Entertainment Industry Should Adapt Business Model NOT Ask the Government to pass SOPA and PIPA
Clarksville, TN – We are told we live in a free market economy driven by the simple laws of supply and demand. However, there are exceptions, bank bail outs being the most obvious. In March 2010, I wrote an article about how theater owners do not follow the laws of supply and demand. The recent discussion about the SOPA law has me thinking about this issue again.
The entertainment industry is tired of having their product stolen via a black market. But instead of asking the government to police access to these black markets, the industry should ask itself why the black market has come to exist.
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The Law of Supply and Demand states that as the more consumers demand a product, the supply of that product goes down, causing the product to be more valuable, which drives the price up. Think Beanie babies. When they were hot, they cost a lot, because you had a lot of folks demanding them. Now, no one is interested in them and they cost very little.
The black market for entertainment goods stems from the entertainment industry’s refusal to price products in the spirit of the law of supply and demand. Let’s take music downloads as an example. The current number one song in America is “We Found Love” by Rihanna and can be downloaded at Amazon for 99 cents. Jefferson Airplane released their famous single “Somebody to Love” in 1966. The b-side to that single was “She Has Funny Cars” and can also be downloaded at Amazon.com for 99 cents. In light of the Supply and Demand law, is it right for both the be priced the same?
Obviously the demand for Rihanna’s song is much greater than the Jefferson Airplane 40 year old, unknown b-side. But does demand even matter in the business of downloading music? Folks aren’t going to Sound Shops to buy cd’s, they are copying a file from a server to their computer. Amazon does not have to ensure its “shelves” are stocked when cd’s are released on Tuesdays. They merely must have the song available for users to copy. Doesn’t this environment negate the rules of Supply and Demand? No, if demand and supply are a near zero, the price should be very, very low. The entertainment industry is not adequately pricing their products, which makes the black market more attractive.
Accessing the black market has some risks. A consumer could be caught and punished or unknowingly download a file that infects their computer. These risks alone are not an adequate deterrent. With the SOPA act, the industry is focusing on policing access to the black market, instead of focusing on what they can do to make illegal download less attractive – dropping the price of their products.
To survive, the industry must make each product’s price point low enough negate the attractiveness of the black market. Would a consumer take the risks with illegal downloads, if the consumer could buy the song for a dime? Lower prices would also increase product sales. There are a lot of songs I would download for a dime apiece, that I would not download for 99 cents. Lowering the cost would mean more money in the artists pocket.
But instead of the entertainment industry taking a hard, long look at itself and adjusting their business model to the current environment, they are asking the government to police an antiquated product delivery method. The future of the industry might look like a peer-to-peer file sharing network, with artists selling songs directly to the consumer – I see the big record/distribution companies going the way of the old Sound Shop.
Adapt or die.
