Cds Market Change Due To Technology

Cd’s Market Change Due To Technology CD’s Market Change Due to Technology At the beginning of the twenty first century, there has been a major change in technology that deals with the music industry. CD burners, Napster, and other internet sites that allow free downloading of all types of music has caused the actual CD selling in stores to decrease and the price will increase and if this continues it will affect many businesses and musicians salaries. This type of change is happening all over the world, but the major dispute with how fair or right this type of technology actually is to musicians is occurring mainly in North America and Europe. In the CD market, the actual affect is on the selling of the music through stores which will then affect the writers and businesses making the CDs. Many teenagers and adults are realizing how much cheaper it actually is to make your own CD then to go to a store and purchase the CD.

Many of the businesses that are allowing the free downloading of music and burning the music then to a CD are being sued for unrightfully taking something from someone else without paying for it. However, there are too many ways to find free downloading programs or if there is a charge it still is a lot less expensive to use that program then to buy the CD in a store. Before this technology came out, the CD market was a great success. Everybody wanted CDs and as you can see in graph A as the population demanded, the CD prices started to increase. The equilibrium stayed the same for many years, which caused people to become annoyed at how much one CD actually cost.

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Department stores that could afford to lower the prices of CDs did so and this outraged music stores because they could not afford to lower the CD prices to compete with the other stores. As David Lieberman and Jayne O’Donnell reported in their article “Crackdown Doesn’t Cut CD Costs” that is found in the USA Today, the major music distributors decided to make a privacy policy called the MAP (minimum advertising pricing) which therefore acted as a price floor. This still did not solve the problem of overcharging the consumers. As you can see in graph B, the price for CDs could no longer decrease. After the technology of CD burners and Internet free downloading music, people began to realize that they could still receive the music they wanted and pay less for it. As USA Today said in their article “HP to Pay Antipiracy Fee for CD Burners,” approximately 500 million CDs are pirated annually by people creating their own CDs from downloads off the internet (this doesn’t include burning someone else’s CD with the burner).

Also, as Jefferson Graham quoted Chris Zingg from the article “Napster Users Wait, and Download” from USA Today magazine, “It’s not free downloads that have hurt sales for many retailers, but the ever-increasing cost of CDs .. downloading is a reaction to that (price remaining high over the years).” Finally the MAP has been dropped in order to stop overcharging the consumers and CD prices were to drop by almost five dollars. Since 1997, consumers have been overcharged a total of $480 million dollars because of the MAP (Lieberman). However, since CD burners and the availability of free music from the Internet has become so popular, the prices could not decrease and it apparently did not matter if the MAP was decided to be removed. Also, since the price stayed the same for so many years, the supply curve has become almost completely elastic, which means even if the demand decreases it would not affect the price as you can see in graph C. The total revenue has also decreased because there is still a lower demand for store sold CDs.

In conclusion, if the CD market continues charging so much for CDs, the market will slowly become lower, which will affect the musicians income and the store’s income as you can see in graph D. Supply will definitely decrease because they are beginning to substitute store bought CDs with home-made CDs which will bring the equilibrium price way below the original price. The only way they could settle this dispute is to find a way to lower CD prices without making the artists suffer and not get paid for what they work for. This is a good example of how technology has changed the market. Economics Essays.


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