11/09/2004

Online Music

Thanks to the fast-moving technology, millions of songs are available on the internet and we are able to download - legally or illegally - songs we want in minutes. In recent years, digital music players like iTunes have made it possible for consumers to download and carry over 100 songs wherever we wish. Online music has proved that it is here to stay. Unfortunately, these new advancements have led to a contant decline in CD sales which have also led to many artist complaints. Now the question is (thinking economically)what about the musicians? Will the decline in CDs sales and other money making opportunities that were lost resulting from file sharing be enough to keep new musician from entering the industry? Or are concerts, fame, and other money making opportunities enough for artist to keep entering? What incentives are keeping complaining artist in the industry? And if artist are staying in the industry, there must be more incentives to keep them in the industry. If that is so, is file sharing such a big deal?

13 comments:

Rufio said...

I wonder if the increase of online music if there will even be CDs in the future. Could this be a repeat of what happened years ago when 8-tracks beat out records, and when cassettes beat out 8-tracks. Maybe online music is the new wave of music listening. Musicians will have to find some other form of revenue in order to stay above what if this idea is true. I think that they will though.

peter_parker said...

There is no way that lack of cd sales are going to keep new artists from entering the market. Maybe it will allow even more. There are so many people trying to "make it" it seems there will never be a shortage of unheard of talent.

Personally, I know many people that play music for personal reasons, because that is what makes them happy. They are never in search of a million-dollar contract, or music video and they know they won't be famous. But they do have a loyal following who appreciates there creativity. It may be hard to believe, but a lot of people write music not for fame or fortune.

Julie said...

I agree with Peter Parker; there are a lot of people who enter the music industry just for the love of music and performing. Maybe downloading and the decrease in CD sales will weed out some people who lack that love and who just want a way to be famous and make lots of money. That still won't diminish the number of people who enter the music industry. The internet offers the opportunity to produce your own music, publish your own writings, etc. so if anything there will be more people entering the music industry than staying away from it.

peter_parker said...

Just to add a little more.....

A lot of artists might be worried about cd sales because they have contracts to fulfill. They don't want to get the ax.

Yet, I have been to a lot of shows and know various bands who will encourage listeners to not only buy their latest album but even download it off the net for free. Many will put on their web site knowing people will download it for free just wanting to get their music heard. Some of these bands have record deals and others don't.

John West said...

CD sales are not how artists make their millions. They make them from concerts and the merchandise they sale at those concerts. The advocates that are so against online file-sharing, are the giant record companies. They stand to lose a lot more from the declining sales.

Bruce Banner said...

Time is changing from eight tracks to now order music on-line. I think contracts will change on how artist sell their music. If the artist don't change with the trend then they will become history. Just a thought but there has only been a few albums that I have purchased that I like every song on the album. Now, if there is only a couple of songs I like, I can now down load the 2 songs instead of buying the whole CD. In some cases, it is a lot cheaper down load one or two songs than it is to buy the CD.

Janet said...

There are some cases where more music will be bought. Sometimes people just want one song from a certain artist and will not go and buy the cd. Because they are able to download the one song from the Internet this makes them more likely to buy it. There are many times when people buy singles instead of whole cd's because they are cheaper and they know they like the song. This also can hurt artists because many times they get all their songs out into the market by combining them with favorites or hit songs. If people buy single songs instead of cd's then these other songs will never be heard. I agree with Rufio that online music might just be the next step.

Biancca said...

I just read an article (I think it was about U2??) where a copy of their new album got out a day before it was scheduled to be released. Instead of releasing the CD on time, they decided to flood the internet with a really bad copy of their CD, so peole would decide just to buy the actual CD anyway.

Bryce Larkin said...

This is always been a problem. Since technology has made it available for people to download songs for free and the artist's CD sells are going down, it creates a large problem. The insensitive for an artist is declining.

Bryce Larkin said...

You can not stop technology so work with it. Some internet sites charge a fee to get songs; this is one way to help solve the problem.

Janet said...

The next step is by charging more per song on the Internet so that people will just go buy the cd. In order to keep the artist happy, you might see the artist getting a percentage of the profit from each individual song. This will lead to consumers buying the entire cd because in order for both the artist and say Walmart to make a profit, the price for one song will become much higher.

Maudi said...

I agree there has to be a love for the music or the performers are going to get weeded out. I feel like the artists to day are not very business oriented. Money doesn't grow on trees you have to work for it. These artist that are crying about not getting enough revenues, need to figure out how to take advantage of this new internet technolgy. Anyone can see it is not going to be easy, however if they would all work together they could find away to capitalize on this new technology. I don't feel sorry for the artists because they can change their situation if they want to.

Dr. Tufte said...

-1 for spelling mistakes on Bryce Larkin's comment.

John_West is right: musicians do not make most of their money from CDs, they make it from performances and selling merchandise at those performances.

Songwriting is probably not a good money-making business. There are high fixed costs to writing the song, and then very low marginal costs for selling additional copies. This is very much like browsers - songs will end up being free, or very close to free, in an open market.

Performance, on the other hand, has high marginal costs, and quite likely many performers have some market power in that their fans will pay more than the marginal cost. There actually was a listing of most successful touring acts in this mornings paper (12/10/04) - and they are all people who are older ones with established records of doing good shows (Phil Collins was the top concert money-earner in 2004). Phil Collins is a good example because not only has he made money touring as a solo artist, but he was the front-man for Genesis when they were one of the biggest money-earners from the mid-70's to the early 90's. He can charge a high price because people see him as the only seller of a Phil Collins-like performance.

Record companies on the other hand are doing two things. First they are bundling songs together. Secondly, they are engaged in a prisoner's dilemna where the Nash equilibrium is that they all engage in excessive marketing. Those costs are recouped through high CD prices.

Really, what online file sharing is all about is the consumer pushing the record companies from the unfavorable Nash equilibrium, to the low cost equilibrium that the record companies would be unable to achieve on their own.