Dvorak on the Music Industry

Here’s a quote by John C. Dvorak that blew my mind:

When Edison first released his prerecorded cylinders, they sold for $4 each. With mass production, he eventually brought the price down to 35 cents, nearly a 90 percent reduction. If the same ratio held true with $16 CDs, the cost of which has been perpetually propped up by price fixing, they would cost $1.40. Since it costs less than 25 cents to mass-produce a CD, $1.40 is reasonable and profitable… The industry can still make millions of dollars, just not billions. And many artists can go back to making money the old-fashioned way – by working harder and performing more.

Dvorak is saying two things: 1) that the price of an album should be tied to the cost of pressing a CD and 2) that the music industry should sit back and accept a drop in revenue by a factor of 1000.

On the first point, there are a myriad of costs associated with the creation of an album of music that have nothing to do with the medium on which it is delivered. Artist salaries, music video budgets, the list goes on. Likewise the record labels recoup this cost in different ways: CD’s, concerts, merchandise, etc. Ultimately, the cost of an album should be determined by the market. I find his price-fixing allegations to be the worriesome issue.

The second point I find more disturbing. I’m a believer that people will ultimately pay what they consider to be a fair price for legitimate content. The VCR, long feared by the movie industry, ended up being its primary profit engine over the last 20 years. DVD, once feared by studios who refused to release their films to the new format, is now the most successful consumer electronics story ever. I would argue that the ability to purchase music on-line, and have it be burnable and playable on multiple devices will ultimately enrich the music industry ,if they give consumers what they want. Dvorak’s view is essentially the one shared by Hillary Rosen and the RIAA, and it is this backwards, defensive attitude about consumers that will keep a mutually beneficial outcome just out of people’s reach.