Monday, May 22, 2006

CDs vs Concerts

Like many pairs of similar products, CDs and concerts are both complements and substitutes. To a certain degree, buying the CD of a band means you do not need to listen to them live, but listening to a band live also makes you more likely to buy a CD.

Downloaded mp3s, both legal and illegal, have reduced the value of CDs as evidenced by shrinking CD sales. However, given the huge quantity of mp3s shared online and the fact that the CD business is still around, it's just a little smaller, means that these two goods are far less imperfect substitutes than many (I) had initially thought.

David Bowie argues that the decline in CDs and the rise of mp3s mean that concerts are the only viable ways for musicians to make money.
But now, he says, the link between the two products has been severed, meaning that artists and their managers need to make more money from concerts and feel less constrained in setting ticket prices.

Professor Krueger says this tendency was spotted by David Bowie, who told the New York Times in 2002 that "music itself is going to become like running water or electricity".

Bowie has advised his fellow performers: "You'd better be prepared for doing a lot of touring, because that's really the only unique situation that's going to be left."
Concerts may also end up being the best place to sell CDs.

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