Music a pure public good? Is it all about services?

November 20, 2007

After having the flu for a few days (sorry for not posting) I found this paper from Will Page, Executive Director of Research at the MCPS-PRS Alliance. He wrote about the pricing in the music industry and asked the question: “Is the price of recorded music heading towards zero?”
A good paper that shows in a few pages why recorded music in the digital age seems to be a pure public good. His conclusion is that the future challenge is to force some measure of “excludability” back upon the consumer, again.

I agree with him, but if we want to find an answer to this question/challenge, we first have to define “the product”.
– Is the product just the “music” – the tones, the recording file et cetera?
– Or is the medium, the way how music is distributed (mp3 file with/without DRM, music streaming, ringtone file, CD, Vinyl et cetera),  also included  ?
– Or is even included where and how I buy the music? Where I discovered the music? The supply of a service?

For the first point their is clearly no chance of excludability anymore from the point on where you publish a digital recording.
For the second of course their is, depending on the medium, but the sales figures show that only few people appreciate for example the value of a good old vinyl record.
For the third point in my opinion there are better chances to get this kind of excludability, even if there will be an “open source” community that supply services for free. You have the chance to sell the music with a better service, a better brand, a better customer experience to a better price for a valuable product bundle, for a special community…
So, it´s just a question of product design.
But this means that biggest part of the value creation of a excludable product is now in the supply of a service and not anymore in the creation of music. This will change the division of  revenues.

And I`m writing now just about music, but of course pretty much the same apllies for any digital content, where our digital distribution systems / technologies are fast and cheap enough to share the digital content easily.

Does that make any sense?


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