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A Tech-Econ Mashup with a Libertarian Flavor

Musicians Pass on iTunes

An article in the WSJ today reports that the music industry is once again failing to adapt to the changing marketplace, as more musicians are bypassing Apple’s iTunes store, opting to sell their music on physical CDs instead. The economic rationale behind this decision: since the launch of iTunes in 2003, consumers have shifted towards purchasing single songs for 99 cents a pop, rather than buying entire albums that retail for $10 – $15 (unless purchased through Columbia House, which charges an additional arm, leg, or occasionally a first-born son). Music suppliers say they make higher profits by selling entire albums than by selling one or two individual songs.

“In so many ways it’s turned our business back into a singles business,” says Ken Levitan, Kid Rock’s manager. Mr. Levitan says the rise of iTunes is far from being a boon to the industry; instead, he calls it “part of the death knell of the music business.”

Death knell to the music business? The music industry has indeed seen steadily decreasing music sales since 2000, when Napster invaded college dorms across the country and created a vast, illegal marketplace for free copyrighted music. However, attacking iTunes as a cause of weak revenues hardly seems fitting. iTunes (especially when paired with the iPod) provides consumers with an extremely easy and legal way to download digital music, deterring many would-be pirates from obtaining music illegally. Would customers be willing to pay for an entire album if the single song they wanted wasn’t available on iTunes, or would they illegally download the song from Kazaa instead?

The more appalling part of this story, however, is that the some music execs would rather blame their customers for wanting the wrong product, rather than updating their business strategy and meeting their customers’ demand. Consumers have effectively stated their preferences loud and clear: they want individual songs, not entire albums. And why not? Is this not how music has been marketed for the last several decades? We’ve all had the experience of buying an album that’s had one or two radio hits, excitedly putting the disc in the boom box, and then realizing that the album, as a whole, totally sucks. A common strategy in the music biz seems to have been to sell hit songs surrounded by “filler” tracks, rather than good and marketable musicians capable of writing many good songs. If music fans only want one or two songs from an album, their expectation is likely to be that the rest of the trac ks won’t be worth the money. The music industry ought to contemplate the part they’ve played in shaping that expectation.

Techdirt and the Washington Post both feature opinions on the topic that are worth a read.

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Filed under: Economics, Tech Biz, , , , , ,

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Whenever you find that you are on the side of the majority, it's time to pause and reflect.
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