The future of recorded music: an asymptotic decline to marginal cost

Interesting, if slightly utopian, column by Michael Arrington…

The economics of recorded music are fairly simple. Marginal production costs are zero: Like software, it doesn’t cost anything to produce another digital copy that is just as good as the original as soon as the first copy exists, and anyone can create those copies. Unless effective legal (copyright), technical (DRM) or other artificial impediments to production can be created, simple economic theory dictates that the price of music, like its marginal cost, must also fall to zero. The evidence is unmistakable already. In April 2007 the benchmark price for a DRM-free song was $1.29. Today it is $0.89, a drop of 31% in just six months.

P2P networks just exacerbate the problem (or opportunity) further, giving people a way to speed up the process of creating free copies almost to the point of being ridiculous. Today, a billion or so songs are downloaded monthly via BitTorrent, mostly illegally.

Eventually, unless governments are willing to take drastic measures to protect the industry (such as a mandatory music tax), economic theory will win out and the price of music will fall towards zero.

When the industry finally capitulates and realizes that they can no longer charge a meaningful amount of money for digital recorded music, a lot of good things can happen.

Hmmm…. I wonder.