Good point. I don’t think most people care, if they are buying the music that is played on devices that support mp3′s, like players or the computer. Even with high quality headphones, I can’t tell the difference between a high quality mp3 played on an ipod and a cd (played on the computer or portable CD player). It depends on the equipment, too.

I have recently tried using apple Lossless files on my ipod, to compare to the mp3, but I am not certain it is really noticeable. It seems very subtle, that the lossless files do sound a little better in certain areas, the quiet areas, there is more “space”. But only when using my best headphones at home when it’s quiet, and I care about it. I doubt I could tell the difeference in a blind “listen” test, comparing the two types, though. It makes me feel better, though having my Jazz, Classical and Pink Floyd albums and specific faves as lossless files, for when I do use my best headphones.

I think these days, with mp3/computer/cd-copying technology, we accumulate “files” and files of music, that we can more easily acquire a large music collection in small hard-drives, even cd-quality if we want….How much of it is actually *listened* to and enjoyed? I have to stop myself from getting more music, and just listen to albums I have. ( And I’ve also gotten rid of music that I hadn’t listened to in years) It used to be a longer wait period between albums when you had less options, that’s for sure.

Today, those options have significantly increased. So the value I placed on a CD 20 years ago is not the same value I place today. Your point about quality is important. How many people realize the quality of the music they download on iTunes is not the same as what they get on a CD? At the same time, how many people care?

-Alan

The economic value of water is a good example. Without water, we’d die. Its value is priceless and inestimable. In a situation of scarcity of supply, you’d be willing to pay almost anything to get it. That would mean the poorest would simply die for lack of it. Does that make what I’m willing to pay (because I’ve got lots of money) a fair price? Is what the market can bear the fair price? Or because it’s an essential good, is the fair price what the poorest among us can afford?

Like it or not, the market decides what fair prices are in the absence of cartels, monopolies and other industry distortions such as government interference. Music, while highly desirable, isn’t necessary. So, what I’m willing to pay is directly influenced by how much disposable income I have after necessities are paid for, and other choices to spend that money. As an artist, you either agree to accept what I’m willing to pay, or I don’t buy it.

The music industry jacked up the rent on music with the format cutover from vinyl to CDs. They were able to extract more from fewer people for a while, but almost immediately began complaining that fewer copies were being sold, therefore there must be piracy. Actually, it was the other way around. The price was too high, therefore there was piracy, and consumption has declined dramatically (until the advent of iTunes) because the industry was charging above a price that the consumer could afford and considered fair, especially in the case where they only wanted a single song (which I’d argue represents about half the population — some of us still prefer the whole album, even when there are one or two cuts we don’t like). Although they still complain about declining sales, the reality is that half the population only wanted 10% of what they were being forced to buy. But, they weren’t listening to the stuff they didn’t like. So, now prices are fairer, and consumption is going up (actual use of what is paid for).

The fact is, it doesn’t matter how much effort the book author put into writing something, or how great a musician is (hard to quantify a qualitative judgment). The supplier can set whatever price they like, but the supply and demand equation is what it is. If you set a price too high, you will lessen consumption and increase theft. The consumer always decides what a fair price is when consumption and revenues are maximized (which is almost always a lower price than the supplier would charge in an ideal world from their perspective). If you set it too low, you’ll sell more, but make less. The labels and artists actually were much more profitable selling vinyl albums for 5 to 7 dollars 30 years ago than trying to rape their customers for more than $20 for a CD that costs a fraction of the price to create and market.

There are people who value anything they can get their hands on from Bruce Springsteen so highly that they’ll pay $50 for a crappy sounding bootleg from a concert. Does that make it a fair price for all of us, or suggest that for a good quality CD a fair price is $100? It’s an absurd argument. At that price, the music industry wouldn’t exist, because very few of us would buy anything.

The internet actually allows us to approach a much fairer model for pricing. One where the artist sells directly (or through an iTunes store — close to direct), and they decide how much they want their music to cost and they decide if they’d prefer to sell more at a lower price. But in general, most of us felt ripped off paying more than $20 for a CD, no matter how much of it we listened to. Current pricing is still too high, but a lot closer to fair. (If a CD was priced at less than $10, and had settled to that price by the mid 90s when it should have, there’s a good chance that most music would still be sold that way, regardless of how it was distributed. I value a permanent higher resolution version much more than the crappy sound you can download from iTunes.)

An interesting point about training the consumers expectations on price and value. Layers of middlemen and exploitation clearly led to some broken economics, the solution to which — low cost digital media — may be worse than the original ill. How long before the broken economics of hard goods distributors (Apple, Walmart, etc), with their exploitation of foreign wage discrepancies, comes crumbling down?

And thanks for the link. I will certainly take a look.

-Alan

I definitely do not believe the artists are at fault. They have been and continue to be the victims of distributors. First the record labels and publishers and now the download sources (e.g. Apple, Walmart, Amazon, etc). However, the latter group is responsible for severely devaluing artists’ work in the eye of consumers by setting prices at a ridiculously new low. A move that I believe will have a long term negative overall impact on artists. Dollar songs and apps, and even non-fiction ebooks falling toward $10 — of which most of the revenue still flows to the distributors — were never necessary. In my opinion, such pricing is at least partially the result of volume-driven mega corporations. They’ve managed to groom consumers to expect high value at dirt cheap prices.

Regarding the example that I used earlier, perhaps I should have provided one that was more appropriate. If you or I wrote a portion of our expertise and research in the form of a book, how might we respond to consumers who feel $30 is “too much” to pay for the same sort of knowledge we might ordinarily charge many thousands to share with our clients today? Even if the information isn’t tailored as our custom research might be, it’s still of significantly greater value than the cover price of the typical book. Now with emergence of ebooks, rather than focus on value consumers focus on price and the cost of distribution. If it’s electronically delivered they expect to buy the book/song/movie/app for a handful of dollars or less. [And if it doesn't meet their expectations they'll still complain as if they spent $100 on it.]

If I may, here is a link from a similar discussion that unfolded on Dan Ariely’s blog (author of Predictably Irrational). There you can find several more of my comments along with dozens made by others in a discussion about ebook pricing:

http://danariely.com/2011/04/10/the-rationality-of-one-star/

While we may not agree on the specifics, we certainly appear to agree somewhat on the result. It’s about the value of the content to the buyer.