The Value of Music and the Trappings of the Marketplace, 1990-2005

Peter Alhadeff
Berklee College of Music

Abstract

Record labels had less control over prices in the U.S. in the 1990s than is generally believed. Demand for hits, for example, was elastic, as buyers could choose the same product from different stores and sellers competed on prices. Demand for less popular music, on the contrary, was inelastic because deep catalog recordings were only found in mega-stores with a large inventory. This explains the paradox of hits selling at a lower price overall than second tier records.

The author calculates a price index of recorded music products which shows real prices declining markedly and continuously since 1991, well before the World Wide Web and Napster. If hits dominated the market, and their demand was elastic, this is to be expected.

The paper also challenges the notion that before 2001 the record industry was able to effectively protect the value of its products. Pirated downloads did not help and would later devastate the trade, together with a single-song economy.  But albums became less expensive every year and, as an object of mass consumption, recorded music fared worse against most other goods in the 1990s, including live concert and movies tickets.

Keywords: record industry, music industry, album pricing, recorded music price index, economics, illegal downloading, price elasticity, record retail

Alhadeff, Peter. “The Value of Music and the Trappings of the Marketplace, 1990-2005.” Journal of the Music and Entertainment Industry Educators Association 6, no. 1 (2006): 13-28. https://doi.org/10.25101/6.1