music! What an odd empty space for such a smart guy.

"Think about it this way; if you owned 100 times as many albums as you do today when would you listen to them all? "

I don't listen to any of my hundreds and hundreds of cds more than once a month, and am happy to listen to them once a year, and if I listen to a cd once and I like it, I am happy to have bought it.

"Say they started selling baked beans for 1p a tin (as my local supermarket did a couple of years ago)."

Right. There are literally tens of thousands of varieties of canned baked beans...

Look. The physical CD media is atrocious and impermanent; I have severely restricted my buying these days because I hate the idea of watching my investment in a serious library literally erode. Better to wait for the next gen. Once the replacement costs are negligible, I begin to take a lot more risks, both on the physical media and the content. As for your comment implying that recording on the cheap is isomorphic to the London garage scene, that's wrong. Isn't Moore's law a wonderful thing? You still need a congenial space, but the equipment costs are getting pretty cheap. So what if nearly all that's produced is noise. That's why John notes there is going to be really important reputation market. (Actually, I'll just reup my subscription to Wired.)

Russell L. Carter

One more observation. By having had the good luck to stumble upon the competent indy scene right out of high school, I have had the extreme good fortune to have listened to a good sized fraction of the really interesting music recorded over the last 80 years in the course of 25 years of listening. And yet I still prize my net connection to WFMU most highly because... they play great independent stuff I have never heard before and certainly can't stumble upon by random selection in the local B&N. I'd really love to be able do the exploring myself with the help of those reputation vendors, as I could when I was on the receiving end of promos at WREK. But the stuff has got to be cheap. So it's entirely likely that a 90% price change generates a 500% volume change in my buying habits. A buck a cd would do it.


I've never studied economics, so I assume there's a good answer to this, but why don't you assume that there's a difference in spending 1/10 of your income on music because that's all you can afford, and because that's all you want? Me personally, my baked bean consumption is limited by the latter, but my music buying by the former.

I mean: we'd assume that you would spend 1/10 of the gain from cheaper CDs on them (if this weren't the case, why weren't you buying more CDs before?)

Well, because I only had $100 to spend on music.



A tin of beans?

I do understand (but not very much) about elastic and inelastic demand. Cutting toilet paper prices doesn't roll the rolls out the door in greater volumes. I do appreciate that cases of extremely elastic demand will be unusual. But it seems sort of obvious this is one of those unusual cases.

Doesn't the fact of rampant file-swapping demonstrate extreme elasticity of demand? Actual implies possible?

You write:

"You currently spend 1/10 of your income on CDs, so we'd assume that you would spend 1/10 of the gain from cheaper CDs on them (if this weren't the case, why weren't you buying more CDs before?)."

I just don't see why the assumption is at all reasonable. It's not psychologically plausible. The reason I'm not buying more CD's now is most definitely because I can't afford to. Well, it's a little more complicated. It's because, right now, doing other things with my money affords me equal or greater utility. But a 99% price drops sends all that out the window. (Suppose through the wonders of matter transmutaton you could have a 5-star restaurant meal delivered to your dinner table for $5. Would you do that several times a week? Yes. This implies a several hundred fold increase in demand. This is striking. Is is implausible? I think not.)

As you say, my argument suffers from the fact that it sounds like a lot of really dumb 'the internet can do anything' arguments and 'selling toothbrushes in China' arguments. Most of all it suffers from guilt by association with 'corporations always suck', which is just a mental tic that wishes it were an argument.

But the internet can spread information. So I'm in the clear there. The problem with the China arguments is that they usually depend on people wanting things they don't want, or having more money than they have, or building unbuildable distribution systems. I'm in the clear here.

And I'm not just saying the music industry sucks because it's mean and corporate and not very punk rock. I'm saying it's not very Hayek. It looks at artists A-Z, picks A and spends a bundle to draw everyone's attention to A, even though there's actually no reason to believe A is better than B. (And by 'better' I just mean: 'more people would like'.) Some band is always going to be the one that 10,000,000 people like. Some band is going to beat the power law odds that way. Record companies are not smart enough to PREDICT who will do it. So they spend MOST of their effort trying to BUY that result with marketing and promotion and sundry controls on artists and outlets. This is not evil - well, it's just business: maybe that's evil, but I don't want to push that line. Suffice it that these efforts are Soviet-style. And most consumers and most artists have little reason to want to subsidize expensive efforts to build musical command economies, since we would be just as happy - probably happier - letting nature take it's sweet course.

Go to your record store and see the flames of desire burning as people click, clack, click, difference-engine-style through the rows and rows of plastic cases. You won't see that in the bean tin section of your grocery. And there's no need to pay to stoke these flames, since the value of music is adequate fuel.

I reemphasize this isn't a prediction of immanent demise, let alone an argument for killing; it's an argument for letting die if it comes to that. If the beast complains, let it find a way to fix it's problems without supererogatory assistance from lawmakers.

Ted Barlow

There's an imaginary guy who makes $1000 a month. He's spending $100 a month on CDs (10 for $10 each), $100 on other entertainment, $100 on food, and $600 on rent. Then the price of CDs drops to $1 each.

This allows him to do enjoy your current set of preferences and have $90 left over. It's not terribly unlike raising his salary by $90 a month.

Since you don't know this guy, it seems like you'd be on shaky ground assuming that he would spend all of his new money on CDs. There's a chance that he'd rather go to the movies more. (On the one hand, every movie displaces more CDs; on the other hand, he might value the chance to go out with his girfriend more than he values new CDs.) Maybe he'd rather move to a better apartment, or eat out more. Maybe he'd spend $90 joining a gym. With any given individual, you just don't know.

The best clues that you have are his spending patterns before the price of CDs changed. He thought that CDs were worth 10% of his income, food was worth 10%, entertainment was worth 10%, and rent was worth 60%.

Now he has an extra $90 to spend. If you have to guess, it makes sense to guess that his new spending will follow his past behavior. There's no rational reason to assume that he'll spend it all in one place.


I'm not actually arguing that most people who spend $100 a month on CD's would continue to spend $100 a month on CD's after the fall. The assumption is, to the contrary, that revenue would fall precipitously. Let's take the model on which price is hypothesized to drop 99%. What I used to buy for $100 I now buy for a dollar. It's not reasonable to expect most people to continue spending $100. Is it reasonable to suspect they will, on average, spend $10 and buy 10 times as much music? Dsquared actually balks at the hypothesis that they will go from spending $100 to spending $5 for five times as much as before. I think it is reasonable to expect at least a five-fold if not ten-fold increase in sales. So revenue only drops 90% on a 99% drop in price.

I am hypothesizing on the basis of nothing but a knowledge of my own inner states, plus occasional and often intimate acquaintance with other members of my species. My impression is that when people only buy 10 CD's, it isn't because there are only 10 CD's they would QUITE LIKE to have. Watch people in record stores, picking stuff up, considering, putting it back a bit regretfully. If somone is even CONSIDERING and rejecting paying $16, isn't it likely that they would buy it for pennies?

I think the case is unlike giving someone a $90 raise, because you are fantastically marking down musical RELATIVE to everything else. So it makes sense to consume music RELATIVELY MORE than you did before.

Ted Barlow

But you realize that you can't generalize from your inner states to everyone else. After you pay off your other expenses, you will spend the rest of your money on CDs. I have no trouble believing that. But how many other people do you think that describes?

Let me go back to MP3.com. You don't even have to spend a dollar. You can get hundreds of thousands of songs for free. If personal demand for music was as elastic as you're saying, we'd all have hard drives full of thousands of songs from amateur bands that we downloaded, legally and for free, off of MP3.com. But hardly anyone does that.

(I should say that this is the kind of friendly, fun discussion that I quite enjoy. I hope that you're not feeling in any way attacked; if you are, I'll lay off.)

Russell L. Carter

"But you realize that you can't generalize from your inner states to everyone else."

Evidently so. There's a shitload of circumnavigating the elephant in the room here.


Me? Take offense? Skin like thick leather. Comments bounce right off, and everyone's being quite polite anyway. Don't give it a second thought. I realize I did use a few ALL CAPS in my response. I guess sometimes people do that when they're agitated. But I am, as you say, having a friendly, fun discussion. Thanks for dropping by, glad to met you, Ted. I think I leaned a little on the caps lock key only because I'm honestly rather astonished that people have such different intuitions about likely buyer behavior in this case. This isn't frustrating to me in any way. My intellectual dignity isn't on the line. It's just ... surprising. I'm a philosophy prof, of course. I'm quite used to people being absolutely sure things are 'obvious' that no one else thinks make any sense. I guess this must be a philosophical problem I've dredged up. It's rather an interesting question, at any rate, in an abstract way: how many albums would you buy if the price dropped 99%? It may be that people are envisioning the technical incidentals a bit differently and this is affecting their intuitions. I'm imagining you log into a kind of system and you've got these 'easy-as-pie-one-click-buy' options. So that you might, for example, read an online source containing 50 reviews, of which 8 sound vaguely interesting. The links are right there twinkling at you. You buy all 8 for about 2 bucks. (What's 2 bucks?) You listen Maybe you like one a lot. The other 7 you never listen to again but you own them now. I guess it seems to me people would do what they don't do now: buy on the puniest sort of impulse. And I realize most folks don't read online review sites. But crafty folk will manage to get tempting offers before them: wouldn't you want to buy a bundle of 10 classic jazz albums for a dollar. Sure. Click. Maybe you never even listen to them. Not saying it's rational. Just think people would click. The clicking has to be made very easy, of course. The sites that offer the clicks have to have EVERYTHING there for you. Their model is: CONVENIENCE, so the least little itswy witsy itch of desire converts into a purchase just like that. And piracy needs to be inconvenient. Not impossible. Just that little bit of extra bother to organize, so that people with jobs don't bother to do it.

colin roald

Let me go back to MP3.com. You don't even have to spend a dollar. You can get hundreds of thousands of songs for free. If personal demand for music was as elastic as you're saying, we'd all have hard drives full of thousands of songs from amateur bands that we downloaded, legally and for free, off of MP3.com. But hardly anyone does that.

But this isn't quite the same situation as John is talking about, is it? Right now, the free stuff on mp3.com is hardly fighting on a level playing field.

Speaking as someone who is hardly a music fanatic (I buy a CD every month or two, on average), I buy and download stuff that I've heard before. In 2003, this is mostly stuff I've heard on the radio, and *that* means big-label music. In a world without big labels, then everything is fair game. Something like radio will presumably still play stuff, and I'll still buy copies of things that I hear that I like. I'm sure there's plenty of stuff on mp3.com I'd be quite happy with, if someone told me what it was.

As far as the implicit poll question goes, I'd say there's no doubt that in a dollar-album universe, I'd buy more music than I do now -- two or three times as much, at a guess.


since you brought up albini, i though it wouls be relevant to share an arguement i had with him about the future of music on his message board.


and a piece that he taped for NPR a mere week or two after our discussion.


great discussion, btw.


While I don't have much to offer on the economics front there are a couple problems I personally have with 600 CD style projections and claims that we can get whatever we want in a record store.

I know that I often can't find the music I want in a record store, or they don't stock enough of the album I want, and this is with each copy worth 15 dollars. Suppose each album is worth 1 dollar. Even if they eliminate the pointlessly large jewel cases and what would probably be not-cost-effective theft protection systems, we're assuming a large increase in the number of sales, so an increase in the number and quantity of CDs in an already limited store space. I am not going to suddenly be able to find some obscure local Boulder band while living in Minneapolis. So I have to buy them off the net. If the band embraces the mp3 distribution system, that's great, but if they burn their own CDs and sell it for 1 or 2 bucks and don't have hosting they benefit from (because hosting these download systems will be a scam too), there is the messy problem of shipping and handling, which tacks on an additional impediment to my purchase.

It's these bands which make up my second problem: there are some artists that I have not been able to find on file trading systems, even on IRC. Will these holes be patched magically? Will Best Buy stock them? If they're only available online, what would I do without a computer? Some people actually don't own them.


Doesn't the fact of rampant file-swapping demonstrate extreme elasticity of demand? Actual implies possible?

Hrrrmmm, not really. Elasticity is a ratio, so funny things happen to it as the price gets close to zero; there's quite a lot of difference between 1/0.01 and 1/0.001. Look what happens to these services as soon as there's even the rumour of having to pay even a couple of cents per download and you see that as you get up to numbers which make your calculation above add up for the artists, you're likely to end up at more normal elasticities.

I still think everyone's overestimating how easy it would be to produce decent quality music for a tenth of the cost of producing it now. My real worry is that John is correct to forecast the decline of the music industry, but that the consequence will be vast amounts of worse music.

Look at modern furniture compared to that of the past for an example of what happens in a world where the assumption that more equals better takes control of a creative industry.


I do concede this much. My plangent 10-fold increase in sales was not conservative. I think it's reasonable, but it's not conservative.

I guess I think the problem with the 'pay a penny' model is that it has never gotten up and running to date. The reason people baulk is not that they actually wouldn't be willing to SPEND a penny, but the credit card forms that must be filled out initially cause you to hit the back button. Too boring. If it really became the norm of payment, however, eventually everyone would have their account set up and they would be ready to hit the penny button. And then I think things would really rip, sales-wise. It would require the demise of the system as we know it.

Now why would the music be so much worse, however? I think it would just be different. Slackery half-musicians who require million dollar production to sound half decent would have no chance, of course. Musicians would have to be efficient performers, working for a living wage, as in many periods in music's past. What sorts of music do you like, Dsquared, and in what ways exactly would it get worse? Are you worried about bad sound quality, or failure to hire a large brass section, or total absence of Hollywood over-budget glamour, or what? I can think of lots of possible sources of concern. Which, exactly, are yours personally ... if I may ask a personal question. (Since we don't actually know about anything but ourselves in this little discussion: we are just speculatively re-ordering the macrocosm as per the dictates of our little microcosms - well, what about your microcosm, Dsquared? What's on your playlist that you fear will go away?)


My playlist is basically and tragically, the entire Wire magazine bill of goods at the moment. A load of Kronos Quartet, a few weirdo ethnomusicology records and a load of Steve Reich. Also, I'll tend to listen to anything written between 1929 and 1939 as I have a minor obsession with that decade. Hate jazz and find myself increasingly unable to listen to electric guitars without pain. I also listen to a lot of UK Garage, unwillingly, because the local pirates have set up too close to GLR.

Bad sound quality is my chief worry. Specifically, bad recording quality of acoustic instruments. The point is that to properly record, say, a piano, so that it sounds like a piano rather than someone hitting milk bottles with a ruler, is an expensive process, for reasons which are basically not going to be changed by Moore's Law. It's a process that's highly intensive in skilled labour and time. Therefore, it's a production process that needs to be financed, which will require financial services companies which look not unlike record labels. Not necessarily large record labels, and not necessarily companies which make their returns out of copyright. But I am very wary indeed of proposals to upset the economic base of production of music which rest on the assumption that this will have no effects (a fortiori, only beneficial effects) on the goods produced. I include by citation the works of Walter Benjamin, which I have not read.

I'm also slightly worried about cultural fragmentation. I don't see how the model you're suggesting is consistent with the persistence over time of any shared cultural experiences at all, if indeed it's a stable solution (which I doubt; if there is any sense in which it pays musicians to be more popular rather than less, then there will still be a role for publicity, and I do not necessarily think that the eventual equilibrium would necessarily involve less promotional activity rather than more).

I have a different perspective on micropayments, but I think I'll put it up on CT as it probably needs a bit of explanation.


Let's assume the "music inductry" dies. Free downloads beat it. Then there won't be any albums. There will be no reason to go into a studio to record an album. The cost of doing so will be prohibitive, since there'll be no way of recouping the money. Bands will still make singles. Because they'll need something that can be played on radio, so people will hear them and then want to come to their concerts. Bands will focus on concerts, which will be how they make their money. Managers will budget for some degree of "publicity" overhead, which will cover recording singles, paying the "independent song promoter" to persuade radio stations to play it (believe me, you can't take sleaze out of the music business), and more traditional forms of advertising.

You may have difficulty finding enough material to fill your newest ipod.


As an experiment, visit the CD pirate village in front of the SFOR base near Butmir airport in Sarajevo where CDs cost €2.5 each regardless of whether they contain a copy of Photoshop, Louis Armstrong or the entire works of AC/DC as MP3s and see what takes your fancy. Add in the possibiity of some of the dough going to the artists and tenfold doesn't seem unrealistic.


On the subject of properly recording classical music, it does indeed require skill and care but my college room mate was able to set up a chamber and choral music record company as much as ten years ago with minimal investment (£2,000) and splendid results. He had no technical background and his largest costs were production of CDs. With simpler distribution and more up to date equipment the costs for a musician are likely to be rather less than their The amounts of money were small and it was a labour of love but the costs of recording can be overestimated.

Robert Nagle

I recently wrote an essay on the subject on my site sharethemusicday .

A few thoughts about things mentioned here.

At the moment, more bands are putting more songs on the Net than on CD's. And they are free. The momentum is to have all songs freely available. It just doesn't make sense to hold back anymore.

The problem is not technological but journalistic. Tim Oreilly wrote that artists worry more about obscurity than piracy. Quite frankly, media outlets to promote bands are limited. That's why I wrote a music weblog , because so few places exist to share recommendations. Interestingly Amazon allows people to make lists of free downloads and write comments on something available for free, but I'm not sure how long this will last. (Another recommendation site is gods of music .

Nagle's Law: As storage devices increase in size, so will our unquenchable thirst for multimedia content. Instead of elasticity of demand, we should be talking about elasticity of taste. I really don't think there is an upper limit to the number of musicians we are able to enjoy.

When speaking of music, people often act as its characteristics have a lot in common with other content. But music is unique. It benefits from replaying, and playing it once creates the desire to hear it again. Contrast that with DVD's, where watching it once is enough. That suggests suggests that you determine the value of the mp3 not before obtaining it, but afterwards. Because tipping occurs after acquisition, then it is an ideal method of compensating artists.

(In the past, value was taken care by hearing the song on the radio, but nowadays, radio playlists are not broad enough to expose the individual to anything new).

Unfortunately, there is no infrastructure to compensate artist voluntarily except for perhaps musiclink or paypal. And p2p doesn't help consumers in providing impartial and user-moderated recommendations. It only is a file delivery mechanism. Even musichosting sites like mp3.com don't make it easy to artist, even though it would be a relatively easy (and cost-free)feature to add. Somehow nobody has told musicians that no one buys CD's anymore. Mp3.com sells its service by saying it will help new artists get a deal with the label. But that just isn't happening in appreciable numbers.

Robert Nagle

Sorry, the URL is sharethemusicday.com.

Robert Nagle

Ok, another apology. I reread my post and gave up with nearly a dozen typos. Really need to proofread better. Feel free to dismiss my thoughts as illiterate fluff. :)

Russell L. Carter

Two quotes:

"(Actually, I'll just reup my subscription to Wired.)"

"My playlist is basically and tragically, the entire Wire magazine bill of goods at the moment. A load of Kronos Quartet, a few weirdo ethnomusicology records and a load of Steve Reich."

It's with a huge smile that I admit that DD is trotting out some heavy duty knowledge that batters, if not defeats, the original claim I had:

"DD doesn't understand music!"

because in fact he gets the right name right: "Wire". Just so you know, on my walls are a number of Wire photographs from the 80s.

But Steve Reich? Oh good lord. Next thing you know we're off on the Wire drinking game. (I have a number of Steve Reich recordings...)


Just because I listen to this stuff doesn't mean I understand it ...


Dsquared, I'm a bit confused about your concerns over cultural fragmentation. And I think my confusion is: what are they?

Obviously this is quite distinct from your concerns about sound quality. (The culture that mixes expensively sticks extensively? Naww.) And the day our culture is counting on Steve Reich and the Kronos Quartet to hold it together is the day every atom of our culture flies apart from every other at near light speed. So it isn't that you think YOUR playlist is social glue.

The Culture Industry, as Benjamin and Adorno and other lesser Frankfurters would wail, is a travesty of true spirit and culture. I think they are a bunch of sillies, But surely they would be on my side here: enemy of my enemy - the Music Industry - is my friend.

Well, anyway . . . what's worrying you? I do appreciate that your worries here are 'slight'. I'm just curious.


Well exactly. Society will fall apart if it's left to rootless cosmopolitans like me, constantly recording our Steve Reich CDs onto tapes so that we can play them back through the left speaker while listening to the same album 2 seconds delayed through the right speaker.

(more serious response forthcoming)

dave heasman

Russell Carter mentions WFMU. This "radio station" has a Web presence and is slowly growing by word of mouth. It's listener-supported and features records, in-studio performances and fairly tendentious talk. It covers some of Daniel's likes, ethnomusicology yes, long mainstream modern classical stuff no, 20s & 30s quite a bit.
It covers more of my likes - 60s garage pop,all jazz, 1917-current, modern song, the odd bleep and clunk. But the big thing about WFMU is its archives. It archives nearly all its shows. Has done for 3+ years.
The WFMU archive almost certainly contains music I would prefer to my current record collection - which is unfeasibly capacious. It would be no hardship to never buy another CD, and just pick 5 hours of WFMU output per day, leavened by a bit of Radio 3 and (what I too still call) GLR. However, I'm irrational, and have just ordered another 100+ CDs from www.zweitausendeins.de, as you do.

I don't suppose the WFMU model is infinitely scaleable. Some people actually prefer a tight rotation of cheerful dross which unpaid disc jockeys aren't incentivised to deliver, but even so there is a growing threat to current methods of production & distribution. The record companies don't seem to be doing anything to protect their interests except to sue what are probably their biggest customers. It seems odd they don't employ anyone who has a clue about basic economics.


There's so much cheap, legal music available through the internet I can't fathom ever again buying a CD. Not an early adopter of anything, I didn't get around to mp3s until this past January. Since then, I've downloaded over a thousand albums. That may sound like a lot if you're using a phone modem, but with a broadband connection, downloading 500 songs between lunch and dinner is quite doable.

Somewhere up the thread, someone said that heavy music downloaders were just being trendy. Perhaps some are, but I think it's a musicologists wet dream. For less than a penny a song, I've accumulated a collection of vintage music that it would have taken me more years than I have left to find and buy, if I would have had the time and money to begin with.

An additional benefit has been the discovery of new and older bands that I never heard of before. I've been lamenting the dearth of good music for three decades and one day discover that it's been out there all the time, tucked away on independent labels, rarely played over the airwaves, found only in specialty music stores.

For me, its been a musical reawakening. Yes, I download more than I can possibly listen to right now, but I have years of retirement ahead of me to enjoy my ever growing collection.

I have also come to realize that the major record labels are complete dinosaurs. Their power has always been based on promotion and distribution. The internet has taken huge chunks out of that paradigm. I ask, who needs them?

Artists certainly don't. With the exception of the manufactured nontalent currently on the airwaves, all the mid-level bands would do better to invest in home recording equipment and go straight to mp3s and a website of their own.

Besides, playing LIVE music is what music should be about. Like David Bowie recently said, and I quote loosely, "in the future a recording will be the advertisement that draws the public to a band's concerts."

Marc Brazeau

I would argue that the music industry is missing the point. The point is whether they will master digital technology or not. The mp3 and P2P are simply too organic expressions of digital technology to fight. Independent labels have been much nimbler in embracing the technology and have been thriving while the majors have been floundering.

I've written a fairly long piece which has been well recieved that I'm fairly proud of at http://marcbrazeau.blogspot.com/2003_07_13_marcbrazeau_archive.html#105846667904708269

It covers suggestions for the majors, opinions of indy icons, management secrets of the grateful dead, bootlegs and mash ups: the current UK amateur dj craze, stax and motown and a few other suprises.

Marc Brazeau

I would argue that the music industry is missing the point. The point is whether they will master digital technology or not. The mp3 and P2P are simply too organic expressions of digital technology to fight. Independent labels have been much nimbler in embracing the technology and have been thriving while the majors have been floundering.

I've written a fairly long piece which has been well recieved that I'm fairly proud of at http://marcbrazeau.blogspot.com/2003_07_13_marcbrazeau_archive.html#105846667904708269

It covers suggestions for the majors, opinions of indy icons, management secrets of the grateful dead, bootlegs and mash ups: the current UK amateur dj craze, stax and motown and a few other suprises.

Marc Brazeau

The url for the above post didn't print properly.

Click my name on this comment, if you are interested.


radio free srini

yeah, but shellac rules! who could forget that article either?

i am bizarrely sitting in a business school microeconomics class as i write this. i think i'll bring it up in class tomorrow. mind your p's & q's.

what it comes down to is that CD's and record sales from the artists' perspective are basically marketing devices to get people to come to shows and buy merchandise - revenue streams that benefit the artist directly.

i would be very curious to see dischord's books. the major labels and the rest of the industry have always artifically inflated the price of their product. remember when CRASS sold LPs that said "pay no more than five pounds" on them? indie labels and the bands on them are making a killing - and good for them! i honestly think albini's article altered the fates of many great musicians by making it easier to follow their instincts in saying "kiss off" to the suits. and look at the generation of bands that signed post-nirvana - how many of them stood the test of time? for every green day or offspring there are a thousand smoking popes or sister double happinesses... i just saw teenage fanclub last week, who have long since fled their major label for indie MERGE and seemed pretty stoked!

i wish they'd make a time limit to music copyright so i can put my covers record out :( here's a sonic youth cover: http://www.radiofreesrini.com/mp3/dirtyboots.mp3

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