Music Patrons or Pirates

9 Comments / Economics, Music / By

Lynne Kiesling

Grant McCracken has a good post on the music industry’s recent behavior toward its customers. Lately there has been some softening toward digital music and fair use. But, as Grant asks, how to capture value?

Here’s a thought. What if the music industry came up with a new pricing scheme? What if the music industry started charging fewer people more?

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The notion here is that every artist has a deeply passionate core constituency. For this constituency, the artist creates value like crazy. The fan is not only willing to pay the full sticker price but to pay more for the full sticker price. And this passionate engagement makes up all those unpaid MP3 in circulation, which may now be regarded as loss leaders. Some of them will end up in the hands of a would-be fan who will, it is hoped, convert to core constituency status. Think of it as a “user pay” model. Lots of people benefit, but only the real users pay.

This is price discrimination; serve high-value customers with high-quality products at high prices, making up for the large volume of cheap customers you lose to digital. Perhaps. I think there will always be music fans who strongly prefer having the media, and catering to them could be profitable.

I have to ask the same question as one of his commenters: isn’t this an industry in which transaction cost reductions (through technological change) have reduced the need for an intermediary between consumer and musician?

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