What Is The Value of Digital Music?

The International Federation of the Phonographic Industry (IFPI) says that global sales in 2008 decreased 8.3 percent  to $18.4 billion in 2008. That number takes in account all forms of revenue: physical sales, digital sales and performance rights. The recording industry blames piracy, and most likely there is some truth to that assumption. However, I think it’s also necessary to judge the value of digital content, and decide how much music fans are willing to pay for music that can be copied instantaneously at zero cost, and erased just as quickly.

How many times have you deleted or simply lost digital music in the past decade? Now compare that to the number of physical records you’ve lost or damaged in the same period of time. You probably still have CDs that you bought in the 90s, while your entire digital collection has been renewed several times. So, even though music can theoretically survive longer in digital format, people give less importance to “0s” and “1s” than original vinyl or CDs. The abundance and availability of digital music gives it more ephemeral characteristics, and makes it less valuable to the consumer.

Bandcamp, which allows musicians to set their own prices for songs sold on the site, recently gave the option to set prices as low as 10 cents per track.

Bandcamp can do this because Paypal has introduced micropayments, which charge 5% + $0.05 per transaction. That means that an album with 15 songs can cost as little as $1.50. The site even gives musicians the option to let the consumer to set their price, like Radiohead did with the digital release of In Rainbows. It’s possible that by lowering prices, musicians can close the gap between what consumers think an mp3 is worth, and what is being charged. This would make the few cents people pay for a song just as disposable as the digital content itself.

I’m sure everyone hoards music on hard drives, and some might even claim to actually listen to their entire collection of 60GB of music. But the very fact that you have 500,000 songs makes each individual song less important. If we consider the millions of tracks available online, and the ability to copy them infinitely (which means infinite supply), then the value of a single track, regardless of the time spent to make it, is close to zero.

So what becomes marketable is the artists’ image and name, which increases in value the as it propagates and becomes popular. Digital content isn’t distributed, it’s broadcast. If I send you a song, it becomes ours, not just yours, which is radically different from the way physical copies are circulated. It’s reasonable to assume that less CDs and vinyl will be manufactured as demand goes down, and become artsy collector’s items at more expensive prices.

For any social networking platform (Facebook, Twitter, Myspace) the value of the network increases proportionately to the amount of people that use it. So what the music industry must focus on is creating online experiences that are unique (like live performances), and use digital distribution to increase the global value of the artist, not individual songs. Yesterday, the Smashing Pumpkins proposed something along these lines by offering fans access to studio video footage for a subscription fee. If the industry is consistently losing money, perhaps the solution is to stop focusing on selling and protecting rights to finished products, and try to market the process of creation itself, while it happens.

How much is a single mp3 worth to you? What are you most willing to spend money on: live or recorded music?

Image via spodesabode.com
Source: Billboard, DigitalAudioInsider