Draining the Moat

Getting ready for a trip, so I’m a little under the gun, but I had to track down the column that inspired this letter to the editor in today’s Boston Globe — Beyond profits in music industry:

THOUGH Charles Stein’s discussion of concert ticket prices (“Why we pluck free tunes but pay up for concerts,” Economic Life, Oct. 5) adds a new dimension to today’s debate about the music industry, it falls victim to the same corporate-dominated thinking of music as a means of profit only. Just as news of lawsuits and settlements from the Recording Industry Association of America frequently ignore the voices of countless bands, musicians, and record labels that rely upon the Internet and file-sharing as a means of generating greater exposure, looking at Simon & Garfunkel’s exorbitant and inexcusable ticket prices as a case study neglects the vast majority of today’s concerts — inexpensive and community-focused events with primary emphasis on artistic expression.

If the live music industry is “a business surrounded by a moat,” as Stein suggests, there is still an opposition, and it exists on the inside. It is about time that this perspective, the voice of local and independent artists, receives a fair share of coverage in discussions about music industry interests. After all, the heart and soul of music is its sound, not a dollar value.


The second half of the article in question [pdf] makes some pretty strong observations:

Whatever moat once surrounded the recorded music industry has been drained by technology. Downloading and file sharing have made music available for free to consumers all around the world. Using the technology may be illegal, but that doesn’t seem to deter many people.

The music business has plenty of company. Changing technology and changing mores have made a long list of industries vulnerable to low-cost or no-cost competition. The prescription drug makers used to have a pretty good moat called the patent system. Today the barbarians are at the gate of the castle. Lower-priced drugs are currently available from Canada. Down the road, pirate producers may manufacture cheap drugs in the Third World and ship them back to the United States.

Newspapers, my business, are having trouble getting customers to pay for their product. Free information is available everywhere, including the newspapers’ own websites. On the advertising side, Internet competitors like Monster.com offer help wanted ads at significantly lower prices than newspapers historically charged. Siebel Systems, a software company, last week had to introduce a discount version of its software on the Web or risk losing sales to rivals who had been undercutting Siebel’s prices.

Where have you gone, pricing power?

I don’t mean to suggest that rock promoters are the only ones who can still push through price hikes. Cable television companies, pro football teams, and health maintenance organizations all seem to be able to get their customers to pay more year after year. So do colleges, even though they are in the business of selling information, a tough field. “People will still pay $40,000 for the experience of sitting in a Harvard classroom listening to a faculty member,” said Jon Fay of Park Loop, a Concord consulting firm.

How about your business? Is it more like a rock concert or a CD? The answer could matter. A lot.