Have Record Labels Sunk Their Own Ship?

Record Labels themselves may have contributed to their own dip in sales as the Internet reduces production margins and companies don't respond with a drop in price. Record Labels that are not prepared to accept the new method of purchase may dwindle in the sight of iTunes and online piracy. Robert Easley writes of the issues that face a Record Label when tackling online sales and piracy and I think the information is valuable for it explores whether crushing internet sales will damage Record Labels in the long run.

The Introduction of Mp3

The Motion Picture Expert Group (MPEG) landed on the computer scene by creating a way of reducing the size of a picture file, making it easier to share online. When the audio version, Mp3, came out it allowed music to be uploaded to the internet and shared globally with easy on any internet connection.

Companies now had the opportunity of reducing production margins to virtually 0 dollars. Now, without CDs or packaging, it was cheaper to share music. "Clearly this puts pressure on the consumer's expectations of a  reasonable product price" (Easley).

This stands true with me. If I purchase a CD at $20 and I'm still expected to pay the same price when the Record Label hasn't any production margins I'm not going to buy online.

The Connection With Piracy

"They think the brand name sheilds them," (Easley) from dropping prices. However, through consumers burning their own CDs, they have learnt that the cost of production is extremely small and that most of the money they spend is profit.

Easley's work shows us this downfall for the Record Labels. Customers became aware that they were being exploited and then became content to source music illegally for no cost at all. I know many who would think that way. If it costs nothing to produce why pay anything at all? Piracy becomes a popular option.

Apple Online

One thing that I failed to see is how Easley says people still wish to buy online. If the expense online is too much and therefore promoting piracy, why does he still say their is a market for online sales. If the cost is the same as a CD then the customer, you would think, would want the CD than pay the price for just the files.

Apple has opened that market buy allowing customers to buy a single track at USD$0.99, allowing someone to have the song they want without the rest of the tracks on the album. This offers "Savings to the consumers," (Easley) and is proof of what Easley says about Record Labels pricing themselves out of the game.

References:

Easley, R. F. (2005). Ethical issues in the Music Industries response to innovation and piracy. Journel of Business Ethics, 62, 163-168. Retrieved March 24, 2011, from Jstor database.