Study Shows That If Labels Lowered Prices, They Would Sell A Lot More

Filed under: music industry, rants & opinions

Another story by Mike Masnick at TechDirt, this time looking at the fact that, surprise surprise, if the price of music dropped, more people would buy it.

Having talked with a bunch of music execs recently, as well as a few different companies that do analytics in the music space, one thing became clear: unlike most other industries, record label execs tend not to be particularly data or analytics-driven. Let’s just say they didn’t get into the recording industry because they were good at math. There are a few exceptions, obviously, but getting many industry execs to think logically and examine data isn’t particularly easy. This isn’t that surprising, given how many examples of actions by big record label execs that make little to no sense when thought about analytically.

Yet another study has come out suggesting that the industry has pricing all wrong, pointing out that the increase in sales from dropping the price of music would increase profits [Wired]. And yet what has the industry been trying to do? That’s right: trying to raise the price. The study suggested that the “optimal” price for music might be closer to $0.60 per track. That still seems way too high to me when you look at how people flocked to services like Allofmp3.com, but in general I think the basic concept makes sense. You can maximize revenue by dropping prices, but it doesn’t seem like many record industry execs have realized that.

The math behind this is simple: shift more product = make more money. And when you are talking about a product that is cheap (CDs) or almost free (online music) to manufacture (once the recording process is finished) then it all makes sense… the kinda sense even a record exec can understand.