Why the Price of Music Is Heading Towards Zero

There's plenty of anecdotal evidence that the price of a song wants to be zero (labels complaining about "competing with free," file sharing, CD borrowing, etc.), but the topic had never become the focus of a paper written by an economist, to my knowledge anyway.

Will Page, who describes himself as "practically alone as an economist working in the music industry," tackled the issue in a paper he presented at the MCPS-PRS Alliance for Transmission conference in Vancouver, Canada late last year (he's executive director of research at MCPS-PRS, a London-based royalty collection society).

He calls the paper an attempt to "walk non-economists through the classic private-publicgood argument to illustrate where the price of recorded music is going." Among other things, he concludes that the music industry could prevent the price of music from falling to zero by making it "excludable" again, meaning that it should be possible to stop non-payers from accessing music -- not by applying DRM, but by selling content in bundles. He also points to supermarkets as one of the forces driving the price of music to zero.

I've been corresponding with Page since January about this, buthadn't written about it before because there was no way to link to thepaper. Now, MCPS-PRS has posted it online (PDF) so that everyone can have a look.

The basic idea, as summarized by the paper's introductory "key points" section, is as follows:

• "Thepaper offers a framework to help understand the economics behind thecommonly held observation that the price of recorded music is 'headingtowards zero'.

• "This economic approach helps show us how recorded music has long lost any notion ofbeing a ‘pure private good’ and now risks becoming a ‘pure public good’.

• "Music has become‘non-rivalrous’ (If I consume an mp3 file, that doesn’t prevent you,
and vice versa) and ‘non-excludable’ (it’s increasingly hard to denyothers access).

• "The theory issupported by evidence: P2P networks creating non-excludability and theunlimited 'long tail' supply of digital content is non-rival in itsconsumption.

• "Both supermarketsand Spiral Frog are shown as ‘Tipping Points’ which risk pushingrecorded music into a public good status – where the market could fail.

• "So, given thatdigital music will never be ‘rivalrous’ in its consumption; thechallenge is to force some measure of ‘excludability’ back upon theconsumer, again."

Update: I've been asked by MCPS-PRS to include the following disclaimer:

"This material has been prepared by Will Page at the MCPS-PRS Alliance for information purposes only and should not be relied on for any other purpose. It does not constitute the view of the Management or the Boards of MCPS, PRS or any associated company. It is provided for the information of the intended recipient only and should not be reproduced or disclosed to any other person without the consent of the MCPS-PRS Alliance PR department. For further enquiries, information, and to request permissions, please contact:[email protected]"

Having obtained such permission myself, here is the link:

Is the Price of Recorded Music Headed Towards Zero?