Does Music Have Value – Follow Up

This is a re-write/rephrasing of something I posted two days ago.  I realized my phrasing was way too broad and that I was ignoring the non-monetary value of music.  My argument was that music has little to no monetary value.  Hopefully this is now a little more accurate.

 

Music is now without monetary value.  This is a controversial statement and I’m sure many will disagree with it on the basis of both personal conviction and economics.  I believe I can address the economic objections and I hope I can also sway some to reevaluate their belief that the music they create, sell, or buy has a monetary value.

 

The reason for the “worthlessness” of music (and I say this in a purely economic sense and I am not referring to the personal value music holds for many) is its infinite supply.  In a manner of minutes (seconds?) I can find and download almost any album or song online for free.  Putting aside the legal objections to this action (and since 95% of music downloaded is done so illegally, this objection is largely irrelevant), this essentially infinite supply of music renders it without a monetary value. 

 

This has several implications.  It does NOT mean that it is impossible to make money through the sale of music.  However, the days of selling albums or songs at 128kbps or 192kbps are rapidly drawing to a close more and more people awake to the notion that the supply of music at these bitrates is infinite and that paying money for them is a silly proposition.  The economics of scarcity and abundance are worth examining.  People have stopped paying for music for the same reason people don’t pay for air.  It’s everywhere and free so why would you?

 

Except people do pay money for air, in certain circumstances.  If you scuba dive, you will gladly pay good money for air.  Of course, the value in this situation does not come from the air itself but from the packaging and delivery of the air.  In short, air = worthless.  Air in a tank when you need it = valuable. 

 

Likewise with music, the basic digitized music is increasingly hard to sell for money but there are ways to add value to it.  One such way is to offer higher quality files, such as 320kbps or lossless.  Another is to add value through packaging.  This is why Nine Inch Nails was able to sell 2,500 of their $300 Ultra-Deluxe Ghosts boxset.  The music itself was free (you could download it from the NIN website) but the packaging added the value.  Because the Ghosts Ultra-Deluxe boxset was autographed by Trent Reznor himself, it is an example of a third way to add value to music: by adding a connection to the artist.  This is the “souvenir method”.  People are willing to pay money, or more money than they normally would, if there is a component of connection to the artist.  Autographs can provide this connection as can individualized artwork.  Selling music at a concert is less about selling the actual music and more about selling a physical memory of the event, thus providing the connection to the artist.

 

It has been pointed out to me that there many other types of value contained within music still.  While this is the topic for an entire other post, the attention and personal conviction behind music absolutely have value.  My argument is merely that on a macro scale, people are increasing realizing that paying for music with money is not a fair proposition for them, the consumer (hence the drop in CD sale).  They are willing to pay when this music has value added to it (hence the rise in the sale of vinyl – the value is in the better packaging). 

 

Is Music “Worthless” Feedback…

Because I was recieving a lot of negative feedback on my last post, where I said that I believed that music is now “worthless”, I decided to ask Chris Anderson, Editor-in-Chief of Wired Magazine and author of The Long Tail if what he thought of my hypothesis.  His reply:

Although your point is generally right, you made a rhetorical error by equating “value” and “price”. Just because something has no price doesn’t mean it has no value. Indeed, in the non-monetary economies of attention and reputation, it may be valued very highly. In short, your mistake was using “worthless” too loosely–to quote The Princess Bride, “I do not think that word means what you think it means.” 😉

This is a common error, and I address it one chapter in the book.

Chris Anderson’s next book, out this summer, is called FREE  and is about the economics of Free.  It is my most eagerly anticipated book of the year.   Thanks so much to Chris for responding and so quickly (in ten minutes!).  

Check out the comments by Jermey Meyes and David Rose on the previous post for some interesting critisism of the post.

The Value Of Music, Pt. 4 – Music Is Worthless

Part four of Hit Singularity’s look at the value of music is authored by myself.  It is my attempt to answer the same question I asked each of my previous guest posters.  Before I give my take, I’d just like to take a moment to again thank Matt Morrell, Bud Caddell, and Christopher Lars Carlson for their time and insightful views.

The question at hand is this:

”What is music worth today?  Is it worth the $17.99/album that a CD retails for?  Is it worth the $9.99/album that you can buy an album for on itunes?  Is music free (or devoid of worth), now that it can so easily by disseminated online?  Does it have some other value or gain value from some other place?”

Music is now worthless and has no longer has any inherent value.  This is a controversial statement and I’m sure many will disagree with it on the basis of both personal conviction and economics.  I believe I can address the economic objections and I hope I can also sway some to reevaluate their belief that the music they create, sell, or buy has “value”.

The reason for the worthlessness of music (and I say this in a purely economic sense and I am not referring to the personal value music holds for many) is its infinite supply.  In a manner of minutes (seconds?) I can find and download almost any album or song online for free.  Putting aside the legal objections to this action (and since 95% of music downloaded is done so illegally, this objection is largely irrelevant), this essentially infinite supply of music renders it valueless. 

This has several implications.  It does NOT mean that it is impossible to make money through the sale of music.  However, the days of selling albums or songs at 128kbps or 192kbps are rapidly drawing to a close more and more people awake to the notion that the supply of music at these bitrates is infinite and that paying money for them is a silly proposition.  The economics of scarcity and abundance are worth examining.  People have stopped paying for music for the same reason people don’t pay for air.  It’s everywhere and free so why would you?

Except people do pay money for air, in certain circumstances.  If you scuba dive, you will gladly pay good money for air.  Of course, the value in this situation does not come from the air itself but from the packaging and delivery of the air.  In short, air = worthless.  Air in a tank when you need it = valuable. 

Likewise with music, the basic digitized music is worthless but there are ways to add value to it.  One such way is to offer higher quality files, such as 320kbps or lossless.  Another is to add value through packaging.  This is why Nine Inch Nails was able to sell 2,500 of their Ultra-Deluxe Ghosts boxset.  The music itself was free (you could download it from the NIN website) but the packaging added the value.  Because the Ghosts Ultra-Deluxe boxset was autographed by Trent Reznor himself, it is an example of a third way to add value to music: by adding a connection to the artist.  This is the “souvenir method”.  People are willing to pay money, or more money than they normally would, if there is a component of connection to the artist.  Autographs can provide this connection as can individualized artwork.  Selling music at a concert is less about selling the actual music and more about selling a physical memory of the event, thus providing the connection to the artist.

There are more ways to add value to music than those listed.  Even in an age of, what I believe to be, valueless music, there are many ways to add value to music.

 

I’d love to hear your critique of this piece, especially my grasp of economics.  If you like it, help to spread the word by Digging this piece.  

What Is The Value Of Music, Pt 3 – Christopher Lars Carlson

Part 3 in our series of the value of music is by Christopher Lars Carlson.  Chris is a student at the Berklee School of Music, where he is also president of the Music Business Club.  He manages Tom Howie and can be found on twitter and on his music business blog, A Musician’s Journey, which is filled with great ideas.  The question I asked him was:

What do you think the value of music is?  Is it the $17.99/album that the major labels charged for so long?  Is it the $9.99/album that itunes charges?  Is it the $0.00 that it costs to get music from Pirate Bay?  Is it something else?

This is what Chris said – 

 

d) None Of The Above

Every release needs a goal. Is the goal to gain awareness? then give it away for free. Do you need to make enough money to fund a tour? Then determine what that amount is and estimate how many sales you think you can make. Divide and decide your price point.

It’s my personal belief that there should be options a la NIN (Nine Inch Nails): free, cheap, regular, expensive, insanely expensive.

Depending on where an artist is in their career, only some of these price points will make sense, but the point is that by the next release, they are at a different point in their career and a new strategy will be needed.

To more directly answer your question: I think the value of music is dependent on the relationship between the fan and artist. An UBER fan is going to pay $275 for a release (NIN deluxe box set) but that same person is going to download an album for free from an artist they don’t have a relationship with.

–

The next guest post will be by Shawn M Smith, formerly of TVT Records and currently the man behind Radio Exile.

What Is The Value Of Music, Pt. 2: Bud Caddell

Part 2 of our series on the value of music is by Bud Caddell.  Bud is a strategist at Undercurrent, blogs at WhatConsumesMe, is a popular fellow on twitter, and is an all around brilliant guy when it comes to the digital world.  We’re thrilled to have his guest post.

The Value of Music

Has music suffered from inflation?

In the 50ʼs, a postage stamp was three cents. Today itʼs fourty-two. In the 50ʼs, a gallon of gasoline was around twenty cents and you could buy a tricked out Ford for two grand. The price of a 10” record, offering around three minutes of playback, was $2.85. A 12” record, up to eight minutes of playback, was $4.85 (source: http://www.fiftiesweb.com/ pop/prices-1950.htm). Adjusted for inflation, $4.85 in 1955 is worth $38.34 today (source). But I can buy a single song right now from iTunes for 99 cents.

Sure, youʼre not pressing that vinyl and youʼre not shipping it out to stores, but everything today, especially producing and promoting music, a band, a single, an album, is astronomically more expensive today than it was then. So why is a single so much cheaper today?

Hereʼs another question, whatʼs the top album in the country right now? Do you know? Without looking, I donʼt know either.

The industry loves to blame the digital format and piracy for the erosion of their business. And as long as they do, theyʼll continue to go the way of the dinosaur – and good riddance. Simply put, music is less culturally relevant today than it was in the 1950ʼs. Bob Dylan wonʼt be reincarnated. That popularity with that cultural message doesnʼt happen anymore. Why? Well, for one, the industry today doesnʼt think like John Hammond did. They arenʼt looking for Dylans. Moreover, todayʼs mainstream is an emaciated corpse of its former self. Our interests and musical genres themselves have splintered. The industry saw demand slipping so they raised the cost of the concert ticket. They hope to sell the song for nothing so youʼll hear the band and want to pay the $50 to see them live. They practically asked for their own irrelevance.

I apologize for the obligatory Radiohead reference, but they sold eight million dollars worth of box sets for In Rainbows. Who cares what percentage of people paid nothing for the album. The promotion and the material were remarkable. They were relevant. And they were entirely fan focused.

Before the Beatles, popular artists didnʼt expect to amass a fortune by playing music. They played to earn one fan at a time. The industry still promotes to a mainstream theyʼve drastically miscalculated. They spend large amounts of money to accrue fans that donʼt exist. And they actively commoditize their own products. As an artist, if you let the industry set your price, youʼre going to fail.

Pricing is relative. I wouldnʼt spend one indian nickel on whoever wins this season of American Idol. But I have my wallet wide open for the next tune by the Fleet Foxes. And my price point isnʼt set at 99 cents either, no matter how much industry people tell us that it is. Give me something worth paying more for and Iʼll eagerly do it.

What Is The Value Of Music – Part 1, Matt Morrell

The first guest post in our series on the value of music is by Brooklyn based indie artist Matt Morrell.  Matt is an indie singer-songwriter in the vein of Conor Oberst, the Mountain Goats and Jeff Buckley.  Not only his is stuff great and absolutely worth checking out but he has some great thoughts on what the value of music is, from the perspective of an independent artist.

To refresh your memory, the question I asked was:

 “What is music worth today?  Is it worth the $17.99/album that a CD retails for?  Is it worth the $9.99/album that you can buy an album for on itunes?  Is music free (or devoid of worth), now that it can so easily by disseminated online?  Does it have some other value or gain value from some other place?”

Matt’s response:

The main thing to keep in mind from a musician’s standpoint is that traditional music sales are no longer anyone’s primary source of income. Just as a hit record today may never be played on the radio, the days of record sales being a barometer of a musician’s popularity are over.

 

Goal #1 as a musician is not to sell your music; it’s to get people to love your music. CDs, in one sense, are leverage that you can use to get your music into people’s minds and hearts, and the price you set on that music is a tool, albeit an important tool, on the road to that goal.

 

Purchasing music is not charity. Ever since Napster arrived, there has been this constant barrage of messages about how artists need us to buy their albums. I don’t subscribe to that argument, and frankly I find the appeal a little obnoxious. The industry around record sales, the same industry that has fifty years of clauses built into record contracts to keep artists mired in debt, they might need record sales, but artists – middle class, working artists – are in a much better position now that their careers aren’t judged by Soundscan numbers.

 

So to get to the question, I think the price of music starts at just around zero and shifts in a kind of auction with the changing context of the work. From a band’s point of view, I think the CD has three ways of looking at its price: the price as a “record,” the price as “music”, and the price as “merch”.

 

As a record, that $18.99 price tag on a CD sitting lifeless in a store is probably more of a liability to you unless you are a successful pop-country artist with heavy radio and CMT rotation. (Pop-country, of course, is the exception in any discussion of CD prices or relevance). Even if you’re lucky enough to get label backing or distribution, you don’t get to see much of the profits from CDs sold at a retail store. People might be paying nearly twenty dollars, but there are lots of hands in that pot and you won’t see much of the money. At best, it’s cool to have your CD in a store next to records like “Blonde on Blonde” and “Crooked Rain, Crooked Rain”.

 

On the other hand, as “music”, an album of mp3s downloaded “illegally” off the internet but played constantly on someone’s iPod could easily bring in $15-$50 a year in merch and ticket sales at shows down the line. As a “legal” download, iTunes and Amazon are kind of doing the job right now, but I don’t know how long it can last. The process of actually loading up and iPod and credit cards and all that nonsense is pretty cumbersome. Until digital music is as easy – and cool – as going to a record store counter and putting down some cash for a 45″ single, that part of the business is transitional at best.

 

Then there is the CD as “merch”. Merch sales are the lifeblood of a band anyway, and CDs are a crucial part of that. There’s a difference between a CD you bought in the store and a CD you buy from a show. It’s a souvenir, and at many shows, you buy it directly from the band itself.

 

And when the band gets a little more creative, there is no limit to how much they could get for a CD, either at a show or over the internet. A band with a great following will easily be able to get $20 a disc on their website for a short-run CD, signed by the band, at very little cost to them. I know some bands have a problem doing this, but music fans love autographed stuff. And why not: you can’t get an autographed mp3. A fan is much, much more likely to fall in love with an album that they have an autographed copy of even if they had already downloaded it for free on the internet.

 

Bands and artists have never had more freedom in setting their own price for their music. There is no set “retail price” anymore, and any band worth a fan’s time will figure out how to set the right prices in the right context. Still, no matter what the price on the music is, who’s paying for it, or what medium that music is on, every artist has to get out there, make great music, connect with their audience and play shows. There is not, nor will there ever be a substitute for passion, persistence, and commitment to craft.

Matt Morrell Myspace