Where does the money go?

April 8, 2008

Via Coolfer I found this article from Chuck Klostermann in the Esquire.

In his article Chuck is wondering:

“What is happening to all the money not being spent on music?”

$4.2 billion are missing. In 1999, the total revenue from all music sales (albums and singles) was $14.2 billion. By 2006, it was barely more than $10 billion, including downloads.

Chuck has a simple point, why that is happening:

“People didn’t stop buying albums because they were philosophically opposed to how the rock business operated, and they didn’t stop buying albums because the Internet is changing the relationship between capitalism and art. People stopped buying albums because they wanted the fucking money. It’s complicated, but it’s not.”

Well basically he is right. That´s how it is. That`s how most of us act, when we are not trying to stop the climate change, we try to save money, we try to make the best deal.

But actually that`s not the whole story. When there is added value, and I mean all kinds of value for a customer, value cause of customer experience, brands, quality, et cetera… then people would spent a lot of money, even if there is a free alternative …. once again, have a look on the “water industry”. So it`s not just about the money, it`s about the “deal”. What is it worth?

But back to Chuck`s basic question: Where is the money gone?
He didn`t give an answer in his article.
To the ISPs? Live events? Hardware? Other things?

Well, personally I think that there is something like “Mental Accounting“, people have something like a imaginary “music budget”, a budget for there hobbies…
If they can save money on the one side they will spend it on the other… a new ipod? more concerts?
An Example: The latest development in the live music industry shows that there is suddenly more demand for live music… ticket prices are rising… why? Live Concerts, the quality of live concerts, the concept of live concerts didn`t change over the years. Mental Accounting could be the answer.

So I think most of the money is still in the music industry, it’s just redistributed to other and some new players like Apple or all the ISPs.

Well… just a thought.

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