OFF: Economics of CD buying

M Holmes fofp at HOLYROOD.ED.AC.UK
Fri Apr 4 12:57:38 EST 2003

I'm afraid I must retract something I've already agreed with Doug.

I said that if there were no percentage royalty (or other correlation of
royalty payments) of primary sale price accruing to a band (assumption
A) then my argument that a positive resale price would mean a higher
primary price would no apply.

Having considered this further I've decided I must retract. My reasoning
is as follows:

I contend that consumers buy based on a kind of notional rent price
which is the difference between the retail price and the price they
calculate (albeit unconciously) they might receive on resale secondhand.
Let's call the retail price X and the resale price Y. I'm claiming that
the consumer buys based on price (X-Y) more than on price Y.

If the price X-Y is lower, then by standard economics of supply and
demand, the demand goes up. X-Y is lower than X whenever Y is positive
(when there's any resale value at all in other words) and therefore
demand for new sales will be higher when there's a positive resale

To the extent that this demand can be met, royalties to a band will
increase due to greater primary sales when there is a positive resale

Sorry Doug, we nearly had agreement there...


BTW: since we were talking about counterexamples. I'd contend that if
Doug were correct and bands received a fixed royalty whatever the price
of a new CD, it would be in the interest of bands to influence the price
down as low as possible so as to increase demand and therefore maximise
their royalties. if possible bands would attempt to have their work
given away (zero price is as low as we can go without actually paying
consumers to take product). In that I haven't heard of any bands
attempting to do this, I offer thise as a counterexample to Doug's

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