Singing a New Tune on Price and Value

By: Frank Yunker

Date: 2015-03-19

I often lecture on the difference between price, value and cost. The classic example is Adam Smith's diamond-water paradox that he published in the 1770's. Today's students might miss the point since their cubic zirconia earrings might be cheaper than the expensive and imported bottled water. So, let's update the lecture.

Martin Luther once said "Next to the Word of God, the noble art of music is the greatest treasure in the world." If that's true, then music is of great value. Music is our inspiration. Music is our relaxation. If life needed to be explained in 3 minutes, then the explanation would be in song.

Growing up as I did in the 1970s and 80s, we had record albums and you listened to 1 side or the other. I had a record player that could stack 5 albums at a time. In the mid 1980s, CDs came out. Sometimes we copied an album or CD to a cassette... technically legal for archival purposes, but it would not be legal if I was listening to the cassette in my car while my wife listened to the album or CD at our house.

Today's youth understand the term "playlist." We had what you might call a playlist... but we called it a "Greatest Hits Album." All our favorite songs on 1 record or CD. But no matter what, you had to buy a physical object. There was a record company making vinyl records in Gloversville. Real jobs for real people. There were dozens of stores in the locally-based Record Town chain that sold music retail. More real jobs for music aficionados.

Then music went digital. For one thing, the cost of producing a song fell dramatically. Instead of booking time in a fancy recording studio, anyone could record in the comfort of their own living room or basement. Marginal cost was reduced to pennies and time spent.

Apple created the iPod and iTunes to manage those songs. For roughly a dollar a song, you could buy just the songs you wanted or the whole album if you preferred. That's was the price a decade ago. The woman then-governor Elliot Spitzer of New York was caught with in a prostitution scandal had a couple of songs for sale on a music website. Suddenly, a couple hundred thousand people bought her song for 98 cents just for curiosity sake. Or maybe they heard she had talent. Who knows.

iTunes still sells millions of songs per year, though "Music Access Services" like Pandora or Spotify will charge you a monthly fee for unlimited access. It's an interesting pricing model that will likely be around for a long time, but it does have some competition.

If you can find the song on YouTube, you can download it for free... technically free, but not necessarily free legally. If you don't know how, just google "YouTube to mp3." So while stardom can come as easily as recording a song at home, uploading to YouTube, and hoping it goes viral, the bottom line is "No profit." Instant stardom... your "15 minutes of fame" will come and go as predicted.

The question, then, is how to make money? Long before recording albums, musical stars went from town to town and played shows. By the mid 70s there were many "studio bands" who never toured but got rich singing. Now, once again, it will require touring to make a living, because an artist cannot make money just selling songs. Extravagant rock stars are part of the "vanished economy" along with factory workers and Record Town sales force. In the new economy, songs will still have value... but with negligible cost and no price.

Songs exist. We still love them. We still need them. We still listen to them. We just don't buy them.