How Music Helps To Understand Economics - And Vice Versa

Even though these goods and services appear to be from different industries, they all have one thing in common. Their prices are directly tied to what consumers are willing to pay for them. If you are touring and need a hotel room, you will search for the cleanest one at the best price. Find one with tons of amenities but too steep a price, and you’ll move on. Find a dingy one with a killer rate, you may move on from that too. The winner will be the hotel with the price which makes the troubadour think, I value this hotel room more than the hundred dollar bill in my pocket.

This same process goes for music stores. I’ve seen time and again customers and store owners haggle over numbers until they come to a price that suits them both — a price which reflects that the store owner values the $1,000 dollars more than the guitar he’s selling, and vice versa. 

Things get confusing when you step over to the realm of music production and distribution. Artists are often so emotionally tied to their end product, they fail to make wise investment choices from the start. While it’s great for the recording studio who gets $10,000 from an independent artist for an EP recording, it’s not so great for the artist, who even after recording still has to pay for distribution, physical CDs, vinyl, and touring expenses to promote the album. With streaming services like Spotify paying an average of $0.003-$0.005 per stream, this doesn’t seem like a justifiable investment.

The Subjective Theory of Value came into play with my music business not too long ago when my band had new music to record but the recording studio we’d been recording at for years had gone up in prices (good for them for increased demand). When I ran the numbers against what we generally make each year from music sales, I had to make the hard decision to pass and come up with a new plan. Due to competition, I have options. I could go find a new studio to record at with better rates (and hopefully no sacrificed product quality.) Or I could even take the time to build my own studio and learn the ins and outs of music production (the most cost-effective).

Not only did I come to the conclusion that I valued keeping the money I would have to pay for the recordings more than the recordings themselves, but I also understood I could take that money and invest it in other resources that had more potential to grow my business and directly generate income.

View single page >> |

Disclosure: This work is licensed under a Creative Commons Attribution 4.0 International License, except for material where copyright is reserved by a party other than FEE.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.