The Myth Of The Lost Sale

Stacks of CD's

Photo Credit: Monochrome

In the early days of the music industry the economics of the business were relatively simple. Produce a CD, sell that CD. Promote it with touring etc. Every CD sale, counted as a sale. But it also counted as a fan per se.

The thought goes that every CD sold was bought by someone who likes and listens to that CD. In the old days, there was really no way to try-before-you-buy. You bought the album, spent a good chunk of money on it too. Chances are for the majority there was only a few songs you liked.

The Old Model

One download is not equal to one lost sale.

Paying full price for an album when you only like 1/3 of it has always (and still does) seem like a rort. Why would anyone pay for that? Well, put simply they wont.

A large group shared mix tapes, their favourite songs recorded onto a cassette. At last there way to hear the songs you may like at your leisure without having to blow you money on something you probably wont like.

Next came the Single, which in the era of physical distribution presented far more value for money for those who didn’t like the whole album. You could now get just the songs you wanted (usually) for a cheaper price.

But then, the internet came. And there was finally a true way to try-before-you-buy. We can now listen to music and decided whether or not we are going to buy it.

The Risk

Think about buying a car, would you just buy it because were told its good. Of course not, you would try it first. You have to ride in that car for a long time, not to mention spend a hell of a lot of money on it.

So a CD isn’t specifically an investment comparable to a car, at least not im a economic sense. The psychology behind it however, certainly is. There is a comparable risk in both situations. Most people don’t like risk, especially in this day and age where such a risk can so easily be avoided.

You see (listen up major labels), as music fans if we don’t like your music we aren’t going to listen to it. Regardless of whether or not we paid for it. Crap is, surprisingly still (and often more) crap after you pay for it.

If we paid for it and we don’t like it, chances are we will be annoyed, disappointed and sometimes feel robbed.

For those of us who bought your record and promptly threw it into a box never to be seen again, we are not fans. We are merely people you managed to screw.

No More Risk

But now, we don’t have to risk buying an album we don’t like. We can listen to it in its entirety, for free. And you know what. Most people actually go out and buy it if they like it. 80% of respondents to a recent survey said they had bought an album after hearing it via BitTorrent.

A download, whether its a song or a full album does not equate to a lost music sale, because if we don't like it we aren't going to do anything more. Let me make that even more clear.

One download IS NOT EQUAL to one lost sale.

In the exact same way as:

One sale IS NOT EQUAL to one fan.

The lost revenue is purely speculative, and the majority of the time the lost revenue would only traditionally be gained using bait-and-switch tactics. Hyping up and album to convince everyone to buy it, which they do only to find there's 13 songs of filler for 1 thriller.

The internet doesn’t run on traditional economics. It has its own set. One theory that describes a section of internet economics is the Long Tail. Without going into detail the point is that we cannot apply traditional models. They are all but obsolete.