Shortly after Whitney Houston died, Sony significantly raised the price of some of her MP3s on iTunes. There was a strong demand for her work – lots of mourners wanted to buy her Greatest Hits album – and Sony figured they would make some extra money from the surge of interest. There has been widespread outrage (see here and here), with lots of people claiming that it was a lousy thing to do. Is this reaction justified?
The basic rules of the market say “no.” Price is regulated by supply and demand. If demand goes up, then price goes up, and as long as demand continues, the price won’t go down again. This is exactly what happened, so it seem hard to argue that Sony did anything wrong.
In response, one might argue that this explanation only tells half the story. Demand went up but supply didn’t; supply still met the demand. MP3s are considered “non-rival” goods. Rival goods are goods that can be consumed by only one person at a time. When you buy one, there is a lower supply. So, if iTunes were selling physical CDs or records, the more people who purchased them, the harder they would be to acquire. But a new MP3 is created every time someone purchases one and the creation doesn’t require any resources other than electrons and a tiny amount of bandwidth. This is what makes them non-rival, an infinite number could be created without affecting the supply and everyone in the world could have an identical MP3 without interfering with anyone else’s purchase.
From this point of view, while demand went up, supply didn’t go down, so the rise in price was unjustified. But even this doesn’t change the fact that price is, ultimately determined by what people are willing to pay given the supply. Since people were buying the music despite the increased cost, Sony was still following the laws of the market.
There is one other option. Someone might claim that when a person dies, the market should not determine the price. By this argument, respect for the deceased and for the sentiments of those who grieve has a higher (non-monetary) value than profit. This special case would trump supply and demand and, as such, Sony should have left the price as it was. This is a complicated position, because at least one thing that the free market can’t do is determine what should or should not be regulated by the free market. Someone outside the commercial exchange has to make that call. Maybe this would be Sony itself, maybe it would be Apple who owns iTunes, or maybe it would be the consumers, who, if you believe the reports, are the ones complaining.
But if we make the claim that people shouldn’t profit from death, then we have to challenge money earned by undertakers, coffin-makers, headstone carvers, and anyone else whose profession is based on someone dying. We have to look at recipients of life insurance and florists, as well. In other words, if we claim that people shouldn’t profit from someone’s death, we have to challenge vast numbers of commercial exchanges and endless cultural assumption. If we are going to challenge such profit we have to object to a huge, perhaps boundless, class of exchanges. What about the person who gets the job that was available after the previous employee died? How would these kinds of vacancies be filled?
All of this does not mean that it is moral to profit from someone’s death, but it does suggest that Sony’s act was consistent with cultural expectations. To challenge what they did is to challenge fundamental attitudes about capitalism and commercial life. Maybe this is warranted, but whether it is or not, we should make it clear how deep of a question these complaints are forcing to ask.
Update: I ended up writing a second post on this topic inspired by the comments below.