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How Much is All Music Worth? · Monday June 01, 2009 by Crosbie Fitch

I recently did a rough ‘back of the envelope’ calculation that gives 2015 as the year in which all the music ever released on CD can fit on a $100 hard disk drive – The Total Music Vortex as I put it.

Now let’s imagine that in 2015, in some part of the world (where copyright isn’t as respected as some might wish it were) there’s a company that has obtained a copy of all music ever released and is selling copies of it on 120TB hard disk drives (that sell bare at $100).

What I want to know is how much you’d offer for such a drive for your sole personal use? Let’s pretend it has no resale value beyond the $100 of the drive.

Is your price $101? $150? $200? $400? or even $1,000?

Would you get anywhere near the $12,600,100 mark that it would cost were you to pay say $10 per CD?

Let’s say you calculated that over the next 20 years you might buy 20 CDs that had been released in the previous 35 years (and would thus be included on that hard drive) – you’d probably buy ten times as many new releases (but they won’t be on that hard drive). That would make your price $300 ($100+20x$10). Let’s say if the CDs had been priced more cheaply you might have bought twice as many. That makes your price $400 ($100+40x$7.50).

So, being relatively generous about it by a factor of 2, if the average person would value a hard drive with all music ever released at $700, that puts the average value of a CD at $0.000476 ($600/1.26m), or less than a twentieth of a cent.

Note that the CDs you do buy, you do value at around $10 (you may value some at even more than the retail price), but there are over a million that you wouldn’t pay even a penny for.

Now if the average CD is valued at a twentieth of a cent, I suggest the record labels could make 2,000% markups if they started auctioning off their back catalogue at a minimum bid of 1 cent per CD. They’ve only got half a dozen years in which to do this, because after that it’s too late, people will have shared it all for next to nothing already.

How would such a digital art auction work? Well, a label would create a website where for every CD ever published they invite punters to bid how much they’d pay to have a copy of that CD with a copyleft license (their cultural liberty to it restored). Let’s say 1,000,000 people bid at least 5 cents for the copyleft release of the CD album recording of Imagine by John Lennon. The label could make $50,000 if they sold it at 5 cents. It’s possible 60,000 people might bid at least $1, in which case it would be better sold at $1 for $60,000. 4,000 of those might even have bid at least $10, but $40,000 isn’t so good. This form of auction enables the determination of the effective market price of a digital work as if it were sold as equally priced copies. The auction of each CD continues indefinitely until the label decides its market price has been reached (as it soon will as the market price descends to zero).

There are 1.5 billion punters online (not all of whom can afford CDs at $10 a pop). Anyway, the theoretical maximum realisable value of a CD is about $700,000 (on average). Being realistic about it, I’d say a label selling a CD for $60,000 (once and for all) is pretty good going (if it can be sustained as an average). But, more critically, if they don’t start selling their back catalogue now, they’ll never sell it.

So, there’s a swansong business model for record labels (artists will have a different model as they’ll be selling the production of their music to their audiences, not copies of monopoly protected published works). Even if the average album only fetches $10,000 this means the labels can make $120 billion over the next 6 years, i.e. $21 billion per annum ($14 per online user per annum). After that, they’ve sold their assets and can focus on selling the value they can still add (if any). The alternative is to sit on back catalogue and watch its sale value decrease to a few hundred dollars, given everyone else will soon also have a copy of it anyway.

You might think this is an example of the difference I often try to explain between selling music and selling copies. It isn’t, it’s selling the public’s liberty back to it, inviting the public to pay for its own manumission concerning a copyright protected work. Selling music is what musicians do, and in the future they’ll sell it to their audiences instead of to record labels as they have done in the past.

So, ethically, the labels’ back catalogue already belongs to the public and the labels shouldn’t get a penny for it (given they’ve been unethically granted the suspension of the public’s liberty to share and build upon it). So, realising its asset value (while it still has one) would be prudent from an unscrupulous and mercenary perspective (a perspective one infers the industry is familiar with).

The final question is though, can the labels dare to acknowledge even tacitly that their monopoly on the distribution of copies may not last forever (let alone 6 years)? As some of us know only too well, it has already ended, but it’s going to take a few years before everyone else realises it. That’s just enough time for the labels to have a closing down sale – unless of course, they’re hoping for a GM style government bailout in 6 years time – assuming the taxpayer’s credit rating hasn’t already been used up by other bailouts by then.



 

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