[Manic Monday] Perception Of Value For Digital Music

We live in times when actual value and perceived value are rarely the same thing. Even that piece of paper you use as money, has more relation to perceived value as to actual value, as the number written on the money is almost definitely more than the actual value of the paper it was made with. Money is represented by specially-printed pieces of paper as a form of guarantee from the government, that it represents the number printed on it; harking back from old times (as recently as the 20th century) where every piece of money was guaranteed its value in gold, kept safe in government safes.

Brands are also a skilfully-played game of perceived value - a good brand would be able to communicate values beyond 'just' the production price and effort to make their products, and thus are capable to charge prices, and even encourage customer loyalty. Some other brands play the "cheap" card, as they are usually in commoditized industries and can only compete by price or by feature, or a combination of price and feature.

Some companies resist commoditization and attempt to achieve higher margins and sustained business through enhancing the perceived value of their products, and others play mass market and attempt to achieve sustainable business through volume business. Whichever way a company goes, it will ultimately depend on the customers themselves - on whether or not they perceive a product to be something of value to them hence needing purchase - among other factors.

So where does that leave music? Good music is notoriously difficult to produce - those string arrangements cost money to make, and perhaps even more to record - and while using the term 'good' or 'bad' for music will depend on a person's taste, anyone in the music industry (or other content-based industries for that matter) will attest to the fact that a higher production budget will ultimately result in a higher-quality production.

The sound of a Gibson-made guitar, guided by a sound engineer and a music arranger, will definitely sound much better than that off-the-shelf no-brand guitar recorded in the bedroom. The actual music could be bad or good, but good music production will enhance (or embellish) a song. A good stage production (good sound system, great lighting, good crew, etc) would make the difference between a mediocre show and the ultimate concert.

Sadly, the effort and actual money that goes in to producing music seems to be lost on the average music listener, especially at the advent of digital downloads (illegal or not) brought on by services like Napster.

Usually, the hard core fan would be more willing to invest in anything their favorite artist releases, but the average music listener might not, especially for a digital music product that essentially costs zero to duplicate and distribute. The notorious MP3 file has garnered a reputation as something that is essentially free, and the youngest generation of music consumers are probably confused that they need to pay something that they perceive should be free.

Should we then attempt to 'educate' the market that "hey, that song you're downloading, it's not supposed to be free"? I mean, there are real costs related to producing good (or bad) music, but does it go through a magical gate that changes the value perception to zero once it hits the internet?

I beg to differ on this argument, since even during the days where people would record mixtapes for each other, using readily-available two-deck cassette players, there probably was not much thought going into copying songs to another tape - just a budget for empty cassettes and borrowing some albums from friends. So was the value perception, even then, at zero for songs? Why, and how, did this happen?

So, is this a historical problem that had its roots even way before the internet age, and only became apparent when the music producers were not able to control distribution anymore, added with the exponential network effect of the internet? Did the internet actually create a total change in music consumer habits, or did it just scale a habit already there?

I'm probably oversimplifying this, but the imbalance is apparent - music costs money to produce, yet the average music consumer seems to be oblivious to that fact. The internet did not do this. The birth of the MP3 did not do this. But perhaps, a disconnect between the communication of value perception is what the actual problem is.

Ario is a co-founder of Ohd.io, an Indonesian music streaming service. He worked in the digital music industry in Indonesia from 2003 to 2010, and recently worked in the movie and TV industry in Vietnam. Keep up with him on Twitter at @barijoe or his blog on http://barijoe.wordpress.com.