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Market Forces and the Music Biz

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Rifat Qureshi, a former performing artist, is a business analyst for a UK-based software company that provides services for the utilities and telecom industries. He has fascinating insight into the global music industry:

    If we look laterally at another industry, the energy markets, particularly here in the UK, we see the powerful effects of market forces.

    Deregulation of generation and supply has revealed a massive glut of supply. So much so that market prices have plummeted over 40% in the past 4 years. British Energy is hanging on by the skin of its teeth, being bailed out by the government. TXU’s stock has collapsed due to earnings warnings. Powergen is shutting down generation plants. My gosh — all this shouldn’t happen to the basic of all sectors, utilities! Opening the market is ruining the industry!

    Well, maybe it should, says an MP from UK parliament! Because, market forces should be the only determining factor in setting prices, not by artificially inflated by regulation.

    Can we find similarities with the music industry in particular? I think so, since new technologies are now “setting the price,” or at least the tone of what a price point should be, compared to what was previously asked of us in a closed market. The music market forces involve so many participants (that’s all of us), that the efficient market will hopefully find the right equilibrium.

    So, will the $37 billion worldwide music industry lose 40% of its pricing in the next 4 years? Possibly. Maybe it needs the drastic correction to see how the market really values it.

This is not what the RIAA wants to hear, but maybe what it needs to hear.

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About Eric Olsen

  • http://www.levi-online.com Levi

    Great article. I would enjoy further expansion of these implications