Friday, June 19, 2009

Reverse Engineering Economics of Music Industry

A recent ruling in Minnesota awarded the plaintiffs (record companies) a payout of $80,000 per song.
The recording industry has blamed online piracy for declines in music sales claiming it has lost billions of dollars through illegal file-sharing.
Here's a novel idea: Let's pretend that the internet existed before music. If record companies attempted to sell/distribute music into the digital marketplace that was as we know it now, it would have been a joke to think that large premiums can be charged for something that can be so easily distributed.

Piracy has always existed, and will exist. But you cannot blame piracy as the sole reason behind the decline in music sales. Newspapers are facing even larger margin reductions, and it has nothing to do with piracy. The source for their woes is the same; when something of comparable value, or even greater value, can be acquired for less (less time, less money, less hassle), then there's no doubt that a company will face declining sales.

Apple's iTunes is the perfect example of being able to monetize an old business model. While the true costs of violating intellectual poperties may never be known, what is known is that Record Companies should be more focused on pushing products and services that are naturally competitive in the marketplace -- something they have neglected to do so for years.

1 comment:

  1. I like the newspaper analogy. To charge $80K per song is retribution is beyong excessive.