A few weeks ago, we noted that Economics of Smoking were such that raising prices reduced the amount people smoked. While many other factors may have also contributed to the decline, the simple fact
may be basic economics of cost has been the prime mover.
The NYT takes this a step further. They look at a variety of teen vices, and conclude that:
"There is in fact a surefire way
to get teenagers to consume less beer, tobacco and drugs, according to one study
after another: raise the cost, in terms of either dollars or potential
In just about every state that increased beer taxes in recent years, teenage
drinking soon dropped. The same happened in the early 1990′s when Arizona,
Maryland, New Jersey and a handful of other states passed zero-tolerance laws,
which suspend the licenses of under-21 drivers who have any trace of alcohol in
their blood. In states that waited until the late 90′s to adopt zero tolerance,
like Colorado, Indiana and South Carolina, the decline generally did not happen
until after the law was in place.
Teenagers, it turns out, are highly rational creatures in some ways.
Budweisers and Marlboros are discretionary items, and their customers treat them
as such. Gasoline consumption, by contrast, changes only marginally when the
price of a gallon does."
Fascinating stuff . . .
Our streak of beating the NYT continues
To Reduce the Cost of Teenage Temptation, Why Not Just Raise the Price of Sin?
By DAVID LEONHARDT
NYT, July 25, 2005
I get some interesting questions about my interest in music/film. (You may have noticed that commentary on this subject tends to run on Tuesdays). In particular, I find the intersection between technology and entertainment to be fascinating. Clearly, its been a huge driver of so many new innovations and products, from iPods to plasma screens to TiVos.
Understand where my criticisms of the recording industry come from: While I am interested in music and film as a fan, my issues with some of the poor decision making of the labels and studios comes from a business/investment perspective.
As an investor, I want to know how the Labels have managed their key assets, how they have strategized, what their business model is for the future, how they incorporated new technology, what their responses are to changing consumer tastes.
In short, they have done a horrible job. Not just recently, but historically. The recording industry has failed to recognize several key ideas:
- all business models are temporary;
- change is ever present;
- adapt or die.
On that note, I would like to share a terrific commentary/rant from music industry insider Bob Lefsetz. His take on the Music Industry’s failure to adapt to P2P and other new tech is fascinating:
Give It Away
"Call it the Metallica Rule. When you can’t get arrested, give it
away. When you’re a star, arrest people for stealing your music.
Radio’s over. The model is done. Unless iPods start coming with
commercials and every Internet radio station has to have twenty
minutes of ads, terrestrial radio is done. Oh, it will survive in a
fashion. As a place for news and talk. But for music it’s history.
OH NO, you say. It’s in all those cars!
Don’t be a fucking idiot. Of course radio counts today. But if
you’re thinking about today, you’re just as dumb as the major labels.
Because really, it’s what’s gonna happen TOMORROW!
Look at major label release schedules. It’s not like the seventies
anymore. If something doesn’t have hit potential, it doesn’t come
out. Furthermore, that which DOES come out is tweaked endlessly,
making it palatable for sporting events and fashion shows, but it lacks
that one essential ingredient of TRUE hit music…it doesn’t touch your
It’s all about the bottom line . . .