Consumer demand as function of perceived production costs (6 December 2005)

This article by Richard Bradley at The Huffington Post is worth reading in its entirety. But what I found most interesting was this aside:

(Remember that it was the practice of the record companies to charge the most for older compact discs by artists like The Beatles and Neil Young, despite the fact that virtually all the production costs on such albums had already been incurred, apparently on the theory that Baby Boomers would happily pay the higher prices. Which, among other things, meant that young people who wanted that music either wouldn't buy it or would steal it, which is one reason artists felt compelled to sell out to Cadillac, etc., in order to feel that their music was still relevant.)

We don't always consider the cost of music in relation to the costs of its production and get hung up instead on quandaries of intellectual property, the rights to exploit the same ideas, musical or otherwise, over and over again with no value added. Of course, price is not a function of production costs but of consumer demand. But consumer demand, if Bradley is right, is itself a function of the perceived fairness of the price in relation to manufacturing costs. The enthusiasm that might have bolstered demand for legally sold music has been diverted into finding ways to undermine that market, which has been rejected as unfair and illegitimate by enough consumers to completely cripple its functioning. Apple's approach to repairing this market was flat-fee pricing, which consumers accepted as more apparently fair. The record industry responded by allowing the dysfunctional market to make prices even more unfair for those still willing to participate in it, and then attempted to imprison those customers in that malfunctioning market with root-kits and lawsuits and other coercive measures.