Music and video versus economics and the internet
It has been very interesting to follow the news related to these topics lately. The EMI downsizing and the subsequent artists strike show that finally some sort of equilibrium has now been restored. Allow me to explain in simple economics what I mean. The music industry is and has been for a large number of years, totally rubbish. The output has been about quantity and profit rather than quality and passion. The only reason the big music labels were able to stay in business was due to good marketing, enough brainless muppets that buy their products, the growth of the celebrity culture and the monopoly of the big labels in the market which fixed the prices of CDs thus preventing any meaningful competition. The movie industry is equally guilty of all this. And then there was this wonderful thing called the internet and the genie well and truly leapt out of the bottle.
In economic theory, a perfectly competitive market will seek to bring goods and services to the consumer at the lowest possible cost while just about making a profit. The system works by companies having a product that ‘INFORMED’ consumers want to buy. When the market is not competitive or consumers are not properly ‘informed’ then quite simply the companies involved will try to sell goods and services at the highest price that consumers will bear ie at the most profitable point on their graph of numbers of customers versus price. So when something like the internet comes along and offers almost the same product, but for free, consumers suddenly become informed to the true value of the product. Or to put it another way, the music and movie industry have been ripping us off for years!
Now faced with this challenge to their supremacy, these two industries have been remarkably stupid and just let the market slip away from them. Instead of innovating, all they did was bleat about copyright. Copyright is an important thing, but then so is paying too much money as far as the consumer is concerned. The writers’ strike in America and the revolt at EMI led by Robbie Williams reflect recognition by the talented people that they are being exploited by the overpaid and short sighted idiots at the top. And it gets worse as far as the industry leaders are concerned. Those clever people at Apple and other various bands such as Radiohead have also proven that not only are people actually willing to pay for downloads (shock horror!) but also that due to the wonders of the internet, you no longer necessarily need a middle man to do the marketing for you.
While walking to work this morning, I was musing on this theme and I was thinking to myself, “There is a lot of money to be made in the digital download version of blockbusters.” And hey presto, Apple have just announced that you can now ‘rent’ films from their Itunes store. Those Apple guys are geniuses I tell you!
This just goes to show that anyone who has a good idea, no matter how simple, can be very successful. The Nintendo Wii is a good example of this. It is technically, the most inferior console on the market, yet it is the industry best seller. If I am to make a prediction about 2008, I would say that it could potentially be the landmark year where people realise how ‘overvalued’ things are, both financially and mentally. Unfortunately this realisation would rather dent the illusions that companies rely on to sell their products. 2008 will be the year of ‘economic re-adjustment’.
In economic theory, a perfectly competitive market will seek to bring goods and services to the consumer at the lowest possible cost while just about making a profit. The system works by companies having a product that ‘INFORMED’ consumers want to buy. When the market is not competitive or consumers are not properly ‘informed’ then quite simply the companies involved will try to sell goods and services at the highest price that consumers will bear ie at the most profitable point on their graph of numbers of customers versus price. So when something like the internet comes along and offers almost the same product, but for free, consumers suddenly become informed to the true value of the product. Or to put it another way, the music and movie industry have been ripping us off for years!
Now faced with this challenge to their supremacy, these two industries have been remarkably stupid and just let the market slip away from them. Instead of innovating, all they did was bleat about copyright. Copyright is an important thing, but then so is paying too much money as far as the consumer is concerned. The writers’ strike in America and the revolt at EMI led by Robbie Williams reflect recognition by the talented people that they are being exploited by the overpaid and short sighted idiots at the top. And it gets worse as far as the industry leaders are concerned. Those clever people at Apple and other various bands such as Radiohead have also proven that not only are people actually willing to pay for downloads (shock horror!) but also that due to the wonders of the internet, you no longer necessarily need a middle man to do the marketing for you.
While walking to work this morning, I was musing on this theme and I was thinking to myself, “There is a lot of money to be made in the digital download version of blockbusters.” And hey presto, Apple have just announced that you can now ‘rent’ films from their Itunes store. Those Apple guys are geniuses I tell you!
This just goes to show that anyone who has a good idea, no matter how simple, can be very successful. The Nintendo Wii is a good example of this. It is technically, the most inferior console on the market, yet it is the industry best seller. If I am to make a prediction about 2008, I would say that it could potentially be the landmark year where people realise how ‘overvalued’ things are, both financially and mentally. Unfortunately this realisation would rather dent the illusions that companies rely on to sell their products. 2008 will be the year of ‘economic re-adjustment’.