Thursday, October 04, 2007

Is free music inevitable?

TechCrunch says it is.

The DRM walls are crumbling. Music CD sales continue to plummet rather alarmingly. Artists like Prince and Nine Inch Nails are flouting their labels and either giving music away or telling their fans to steal it. Another blow earlier this week: Radiohead, which is no longer controlled by their label, Capitol Records, put their new digital album on sale on the Internet for whatever price people want to pay for it.

The economics of recorded music are fairly simple. Marginal production costs are zero: Like software, it doesn’t cost anything to produce another digital copy that is just as good as the original as soon as the first copy exists, and anyone can create those copies. Unless effective legal (copyright), technical (DRM) or other artificial impediments to production can be created, simple economic theory dictates that the price of music, like its marginal cost, must also fall to zero. The evidence is unmistakable already. In April 2007 the benchmark price for a DRM-free song was $1.29. Today it is $0.89, a drop of 31% in just six months.
In 2000, at the height of the Napster hysteria, I observed that the very business model of the music industry had become obsolete. The cost of CDs - twenty dollars for a plastic disc that cost pennies to produce - was outrageously overpriced. It was inevitable that someone would find a way to circumvent the record companies at some point. The technology which the music industry introduced, digital music files, provided the means for people to acquire content outside of the business model.

This is not to say by any means that ripping files and trading them online was legal, or even morally defensible, but the behavior was not surprising. And once the precedent was established, absent the outlawing of digital media consumer technology, there was no going back. You could argue that it wasn't fair to the music industry, just as you can argue that it isn't fair for the wildebeest set upon by a pride of lions, but there it is.

With artists adapting to the collapse of the music industry business model, even the record companies strategy of litigation against file-sharers is going to lose momentum. It really is nothing more than a futile effort to postpone the inevitable, not unlike the smashing of textile machines in 19th Century England.


Suricou Raven said...

Yep, inevitable. Value comes from scarcity, and there is no longer any scarcity of music - nor of any particular music. For people used to copying a file in seconds and burning a CD in minutes, it seems quite rediculous to pay so much for a disc. The music industry isn't going to die, but its time to prepare for a massive reduction in sales and a general decline.