April 28, 2003

Big Music's Small Piece

If Harvard law professor Terry Fisher is right, then those who are downloading illegal songs of the Net to stick it to Big Music are inflicting a lot of collateral damage. Let me quote from Orin Kerr's post:

I understand that the record companies have done some pretty bad stuff in the past, and of course they are the industry that every one loves to hate. If I understand Fisher's figures correctly, however, record company profit makes up only about one percent of the price of a compact disc. If record companies decided to operate on a not-for-profit basis, the average price of CDs would drop from $18 to $17.81. This is certainly news to me. Am I missing something, or does downloading hurt local retailers the most-- with artists, record companies, and manufacturers all taking their share of the hit as well?

A problem I see with Fisher's conclusion is if Big Music gets such a small portion from a CD sale then why did companies like Sony and AOL Time Warner get into the business or stay in it? When the music market was doing better a few years ago were they making their sliver from volume?