And you’ll like it!

I was recently reading/listening (look, I do a lot of stuff ok? I can’t remember which one it was) to a music industry spokesperson decrying the negative effects that piracy was having and how it was all the Pirates’ fault.

My stance on piracy has been well documented but I felt I should talk about this again. Because I’ve realised that in addition to being bad sense from a social point of view the spokesperson’s ideas are also bad economics.

Unrelated .jpgs are a sin!

You see friends many of the pro-piracy voices are constantly saying that the reason they pirate is because music is too damn expensive and that if only the music industry would drop its prices fewer people would resort to piracy.

Industry mouthpieces respond that this isn’t true. That they don’t even set the price of music. The price of music, they claim, is actually determined by impersonal market forces that are beyond anyone’s control!

Supply and Demand

What this claim relies on is the idea of Supply and Demand, one of the simplest and most fundamental concepts in economics. Supply and demand basically says that if you charge too much for something then fewer people will buy it (duh), your profits will go down, and so you will be forced to drop your prices. Conversely, if you drop prices too low then your profits will drop too low and so, naturally, you will increase the price to an appropriate level.

So Supply and Demand essentially means that prices will always be correct, right?

Also Supply and Demand

Hehe. I’m sure that by now anyone who has read this blog before is already thinking “no”, and you are right to do so.
Supply and Demand works great as a basic theory of how prices are established but there are multiple loopholes and nuances.

Why so…supply and demand?

The most famous one is a Monopoly where one company has total control of something and can thus force people to pay too much for it.

A more complex form of this is the Oligopoly, where a group of companies work together to keep everyone’s prices too high and thus force all consumers to pay too much. The US healthcare system is the most powerful and most obvious of these Oligopolies.

And there are plenty more ways to screw with a market, but I digress.

So, which of these loopholes or nuances applies to the music industry? Well, actually, none of them.

As serious as a hamster with a harness.

I think that what is happening with the price of music is EXACTLY what a classic Supply and Demand curve predicts, I just think that the music industry hasn’t thought things through.

Think of it like this. Let’s assume, for the sake of argument, that the Pirates are right, and music is overpriced. What does the classic Supply and Demand curve predict? Why, it predicts that people won’t want to buy music, and will instead find some way to get along without buying it.

And that is EXACTLY what has happened. It’s just that the way of getting along that they have chosen does not involve going gentle into that good night but involves instead downloading a bittorrent client, getting behind peerblock and getting all the music they want for free.

Starting with Autotune.

The Supply and Demand curve doesn’t prove the Pirates wrong, it proves them right! In fact some professional economists have recently said exactly the same thing.

See, my point of view is that everything in life is a combination of push factors and pull factors. Right now the factors that push people towards piracy are far more dominant than those that pull them away from it. There is little danger of getting caught, piracy is far easier than buying (for one thing you don’t have to battle with iTunes or Windows Crap Media Player) and music really is very expensive.
For that matter so are movies, games, software and books.

And how do I know this?
By now you should know the answer: because if they weren’t overpriced people wouldn’t pirate them. It’s simple economics.



[Standard Disclaimer: this post was entirely my own opinion and was not paid for in any way, directly or otherwise, by anyone or anything that stands to gain in any way from the ideas expressed herein.]

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