what is the value of music?
There’s a post on TechCrunch today by Michael Arrington that really got my blood boiling. Arrington writes:
The faster music labels realize their massively profitable days are over, the better it will be for them, as well as the bands they represent and us, their customers. Digital music sales are not going to make up for lost revenue. Suing their customer base is not going to make up for lost revenue. In fact, absolutely nothing is going to make up that lost revenue. The industry, revenue-wise, is going to continue to shrink.
The problem is that their main product, recorded music, has a zero marginal cost to produce. It’s so cheap to make that consumers can actually make it themselves. And they do. A billion songs a month are downloaded, mostly illegally, from P2P networks.
As the marginal price of recorded music continues to fall towards zero, its natural price, bands will need to make money elsewhere. Live concerts will become more and more popular, and will be the largest source of revenue for many artists. Recorded music will be used to promote those live events. Popular artists will still make a very, very good living. Others will have to decide if love of their art is enough to keep going.
The idea that the music industry needs to change its values and reconsider how it makes money and distributes records is not a new one, and yesterday’s Wall Street Journal report that CD sales are down 20% in 2007 certainly illustrates that. And yet, in this post, and in many around the web, there is a flippancy towards the creation of art (in this case, music) that reveals how little people understand the trials artists endure in the process of creation. There’s a comment by Kewtr on the TechCrunch post that does a great job of vocalizing that:
What’s really interesting is the range of justification for doing something morally and legally wrong, something that affects a band that people ostensibly like. The marginal cost going towards zero doesn’t mean the consumer gets to decide to steal it. The creator should have the 100% choice to sell their art for whatever they want. It’ll sell or not sell accordingly, but this is one of the most pathetic things ever.
I think people must believe they have a right to anyone’s creation at whatever price they decide is fair. They don’t. But people don’t decide NOT to buy a particular piece of music if the price is wrong, they just take it, because there is no replacement, music is unique. But both sides of a transaction have to agree for it to be a transaction, or else it is something else completely…
By the way, for all those people that think the music business is overpaid or whatever, go ahead and start up a band, and try promoting it, and producting [sic] the album, and then distributing it. There has to be just a pile of cash at the end since the prices are so unfair. Enjoy.
While capitalism and our own peculiar consumer culture has certainly commoditized music — indeed, I am employed by a music retailer, even! — music itself is not a commodity. Art is not a commodity whose value can easily be quantified, as Kewtr rightly states.
We need to restate something Arrington wrote: “The problem is that their main product, recorded music, has a zero marginal cost to produce. It’s so cheap to make that consumers can actually make it themselves. And they do.” But here he acts as if the cost of music is a recording budget, and that everyone can simply fire up GarageBand and make the record that they want and a record that we all want to hear.
The reality is so far from this it’s not even funny. Artists need money for creation. They need time. They need opportunity. They need to sell copies of their album to enable them to have the means of production for another album. Live music is not an answer. Look at how many live venues are shutting down across the world.
Raj on the TechCrunch post points out that concert revenues were up 35% last year — revenues, not attendance. That’s a product of insanely high ticket prices, not some sign that people are getting off of their couches to experience live music. Ask some indie band if touring is 35% easier now than it was a year ago. Ask them if they’re getting 35% fatter off of driving 500 miles a night to play a gig. Their answer will likely be nothing more than a dumbfounded look if you’re lucky, and a slap in the face if they are being honest.
The act of consuming music is very different from the process of creating it. It is far from just to judge the value of music based on how you consume it; the value is tied up in the process of creation, in the difficulties of writing a song, recording it, making people want to hear it. That is work, and the marginal cost is much greater than one that could be read on a balance sheet.
Sure, the record industry is in trouble. There are ways it needs to be dramatically fixed. But if the starting point of argument is that music’s “natural value” is zero, then we’re dooming ourselves to no music at all. And what could be worse than that?
Edited to add that Kali from the Affair posted a great comment on the Idolator piece on this topic. Read it here. A sample:
As a musician, I can tell you there’s a lot about music - and I’m talking making it here - that’s plenty costly. Maybe the authors of these sorts of pieces are unaware that manufacturers continue to steadfastly refuse to produce CDs for free. Car companies have yet to waive the costs associated with purchasing a van (even when it will be used for touring the country(!)). Food? Shelter? Yes, grocers and landlords still demand money in exchange for nourishment and housing. Even the most essential parts of making music - the, um, instruments, stupid - aren’t free (or cheap, for that matter). Have you been to a Sam Ash or a Guitar Center lately? There’s not a lot of handing out of amps and drum heads going on, and it looks unlikely the policy on that will change anytime soon.
Upon reading the various news that’s popped up recently, including the post about ‘eMusic for Sale’ in the eMusic Forums, I was disturbed with the way people are passing off the Industry as solely a piggy bank for greedy bands and record labels who have elaborated a giant prank on the consumer. My mind was presented with some questions and I wrote about it here: http://burnboy.net/index.php/2007/03/22/pristine-coasters/
It’s bias, contradicting, and based on very little technical understanding of the actual honest to God music industry, from the point of view of a pretentious music nerd (me).
Having said that, give it a read. Worth at least a laugh.
“marginal cost is the change in total cost that arises when the quantity produced changes by one unit”
I think Arrington was talking about the cost of re-producing music and not the production costs for creating it. Once a song is recorded, perfect digital copies can be made for free, regardless of how much effort was put into creating that first copy. And with the technology available to bands today, production costs are going down too.
Somehow, sometime, someone needs to find a way to bring the reality of the market and the ideals you eschew here back together. eMusic does it best out of any of the “legit” music services by having some respect for its customers — the ones who still choose to acquire at least some of their music legally.
But very truthfully, Pandora’s Box has been opened here and it’ll never, ever be shut again. The solution Bob Lefsetz is always blabbing about — monetizing p2p at the ISP level — is starting to get some traction (I was reading somewhere that some Chinese universities are trying it, with some American institutions to follow). Track every download. Distribute the monies in an ASCAP/BMI/SESAC model. It’ll be the most accurate accounting the music business has ever seen and the artists will (finally) get paid. More music for more people, artists getting paid what they’re owed…it’s a winning proposition for everyone.
Well, I’m a bit late to the party on this one but this is a great piece on a really important subject. The notion that the marginal cost of producing and shipping media (not the contents of the media) is indeed driving consumer change. But I think there is more to it than that. The way the majors have brought music to the market has fed into this as well.
You are absolutely right that the decreasing marginal cost of production does not mean diminished pricing rights of the artists. Ideally, the near-zero maginal costs of production and distribution should increase artists’ options in how to market their music.
No longer will bands be required to go through the brick and mortar music industry. Portals like emusic essentially allow music to be delivered directly to the consumer. How long will it be before a digital only label appears (I’m not necessarily talking about netlables here, either). CDs are a dying format, so eventually somebody will be all digital.
What I find ironic about the whole dust up is that the major labels have victimized themselves. The marketing of ‘hits’ as opposed to long-standing albums which merit repeated listening over time has fostered the notion that music itself is disposible (indeed, most of today’s pop is utterly disposable). For consumers in their teens and early twenties, downloading music is seen as harmless in part due to the ephemeral nature of the music itself. The RIAA can point to the number of times a Gwen Stefani hit has been shared - but how many people are listening to that song 9-12 months down the road.
The major labels spent a long time feeding at the through of pop. Extensive and aggressive marketing rolled songs in and out of popularity - at the obvious expense of permanence. I’m not saying this makes it right, but it is a factor.
What is the motivation for a consumer to buy a material good when the content therein is of only temporary interest. I don’t spend anytime in the P2P ecosystem, but I’m guessing that the number of downloads is disproportionately tilted toward pop.
How many people go online to steal a Miles Davis album, or to find one track from the latest Explosions In The Sky release? Probably very few. If you are interested in these artists, you are likely looking for the whole enchilada and you probably want to obtain it legally.
So again, not to say this makes it right - but I do think that what is being shared on P2P is probably a reflection of the perceived permanence of the content in question.
cost theory is but one measure of value. and critics play with it in all sorts of ways - for example, i could say “howard stern is the cost of an xbox away from being forgotten” - implying that all those sternies could buy an xbox and be so captivated as to never turn on stern again.
a few years ago i bought tix to see the CSO and when my wife found out the cost, she staggered and said “you could have bought 12 cd’s with that money.” but after going to the performance we were both thrilled and easily laughed off the idea of using the money for cd’s over the performance.
arrington said nothing that diminishes the intrinsic value of music, imho…he just seemed to prove he doesn’t want to talk about it.