Assignment
Death of the CD! In August 2003, EMI announced the agreement of the Rolling Stones to offer all the band's post-1971 recordings through digital downloads for the first time. EMI had already announced a deal in April 2003 to offer most of its back catalogue through 10 online music retailers in Europe, though the Rolling Stones had at that time been one of the few groups (together with the Beatles) to refuse that approach. Many see this move by EMI as part of a strategy by music companies to combat the growing threat of illegal music downloads, with EMI claiming that the (legal) downloads it is now offering take up only half the disc space of a typical MP3 file and are of better quality. To some observers, all this is further proof of the end of the CD. Yet new figures in August 2003 from the British Phonographic Industry (BPI), the UK music trade body, showed that CD album sales had exceeded 228 million units over the past 12 months, a 3% rise on the previous year. Much of this increase in album sales has been linked to heavy and sustained discounting of prices, with the average price of an album in the UK falling to £9.79 in 2003, the cheapest ever. Extensive mark-down in prices of albums by supermarkets have forced music shops to hold almost permanent sales and to keep extending their ‘limited offers'. Further evidence of price reductions being the driving force behind album sales is contained in the fact that over the past 12 months revenue from album sales actually fell by 2% despite the volume rising by 3%.
Another factor driving album sales would seem to have been a more attractive set of new releases. The BPI noted that ‘cheap retail prices combined with strong new titles are sustaining the UK album market at a high level'. Even piracy is seen by some commentators as increasing album sales, with many people illegally copying certain tracks as ‘samplers' but then going on to buy albums containing those tracks. Record companies also point to the higher disposable income of the twenty- and thirty- ‘something's' who are the main purchasers of albums. On the downside, the BPI points to continuing problems for the singles CD market, which slumped by 26% in both volume and value in the year to August 2003. In fact demand for singles has halved over the past five years and singles now make up only 6.5% of the total sales value of the music industry. One of the problems is the now relatively high average price of singles (£4) compared to albums (£9.79). Also more piracy is taking place amongst teenagers, the main buyers of singles, who then download the single without subsequently purchasing it.
Questions
1 In the market for albums, what evidence is there for a ‘movement along' the demand curve?
2 Can you find any evidence for a ‘shift' in the demand curve for albums? Identify the variables in the ‘conditions of demand' that might be involved here.
3 What is happening to the demand curve for singles?
4 Do you agree with the suggestion that the CD has ‘no future'? Explain your reasoning.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.