You don’t think of rock stars as the bearers of economics lessons (despite the occasional
London School of Economics student among them). But Jack White
recently demonstrated
an admirable understanding of basic economics. White’s record label,
Third Man Records, puts out limited prints of records in order to meet
customer demand “to be involved in collecting rare and interesting
vinyl”. There is a problem with this though. If you make something rare
and valuable, the market price will be high. So when White set the
prices low, people would show up at the Third Man store and buy up
dozens of copies then sell them on ebay for hundreds of dollars.
Here’s where the economic insight comes in. Many artists in this
position would complain about the greedy resellers and that would be the
end of it. But White realized that 1) if customers want rare and
valuable albums they will be expensive, 2) the market price will be
reached no matter what they sell them for initially, and 3) if someone
is going to profit it might as well be the creators. So instead of
selling them cheap, he auctioned them off at ebay, and as one would
expect from the high prices in resale markets
some albums sold for $300.
As one also might expect, due to people’s general lack of economic
knowledge and the demands of consumers to get valuable things without
paying for them, fans were upset and complained about the “exploitative”
auctions. But rather than backing down, White defended the economic
wisdom of decision:
We sell a Wanda Jackson split record for 10 bucks, the eBay
flipper turns around and sells it for 300… If 300 is what it’s worth,
then why doesn’t Third Man Records sell it for 300? If we sell them for
more, the artist gets more, the flipper gets nothing. We’re not in the
business of making flippers a living. We’re in the business of giving
fans what they want.
He went on to explain that if rarity and value is what you want, then a high price is what you’ll get:
make no mistake, we could make twenty thousand split color
whatevers for you, and they’ll be worth 20 bucks, and you’ll pay 20
bucks for them, and you’ll never talk about them, desire them, hunt to
find them, etc. why should ebay flippers, who are not real fans, dictate
the price, make all the profit (taken from the artist and the label)
and take the records out of the hands of real fans. there’s a guy who
waits in a black suv down the block from third man who hires homeless
people to go buy him tri colors when they are on sale. doesn’t even get
out of his car. should he be charged ten bucks or two hundred? don’t be
spoiled, don’t insult people who are trying to give you what you want.
Ok, so let’s forgive White the error saying that the resellers, or
flippers, “dictate the price”. Sure they may set a price, but it is the
supply, set by Third Man and Jack White, and the demand of the customers
that actually dictates the price. Nevertheless, Jack White is clearly a
man who thinks like an economist. By giving the profit to the creators
instead of the resellers, this gives White, Third Man, and their artists
more incentive to create more albums. Fans should be happy about this,
but instead they’re indignant. They should take White’s advice:
don’t get mad at third man for giving you exactly what
you’ve asked for. and seriously stop all of the whining, because what
you communicate to us is that all of the trouble we go to isn’t worth it
because nothing we do will make you happy.
No comments:
Post a Comment