Was pop music a bubble market?

I’m using the term “bubble” rather loosely here, but it seems to fit: Record companies selling albums for $12 to $20, with one or two good (well, popular) songs on each and eight to ten tracks of filler.  Then iTunes comes along, and consumers can pay $2 for those two good songs and ignore the remainder.  The value of the two good songs was mistaken for the value of the whole album, much like the value of a house can be confused with the value of a mortgage.

Tyler Cowen mentions this phenomenon:

The recorded music industry has collapsed for a number of reasons, but one is that pre-purchase web listening helps consumers avoid songs and albums they don’t really want to buy.  There are fewer mistaken music purchases today than in say 1986 but of course that also means fewer music purchases. That’s good for consumer welfare, even if it’s not always good for the music corporations and artists.

Let’s continue my dubious analogy by comparing music albums to mortgage-backed securities*.  Following Cowen’s claim, buying a pop album in (say) 1995 was sort of like buying a AAA-rated MBS in 2007: you didn’t know what was in it, but everyone else was doing it and it sure looked good on the cover.  Fifteen years later, a bit of internet research will tell you exactly what’s in that album.  (If only investment bankers had been inclined to do the same!)

Cowen concludes:

So much of our cultural industries have been built on consumer mistakes and those days are coming to an end, rapidly.

Consumer mistakes and signaling, I think.  Signaling gets weighted more heavily as the art form becomes less popular, or maybe less accessible: if I buy a copy of Ride the Lightning it’s probably because I like thrash metal, but if I buy a John Cage album it’s probably because I like to show off my musical sophistication to my friends.

But signaling doesn’t explain why I own a Dance Or Die album; that’s nothing but consumer error.


* This is where you should recognize that I’m more interested in having fun with the concept than I am in actually enlightening anyone


1 Response to “Was pop music a bubble market?”

  1. 1 KingsideRook
    April 8, 2010 at 18:25

    I recall saying a while ago that buying albums made no sense nowadays, since any individual pop song I wanted was on Amazon. I like how you’ve extrapolated it, makes sense.

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