More Research Analyzes Zero-Sum Digital Music Game

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As technology continues to advance, the music industry is experiencing a shift that is causing the value of pre-recorded music to slide towards zero. This shift can be attributed to the availability of free MP3s on the internet, which is causing a decline in the demand for traditional physical music assets such as CDs.

For years, economists have been analyzing this possibility and applying basic principles of supply and demand to this highly disruptive transformation. Economic theory dictates that infinite supply and a complete lack of scarcity spells zero price points, and reality is beginning to support that assertion. According to Will Page, executive director of Research at the MCPS-PRS Alliance, “It is true to say that you can already see this happening. Simply look at the deflation in the price of a CD at your average big box retailer. The cost of an album today is roughly the same as it was 20 years ago.”

Moreover, a continued and accelerating decline in CD sales also supports the theory, as less consumer dollars are being poured into higher-priced, physical assets. This decline has been particularly pronounced in the last decade, as streaming services such as Spotify and Apple Music have taken off. With the vast majority of consumers now accessing music through streaming platforms, the need for physical music assets has decreased significantly.

Other theorists have echoed the Page assertion. In a recent discussion at MidemNet in Cannes, France, leading French economist Jacques Attali pointed to a pre-recorded market that will be very difficult to assign and impose valuations around. “The only thing that is rare is the time you share with the artist,” the thinker noted. That points to the capitalization of unique experiences like live concert appearances, a shift that pulls the emphasis away from major label revenues.

In that light, Page pointed to the possibility of crafting successful bundling strategies, something the industry is losing as consumers shift away from the pre-recorded CD. “For a unit of recorded music to retain an element of excludability, bundling might become the optimal strategy, as this increases revenues because the willingness to pay for the bundle is less dispersed than the willingness to pay for the components,” Page stated in the report.

One of the ways in which bundling strategies are being implemented is through the sale of concert tickets. Many artists now offer a bundled package that includes a ticket to a live show as well as a digital copy of their latest album. This strategy not only increases revenues for the artist and label but also provides fans with a unique, memorable experience that cannot be replicated through streaming alone.

Another potential strategy is the creation of limited edition physical releases that provide fans with a tangible, collectible item that cannot be replicated digitally. For example, many artists now release vinyl versions of their albums, which not only sound better but also provide fans with a physical item that can be displayed and collected.

Overall, the shift towards streaming and the availability of free MP3s on the internet is causing the value of pre-recorded music to slide towards zero. However, by implementing successful bundling strategies and focusing on unique experiences, the music industry can continue to thrive in the years to come.