Stochastic Demand and Sound Recording Pricing

Theo Papadopoulos

Victoria University

Clyde Philip Rolston

Belmont University

Abstract

In the wake of anti-trust litigation, such as that relating to payola, it is easy to blame several music industry practices on collusion and corruption. However, analysis of 2004 SoundScan sales data of new, full price releases paints a broader picture with respect to pricing practices. Where it may initially seem that title-specific pricing, or dynamic pricing, would optimize revenue, the prospect of facing a constant swarm of new releases complicates the profitability of such a practice. Moreover, this economic analysis shows that uniform pricing, although it increases risk, is in fact the model that maximizes profits. Therefore, we can best understand current music industry pricing practices as pragmatic business decisions, not necessarily ones with ill intent.

Keywords: music business, economics, music sales, music marketing, sales tracking

Papadopoulos, Theo, and Clyde Philip Rolston. “Stochastic Demand and Sound Recording Pricing.” Journal of the Music and Entertainment Industry Educators Association 6, no. 1 (2006): 59-75. https://doi.org/10.25101/6.3

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