Knowledge@Wharton Online music’s winners and losers
This moronic article takes the current recorded music value chain as a given basically swallowing the whole RIAA party line), without even questioning the 99-cent-a-song pricing. Guys, this is a digital product. We’re talking about moving electrons and bits of content that has for the most part been amortized already. The cost is so low delivery is basically free on a per-song basis. In the face of changing consumer demand, no matter how hard RIAA members try to stick to their cartel solidarity, the same kind of pricing pressure that is destroying the long distance and international phone call troll tax is going to work in the music business as well.
Once you shave off the legacy overhead (e.g. through bankrupcies) a single song could cost a fraction of a cent, down to the point where it’s not even a meaningful pricing point anymore (i.e. the single song wouldn’t even be priced separately). But with an explosion in volume (thanks to price elasticity of demand I’m sure is there), more money could be made at the end of the day. Right now most people consume a very low amount of paid music, since they’ll listen to the same CDs over and over again or will tune in to free radio in cars and stores.
By analogy, how much is worth a drop of tap water? Not much, at least in Europe and North America. But you end up paying a significant amount of money to the utility company because of the gallons of water you use every day. Entertainment successes such as the Lord of the Rings (both in book and film) show there’s no limit to how much fans are willing to ingest of something they love, provided the price is right.
The article is even more stupid in claiming streaming is going to be the winning delivery format, while at the same time taking shots at "pirate networks" supposed to be frustrating to dial up users. Hey genius, that’s the case too for paid download products, while streaming is frustrating on ADSL already so don’t even think about dial up there. Advice to Wharton: hire people who know something about the topic they’re writing about, thanks. CNET themselves had a clue a couple weeks ago.