Over the past few days, my frequent internet correspondent [MA] has sent me numerous examples of Amazon music pricing that seems unusual. In most of the examples he sent, CDs are priced at roughly 2/3 the price of MP3s with some priced much less than that even.
Why would Amazon price MP3s more than CDs? Are there distinct markets?
One possible explanation might be that many young people don't even have CD players (except on their laptops) but listen to music only on MP3 players and especially like having accessibility to their music via the cloud. So while the cost to producers (and to Amazon) of producing MP3s is lower, the demand for them is higher.
Another possible explanation comes from the economics of durable goods considerations: those who want CDs have more choice, including being able to buy used CDs for considerably less than the prices of new ones (check out the differences between the new and used prices in item #2 below). I have no idea how the market in used MP3s would work, if there even is such a thing.
A third possible explanation is that many people (like me) do not wish to store so many CDs. Storage is costly, and if I can pay a bit more to have someone else store my music or to have music in a form that allows me to store thousands of tunes on a very small device, it might very well be worthwhile.
Here is just one example. They abound on Amazon.
To add to the weirdness, if you buy the above CD, Amazon will include the MP3 at no extra charge. So why would anyone buy just the MP3?
- Maybe someone who doesn't have Amazon Prime and who doesn't want to pay the shipping charges for the CD would buy only the MP3.
In other instances, however, the CDs are much more expensive. Here is just one example: the complete set of Haydn's symphonies performed by Philharmonia Hungarica, conducted by Antal Dorati.
- On CD, the London Label, $136.99
- Same thing on CD, the Decca label, $435.19
- Same thing on MP3, $47.49
And it is not just Amazon.com. Similar anomalies appear for the same items at Amazon.uk. MA writes that,
First the CDs:
Haydn: The Symphonies
Haydn: The Complete Symphonies (This is no longer being sold by Amazon. MA paid £49.98 for this a few years back - - it was always more or less this price - quite a bargain compared with the first set)
Then the MP3s:
Buy the MP3 album for £149.89 at the Amazon MP3 Downloads store.
Buy the MP3 album for £37.49 at the Amazon MP3 Downloads store.
MA tells me that London and Decca are owned by the same company. Is this pricing of the CDs just a weird case of the right hand not knowing what the other right hand is doing? Or is the Decca set really that much higher quality? As he said, bizarre.
I just checked the Amazon.uk prices for the first example, and the pricing for them is reversed. What is the possible explanation? Are market conditions all that different in the UK compared with the US?
- The Only Big Band CD You'll Ever Need, MP3. £7.49
- The Only Big Band CD You'll Ever Need, CD+MP3. £11.33
It really is difficult to believe that rational maximizing economic actors thought long and hard about these prices.
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