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John, can you please explain the economics of music?

So Jason Isbell has been promoting his new album and I went to Amazon today to buy it. Please examine the pricing.

Isbell screen shot

So if I buy the CD, it's $8 and I get the MP3 for free. If I buy just the MP3, it's $1.49 more! Amazon clearly wants me to buy the CD even though I'd really rather just have the MP3. What am I missing?

You can buy the album here (which you definitely should do). You can listen to the title track here and the whole thing (perhaps not permanently) here.

 

 

This work is not a product of the United States Government or the United States Environmental Protection Agency, and the author is not doing this work in any governmental capacity.  The views expressed are those of the author only and do not necessarily represent those of the United States or the US EPA.

 

 

 

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  1. John Whitehead Avatar
    John Whitehead

    This one is easy, it looks like they are trying to get you to pay for Prime!
    Amazon tells me that my CD is arriving July 17.

    Reply
  2. Economists Do It With Models Avatar
    Economists Do It With Models

    It’s also not clear which product is actually higher margin for Amazon, since that depends on the wholesale price of a CD (whereas Amazon probably gets 30 percent from the MP3 sale as it does for Kindle books). Of course, it would then be sort of nuts for the wholesale price of the CD to be less than the label’s cut of the MP3 sale, but I wouldn’t be surprised if this were the case since wholesale prices seem to be largely driven by historical norms.
    Actually, let me try again based on what nonsense has gone on with e-books- consider for a second that it’s not clear who actually sets these prices. It’s entirely possible that the label sets the MP3 price and Amazon sets the CD price, and the two parties have somewhat different incentives.

    Reply
  3. willwheels Avatar
    willwheels

    Thanks, Jodie, those are really helpful answers!
    John, I have Prime, but I think you might have also been close. I spent way too much time on this, but MP3s are downloads and the autorip goes to the Amazon player, so they may be trying to push me towards that (which I use because I can get away with it at work).
    Or it could have been the treatment of one of their experiments.
    In any case, I look forward to the album on Friday.

    Reply
  4. Ironman Avatar
    Ironman

    It’s the CDs – nobody wants them any more! As for what to do with it after you’ve converted its data into a proper streamable format, see:
    http://www.core77.com/posts/38777/Misburnt-CDs-Angle-Grinder-Pigeon-Throwing-Machine

    Reply

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