Letter to the Editor 31 May 2000

12:54 AM: (6/1/2000 actually): The recent couple of articles in Slate about price discrimination - Why Do Drugs Cost Less in Canada? and The Economics of Priceline - got me thinking about the Napster/MP3/music-"piracy" issue. I'll skip the scare quotes from here on, but I think that's a loaded, inaccurate term. "Piracy" should be reserved for operations like the video tape farms in Hong Kong that make bootleg copies of American movies - FOR SALE. Joe College in his dorm room making an MP3 copy of somebody's Sleater-Kinney CD isn't really all that different from Jane College doing the same thing onto a cassette tape down the hall, and you'd hardly call her a pirate.

I wonder if the speed and hunger with which Napster and CD-burning have spread is a sign of a kind of market-created price discrimination - being imposed on the sellers, instead of practiced by them?

After all, really, the total number of MP3 copies of a CD isn't relevant. The real question is, how many purchases have gone unmade as a result? How many of those people would ever have bought the CD in the first place?

So, if you want to go to the trouble of owning a PC, having a (relatively) high-speed Internet connection, getting the right software, and buying a hard disk big enough to hold the files, you can download a song for free. If you want to actually download a CD, you have to first go find out what songs are on that CD, since Napster, at least, operates on a song-title-by-song-title basis. Then you can go look up each song, and download them.

Or, you can go to a record store in the world or online, pay $15, and get all the songs at once, in a nice durable medium, with cover artwork, liner notes, lyrics, and pictures of the cute bass player.

Is this so different from one price for coupon cutters, and another for everyone else? Except, of course, that the record label didn't issue the coupon.

In a recent Salon article about record stores terrified at the boom in blank recordable CD sales, a store owner complains:

"We see three kids pool their money to buy one record," says Don Van Cleve, owner of the Magic Platter in Birmingham, Ala., and president of the Coalition of Independent Music Stores. "We know the other two are getting copies."

So, what is the problem here? At least one record is being purchased. Does he really believe that if it weren't for MP3s, all three of those kids would run off, get jobs, save their pennies, march back in and buy their own individual copies, bright and shiny with the inner light of Virtue and Copyright Protection?

No, of course not. Probably they'd either still pool their money and tape the thing, or none of them would buy it at all. Somebody is having a money illusion problem here.

Instead of piling lawsuit upon lawsuit, what the record industry really needs to look at is the gap between the prices of the two alternatives: either free, or $15. The rush to download is telling them in a very clear way that $15 is too much money. (And their own downloadable-music schemes are worse - $2.49 per *song*?)

If a CD was, say, a buck, almost nobody would be using Napster. Nobody would be making a profit either, probably, but the point is, there's a middle price between free and $15 that would keep most of the people who ever intend to buy the things in the first place. At $5 a CD, for instance, I'd probably buy a copy for home and another for work, where CDs tend to get scratched or go walkies.

The people who would continue to download music, and who would probably never buy the CD, well, they're a marketing expense. A broke student who downloads Macy Gray's new music today and becomes a huge fan may be the high-income web designer who buys all of her CDs - including the back catalog - a year later, not to mention going to her concert and buying a t-shirt. Maybe. But if not, what's been lost? Broke is broke.

After all, people routinely spend $2 - $5 a day to *rent* movies, when for the most popular titles, they could tape them off cable for "free" (already-sunk costs) in a month or two. Why? Because it's easier, because it's a month or two earlier, and because it is NOT $10 - $15 a day.

Willfully blind self-indulgent nebbish or amusingly quirky old coot? And how bout that local sports team? Discuss among yourselves.

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