As free MP3s continue to float around the internet, the value of pre-recorded music may be steadily sliding towards zero.
Economists have been analyzing the possibility for years, and applying basic principles of supply and demand to a 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. “It is true to say that you can already see this happening,” opined Will Page, executive director of Research at the MCPS-PRS Alliance, in a recent research finding. “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.
Other theorists have echoed the Page assertion. In a recent discussion at MidemNet in Cannes, France this year, 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.