Digital Audio Insider -- blogging the economics of digital music

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Digital Audio Insider is David Harrell's blog about the economics of digital music.

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January 09, 2009

Amazon MP3's Best-Selling Free Album: What Does It Mean?
by David Harrell

As Hypebot, Chris Anderson (author of the Long Tail and the upcoming Free), and others have noted, the album at the top of Amazon MP3's top selling releases for 2008 is a "free" album -- Ghosts I-IV, by Nine Inch Nails. (To be precise, the first nine tracks are available free from the NIN website, though the entire album was released under a Creative Commons license that allows for free distribution via file sharing networks or other methods.)

So is this proof of the public's willingness to pay for free music?

It is, in the case of one bargain-priced album by one already well-known artist (who also received a ton of attention and press for offering a free album). Ghosts I-IV has been priced at $5 since becoming available for paid download on Amazon back in March. My hunch is that the album wouldn't be sitting at the top the year-end chart if it were selling for $9.99 or more.

Amazon MP3 customers appear to be extremely opportunistic, taking advantage of the Amazon's one-day specials (where you'll often see $1.99 albums) and weekly $5 deals. (See yesterday's Coolfer post for a recent example of a $1.99 classical album moving 21,000 units in a week.) Many of the albums on the top 100 chart were priced at $5 for the entire month of December, and no doubt some of them were also daily or weekly specials at some point during 2008.

What I'd really love to see is the average price paid for each of these albums in 2008. Amazon.com folks: I know that a couple of you are regular readers, so if anyone has any details to share, I'd love to hear them.

Of course, the really big question here is still unanswered -- is there a price elasticity of demand for music, and can the music industry increase total revenue by selling more for less? That is, are the purchasers of these bargain albums simply pocketing their savings, or are the discounts encouraging customers to consume more music, spending as much or more money on recorded music than they would at standard prices?

The only published study I know of didn't reveal any such elasticity. But as I wrote last year, perhaps the discounts in the study (a drop in wholesale CD prices from $12.02 to $9.09) simply weren't enough to stimulate any increased consumer demand. If a price elasticity of demand actually exists, maybe the $5 album is enough of a discount to reveal it.

related: Price Elasticity of Demand for McCartney

tags: digital music free music price elasticity of demand NIN

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The Layaways (my band)

New album: "The Space Between" is now available from eMusic.

"It can't be easy to make something this basically simple sound so fulfilling; it if were, everyone would do it." -- Fingertips

"The Layaways have a unique sound with great drum fills and airy vocals that will make you tap your feet and sing along." -- VIC Radio

Keep It to Yourself - free mp3
All Around the World - free mp3
Come Back Home - free mp3

Download from eMusic, iTunes, Amazon MP3, Lala.com, or CD Baby, listen to free streams at Last.fm and Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"A wonderfully crafted recording built around tasteful songwriting and musicianship..." -- PopMatters

Silence - free mp3
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, listen to free streams at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, listen to free streams at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

the layaways website

Current/Recent Reading and Listening:

Music Supervision: The Complete Guide to Selecting Music for Movies, TV, Games and New Media by Ramsay Adams, David Hnatiuk, and David Weiss

It's written as a how-to guide for those looking to become music supervisors, but I found it to be a good resource for musicians (like me) who are trying to get their music used in movies, TV, etc.