consumer behavior – The Money ride

It’s unlikely to hear of music consumers who have never downloaded at least one song illegally. Whether through P2P networks such as the old Napster or Kazaa, through bit-torrent programs, or from some random website hosting download-able mp3s.

However, there are those few who are still loyal to the bands they hear. But even so, there is still free music out there, online. And it is legal. Streaming music has become highly popular over the last decade. With almost any song available for free on-demand, how can one resist listening?

In a tough economy, people must choose their luxuries carefully. And when free alternatives present themselves, especially those of the legal variety, people are bound to respond, and in a big way. Consumers have jumped on the streaming music bandwagon like it’s their job, myself included. Websites such as MySpace and the newly created Grooveshark are just a couple of the countless websites that offer free online streaming of millions of songs. Why do they offer this? Consumer traffic. While they don’t make money from music sales, they receive ad revenues from companies trying to benefit from all the traffic the websites generate.

The response: making subscription services more appealing. Not just to the music listener, but to the site hosting the music as well. According to Anthony Bruno of Billboard,

…expect to see the music industry increase its efforts to make paid services more compelling than free ones. The high rates charged today for ad-supported music are designed to make it less compelling for the service provider.

As for illegally downloading music, the debate is still heated on whether it hurts the music industry or not. While the RIAA estimated a loss of 4.2 billion dollars a year in music sales due to piracy, Chia-chen Wang et al. state,

…file sharing does not have a significant effect on music sales from an economical perspective… more than half the people who have listened to pirated music would buy licensed CDs. Therefore, downloading serves as a means of sampling before purchase.

I’ll let you be the judge…

How many times do you fill up your tank of gas? Most American’s fill up their cars at least once a week. Between daily commutes, errands, and vacations we use our cars all the time. A Professor from the University of Southern California has investigated how the price of gas effects our spending habits. In the short run we could:

– eliminate driving vacations

-carpool or ride public transportation

-buy cars with better gas millage

But all of these options are either expensive or inconvenient. That is why we make cuts in other areas:

“In 2007, Wal-Mart estimated that the then current higher gasoline prices take away $7.00 per week from an average family budget. Since then, this figure has certainly increased significantly”.

It is clear that gas prices effect consumer spending. Instead of cutting back on gas consumption, we cut back on eating out, vacations, and entreatment, and shopping:

“Some economists estimate that for every one cent increase in the price of gas, spending in other areas will decline by one billion dollars”.

Our reliance on gas shows how we narrow minded we are. We are willing to hurt all the other industries just as long as we don’t have to give up driving. Other industries are feeling the effects too. Consumers are noticing higher prices in grocery stores because the goods have to be transported. Warehouse stores or discount retail stores are seeing more action. Consumers want to get all their shopping done at one place for the best price possible. Gas prices effect everything!

Tag: consumer behavior

The (Mis)behavior of Music Consumers

Worth the tank?