Chronic Murmuring

Music

Wal-mart's recent entry into the point-to-point distribution of singles is interesting. First, iTunes was selling songs for 99 cents a song. Now Wal-mart is selling songs for 88 cents a song. I also read that roughly 50 (or was it 500???) new suits were brought against pirates trading songs illegally. And while I don't have numbers on this, from what I can gather, this point-to-point distribution of songs digitally is a healthy new market for music.

I was wondering the other day - why has it been historically the case that artists produced and sold songs bundled in the "album"? There seems to be some advantage to the returns to scale on the seller's end by doing it that way, but there may also be a way in which the album can generate more demand for the artist. If you know you like one song, you purchase the entire album, the album as a whole becomes the experience good you care about, and by repetition of listening to several songs, rather than simply one song, by the same artist, you may be able to accumulate some tastes for the artist. If that's the case, then I wouldn't expect the proliferation of technology like iPods and MP3 players to change that too much. But, I also get the sense that bundling several songs on the single album was something which studios because of the returns to scale. Selling individual songs straight to consumers historically was not viable given the high transaction costs and tranportation costs associated with buying and distribution. Bundling the songs was one way of practically driving down the average costs - include more songs on the album, raising the price of the album, and produce enough copies to drive down average cost.

But with digital distiribution, do the returns to scale exist anymore? iTunes, but more Napster in its day, reveals that consumers are willing to purchase individual songs. The transaction costs for purchasing more songs is relatively low since the catalogs are themselves only a click away, and the transportation costs are also nonexistent. Also, products like Apple's Garageband, which allow artists to replicate much of the production sophistication that takes place in a mixing studio, seems to be loosening artists' dependance on studios for bringing their products to market. It makes me wonder if in the future, will we even have albums anymore? A band could realistically use Garageband to record a song or several songs, contract with Wal-mart or iTunes to have it distributed, and entirely circumvent the studios completely. The main value it seems of studios in the future will be in marketing the product, but who's to say that Wal-mart or iTunes cannot do that either?

This new technology has the potential to turn how music is produced, distributed and consumed entirely on its head. The technology has achieved a place where music is entirely portable, for instance, which for all the advantages of CDs, really was nothing like this at all. My friend Matt is at my house right now, and he has with him his iPod. His iPod has 11 gigabytes and is about twice the size of a Zippo lighter. He has 400 albums stored on it, and he tells me that he still has half of his memory free. That's approximately 4000 songs. The iPod synchronizes with his computer, and has the capabilities to be wired into his car's stereo, as well as his home system. Music can be easily selected via the iTune store and downloaded instantly, at a very affordable price. I'm trying to figure out, in light of all these radical changes happening all at once, how will this affect the nature of the entertainment products being produced and consumed?