Now there are substitutes for seeing movies and buying records. At the more legal end of the spectrum there are pay services to stream content, albeit the selection is generally very limited. At the less legal end of the spectrum there are free streaming sites, torrents, or simply googling a record with the name of a filesharing website.
Now if we are to assume that consumers are rational utility maximizers then wouldn’t it make sense for movie and music sales to completely vanish? It’s not like it’s exceptionally hard to get the content for free, and all things considered the risk of legal action is minimal. Then why are these companies still making money? I think it has to do with the fact that people place a very very low marginal benefit on the actual content of movies and music, but the experience of going to a movie theater or owning an actual record has a very very high marginal benefit.
So what can the movie and music industry do to combat this? I mean aside from not putting out shitty products anymore I see only one path to fixing their business models.
The first step is to make everything available to streaming services, because that’s clearly what the market demands. At least with a streaming service they’d be able to capture more of the free riders. The problem with this however is the price needed to cover all of these licensing rights is likely much higher than what the marginal benefit to consumers would be.
Perhaps the costs should be subsidized through advertising with the option to either buy a premium ad-free subscription or maybe purchase single ad free viewings for a nominal cost. Because once the fixed costs are covered, the marginal cost per viewing on a streaming site is near insignificant.