Letter to the Editor:
Dear Sir,
The Australian Competition and Consumer Commission's Trevor Lee and Jill Walker are incorrect in claiming benefits would follow from taking the right of CD producers to charge different prices in different markets. They maintain that the segmenting of markets merely brings excessive profits.
Such profits are only possible if the supply of CD's is monopolised. In fact the CD supply market is intensely competitive. There are half a dozen major world producer/marketers and dozens of smaller suppliers. In those circumstances any "rents" from price differentiation must fall to the suppliers of the scarce goods: namely the artists. The artist has a unique product and is faced by many possible processors and marketers of that talent. Why should he or she be prevented from seeking the best return for these creative efforts?
In addition to reducing income for successful artists, constraining the conditions of supply to prevent price discrimination reduces opportunities for new artists. A CD producer has a great many options in promoting new acts and would lose money in nineteen out of twenty cases. If producers are impeded from seeking to maximise revenue from their products, they will be more cautious in offering opportunities for new performers. Price reductions from intervening in market processes may bring a short term gain to consumers but will mean a future loss in diversity of output.
Mr Lee and Dr Walker claim that the majors who undertake the price differentiation rarely discover the new talent but take over artists once they have been nurtured by smaller firms. Even if this were correct, it would add no weight to the case for requiring the same price to be charged in all markets. The fact of this price differentiation allows smaller companies to negotiate a higher transfer fee to compensate the incubating smaller firms and encourage them to seek out new artists to meet consumer needs.
It should be up to the parties involved to determine their marketing strategy, not to impose a one-price-fits-all approach.
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