Music as an Information Good

There are many reasons why there is a limited social stigma towards copyright infringement, specifically with regards to downloading/filesharing music. My contention is that market forces tend to convince us that music is overpriced. As the record industry partakes in price gouging, people feel less guilty stealing another’s work. I believe this is due to the fact that the medium for delivery has changed. Additionally, our perception of the music product has changed, as well. I plan to show that as a result of these changes, there is a limited social stigma accompanying copyright infringement.

One key aspect of music that has changed over the years is its delivery mechanism. While changing over from records, to cassettes, to CDs and even to DVDs has been somewhat of a seamless process, the changeover to digital files has been revolutionary. Regarding all of the previous formats, the idea behind each product was fairly simple; an individual would go to a store, pay a certain amount of money and then leave with a physical product. The perception here is that a person is leaving with a tangible item because funds were exchanged for an object that actually cost money to produce. The key difference between this and a simple file is that a file doesn’t have the tangible quality that a product has; it is not anything you can touch or feel. Rather, there are merely a few 1’s and 0’s stored on a hard drive that enable a media player to produce a sound.

When music is stored as a digital file it is no longer an ordinary good, it has become an Information Good. Information Goods have interesting properties. For example, information is costly to produce but costs nothing to reproduce. All of the cost is incurred in making the first copy. Economically speaking, there is a high fixed cost (and sunk once you have created the first copy), but zero marginal cost (Shapiro 1999). In a perfectly competitive environment (where the internet is unregulated), competition drives prices down to the marginal cost of production. (Krugman 2005) The problem now resides where the marginal cost equals zero. Hence, economic forces drive the price to zero.

When viewing the economics behind the current state of the music industry, it seems almost impractical for people to pay for music. There are minimal costs in creating a copy of a song for an additional user. Additionally, packaging, design, or other costs are not incurred by the music industry to deliver the product to the consumer. There can be an unlimited number of copies made for free, so when a copy is stolen, that user does not reduce the availability of the song to other consumers. Public goods are non-rival and non-excludable, which means that consumption of the good by one individual does not reduce the amount of the good available for consumption by others (Krugman 2005). Because music is available online and consumption of a copy does not reduce the number of copies available, music fits the definition of a public good. Interestingly enough, the music industry is facing the same problems that public goods usually face, the ‘free rider problem.’ The free rider problem consists of consumers taking advantage of public goods without contributing sufficiently to fund their creation (Krugman 2005). Whereas private organizations do not reap all the benefits of a public good which they have produced, this results in fewer incentives to produce that good voluntarily.

As the space for music delivery has changed, the costs have changed drastically. As a result, many people feel as though music costs nothing to produce and thus consuming a copy does not hurt any other person who would like to consume a copy. Because society feels that music is overpriced, people do not feel guilty stealing from music corporations. Thus, the current and limited social stigma associated with copyright infringement remains.