Posts filed under “Music”
Has the Music industry found religon when it comes to allowing the free market to set pricing? And if (a big if) they have, is it already too late?
At Best Buy, some CDs are on sale for $7.99 (Mae – Destination Beautiful; Yellowcard – Ocean Avenue; Fall Out Boy – Take This To Your Grave), $8.99 (En Vogue -Soul Flower; LostProphets – Start Something; Dashboard Confessional – A Mark, A Mission) and $9.99 (Sting – Sacred Love; Kanye West – College Dropout; Clint Black – Spend My Time). There’s even a release at $5.99 (The Get Up Kids – The Guilt Show). Order on line from Best Buy and shipping is free.
At Target, the price points start at $6.98 (The Polyphonic Spree – Beginning Stages; Rooney – self titled; Something Corporate – North; Josh Kelley – For the Ride Home; and Fete Dobson – self titled). At $7.98 is Katy Rose – Because I Can, at $8.98 is the self titled Phantom Planet. For $9.98, you can pick up Switchfoot – The Beautiful Let Down; The Darkness – Permission to Land, and Clint Black – Spend My Time.
The promotional prices seem to be a management compromise: Instead of letting the prices of all CDs float as per market forces, they are discounting very select merchandise, while maintaining prices on al l the rest. I have no idea who chooses which CD gets selected for what price (or how). If anyone can tell me, by all means please do.
I noticed the “A” list CDs — Norah Jones, Sting, Clint Black — don’t really get below $10. Last week, I ordered the Norah Jones CD on line from Best Buy for $9.99 (free shipping); I see its now at $13.99 there. Guess I better order Sting‘s Sacred Love CD for $9.99 (free shipping) beofre that goes up also.
While this is a promising start, consider the competition CDs are up against: DVDs.
From the same Target circular, any of the following are 2 for $15:
• Moulin Rouge
• Van Wilder
• Reservoir Dogs
• Legally Blonde
• Wedding Planner
• When Harry Met Sally
Compare what you get for your entertainment dollar between CDs and DVDs, and you get a better sense of the corner the music industry has painted itself into . . .
The economy slows, CD sales slow.
The economy recovers, CD sales recover.
If I am going too fast for you with this complex and sophisticated economic argument, please let me know. I can’t make this explanation any simpler, but perhaps I can find some crayons or blocks for you to play with.
The simple truism above is well known to everyone outside of the music industry. For unknown reasons, the music industry and the RIAA act as if they are exempt from the business cycle. Most sectors of the economy suffer during recessions — the exceptions are “interest-rate sensitive” groups, like Autos, Home, and Durable Goods, which benefit from the falling rates which usually accompany economic slow downs.
As we have been discussing for quite sometime now, sales of discretionary entertainment products like CDs are not an exception.
Despite the high, illegally price-fixed costs of a CD, you don’t yet need to take out a mortgage to buy one. So there is simply no reason to believe that CD sales have ever benefited from a broader economic slowdown. Yet judging strictly from the public statements of the recording industry over the past 3 years, one would never have even known that a post tech-bubble recession happened from 2000-2003. They simply never mention it. The New York Times, in an article about the continued uptick in music sales (“CD Sales Rise, but Industry Is Still Wary“), never reaches the issue of the economic weakness during the past three years.
As the economy weakened, so have CD sales:
Annual CD sales
Source: New York Times
Not surprisingly, industry sales are running parallel to the broader economy.
Indeed, in the aftermath of the world’s greatest speculative bubble, during a recession and a bear market which saw the Nasdaq lose 80% of its value, the sector only saw a 12% drop in sales during the same period. Its hard to undestand why music executives are wringing their hands over this; Most businesses would have been thrilled with “only” seeing their business off by 12% during this period.
Since then, we have seen an improving economy. Although consumer confidence remains shaky — mostly due to anemic job growth — we have seen a general improvement in spending. This has been especially true in the second half of 2003, as the hottest part of the Iraq war passed.
As the economy continued to gather strength, sales of CDs recovered. The last quarter of 2003 saw a marked marked uptick in total album sales.