Wednesday, March 29, 2006

Dirt Cheap CDs

CD retailers have taken a battering from the rapid rise of MP3 players and music downloads. Established businesses are also threatened by the growth of factory suppliers and websites that sell CDs for $15 or less about half the regular retail price. Illegally copied CDs purchased in Australia or overseas are a further source of competition.

But as the AFR today (subscription required) points out, even pre-recorded CDs face competition from firms, such as Dirt Cheap CDs , which take advantage of the government's decision to bypass the Copyright Amendment Act (No. 2) 1998 which permits parallel imports of non-infringing copies of a sound recording.

Midnight Oil's frontsman Peter Garrett, the ALP's arts spokesman, as usual sees such competition as jepardising careers of Australian artists and their royalties. But Dirt Cheap CDs is also improving consumer choice and 'gains-from-trade' arguments show the value of gains to consumers here exceed losses to artists. If Australia did wish to promote its own rock performers then explicit subsidies to performers would outperform limiting access to cheap overseas CDs. Why however would one ever want to subsidise such activities? The performers appeal to a mass audience and those who cannot succeed would seem to have questionable talent - even the successful don't have much! There are better users of public money.


D. Prentice said...

Michael Harris's paper in Economic Papers a few years ago gives a nice discussion of the Australian regulation and the winners (local record companies and popular artists (like Midnight Oil)) and losers - consumers. If I remember correctly, restrictions on parallel imports didn't provide much in the way of assistance for independent or alternative music artists either.

hc said...

David, I am not surprised as local CD producers can (and do) restrict sale of their CDs to discounters like Dirt Cheap CDs even without the restrictions. BTW Dirt Cheap export a lot of CDs and DVDs to the US - so I guess restrictions asre in place there.

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