By Jim McCarthy Mar 3, 2009 0 comments

CDs, like Real Estate, are a Great Value

So if you’ve seen my short talk on the rise in the value of live entertainment and the fall in the value of recorded or broadcast entertainment, you’ve heard me use the example of a record and a concert ticket I bought around the same time for around the same price back in 1985.

The punch line of course is that now, the same concert ticket would cost a whole lot more, and the “album” (by now a CD or even more likely, a collection of mp3s) would cost a whole lot less.  I’ll link the talk again so you can watch it.

But thanks to eagle-eyed media maven Patch Canada, I got a hold of this report from the RIAA (warning:  you’re downloading a pdf if you click the link.)

It’s data-rich, comparing the inflation-adjusted price of various kinds of entertainment.  The agenda of the report’s authors is to say that CDs represent a great value now as compared to in the past, and really, that’s true.

The problem though is that it’s true not because people want it more (and thus get more “value” out of it) but because the price has truly plummeted.

Here are a couple key tidbits:

“Forty years ago, fans could walk into their local record store and buy an album for
about $3.75. That certainly sounds like a bargain, but adjust for the buying power of a dollar
in 1967 versus a dollar now, and that album would cost nearly $22 in today’s currency!”

True enough, but there’s more.  The report sites data from 1996 to 2006, showing the “real” (that is, adjusted for inflation) change in prices.  A Major League Baseball ticket jumped up 53%, concert tickets 86%, and Broadway shows, 21%.

Meanwhile, the price of a cd in that time dropped 9%.

The report sums up this way:

The conclusion is clear: While many forms of entertainment have increased in price
in both nominal and real terms, the price of a CD has actually decreased in real terms, and
when adjusted for inflation, CDs are less expensive today than ever before.

This is all indisputably true, but there’s more to say.  First, the RIAA is making this argument as a way to convince consumers that they shouldn’t simply “steal” the music, which is a perfectly legitimate gripe on their part, if completely hopeless.  The fact is, the “value” of recorded music has only one way to go:  down.  Now, as a result, it represents a good “value for your money” because it’s cheaper.

It’s like saying real estate is a good value right now.  True, but you wouldn’t want to be in that business.

We talked a little bit about why live entertainment has appreciated in value yesterday, and we’ll keep that up.  It’s nice to see a set of good data on this change, even if the RIAA’s purpose for gathering it is different from ours!

PS:  Here’s the talk I mentioned before.

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