Music Industry Booming, Part 2

Chris Anderson points out another thriving sector of the music industry:

Music as a digital product enjoys near-zero costs of production and distribution–classic abundance economics. When costs are near zero, you might as well make the price zero, too, something thousands of bands have figured out.

Meanwhile, the one thing that you can’t digitize and distribute with full fidelity is a live show. That’s scarcity economics. No wonder the average price for a ticket was $61 last year, up 8%–in an era when digital products are commodities, there’s a premium on experience. No surprise that bands are increasingly giving away their recorded music as marketing for their concerts, which offer something no MP3 can match.

Live performance is the fastest growing part of the music industry (up 16% in 2006 to a record $3.6 billion in North America) and with services such as SonicLiving (brilliantly described as a “digital-to-analog lifestyle converter”) and TourFilter that notify you when some band in your library is coming to town, that’s only going to grow more.

So there’s big money in live shows (92% of the Rolling Stones’ revenues comes from performance, not recorded music). Sadly for the labels, they don’t get any of it. No wonder they’re so against free music. It only helps the bands (and consumers)!

When discussing the economics of copyright, it needs to be constantly kept in mind that the interests of artists and the companies that distribute their content are not always aligned. The distributor only benefits from the revenues generated by the product being sold. The artist, however, also receives publicity benefits from wide distribution of his product. It makes perfect sense, then, that many bands especially up-and-coming ones put a higher priority on getting their music to as many fans as possible than they do to maximizing revenue in the short term. Being less concerned about piracy is one aspect of this phenomenon. But even in a world with no piracy, many bands would find it in their interest to give a lot of their music away for free in order to build their fan base.

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