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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.
By the same token, downloading the “non-rival goods” via BitTorrent would also be consistent with “cultural expectations” … at this point record labels are pretty much counting on the moral imperatives of their customers to sustain an otherwise broken business model. If Sony chooses to justify crass profiteering on the grounds of sheer expediency, I would encourage consumers to adopt a similarly mercenary attitude.
This is not a free market supply-and-demand thing. It is about human decency and dignity. Opportunistic/parasitic profiting from someone's death or misfortune shows a fundamental lack of decency and respect for their life. You are just using them and are actually happy about their death because it makes you money, as if money is more precious than life itself. You are free to ask whether or not it is ok to profit from somebody's death/misfortune. However, the fact that you actually
(1) have to argue to sort this out, and
(2) attempt to disconnect the moral aspect from the money aspect by saying that it is expected in our culture
is a disgrace to you and our “culture”, an affront to humanity, and shows there is something fundamentally lacking in you, like a conscience, or compassion.
I disagree. I would not say this is similar to undertakers etc.; The problem is not that some people make money when others die (given the way society works, this is a necessity), it is that Sony chose to raise the price; they would've made a lot of money on her death already, but they just wanted more.
It does meet my cultural expectations though; not because of general capitalism and supply-and-demand, but because we know that Sony (and most record companies) are money-grubbing bastards.
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sony is a business. business are not people. businesses are not capable of human dignity because they are not human. jesus christ was a person apparantly, sony is not a person. it is up to you and me to demonstrate human decency, not companies.
Companies are run by human beings who make conscious decisions. It is a total cop-out to absolve a company of its humans' behaviour/decisions by claiming that businesses are not people. If you maintain that companies are not people, then I think that's a good a reason to abolish “corporate personhood”. After all, corporations are simply a legal construct that allows the humans that run them to personally escape legal consequences for their behaviour.
Corporations do not operate for the social good. They in fact are required to act without regard for social responsibility but instead to fulfill the wishes of the stakeholders, which is to make money. In this sense, they behave like rogue states that conform to social mores until such time as they come into conflict with the corporations interests. In instances of these conflicts the social mores are discarded and the profit is sought.
To ask a corporation to not do this is to ask a corporation to cease being a corporation. To ask a corporation to act in the interest of society is also misguided as they do not perform well and are unskilled in these areas. The nature of a corporation is such that they are ill suited to even comprehend what social good is and should be kept far from that conversation.
This said, to do anything other than price gouge in sync with celebrity death would be to fail to act as a 'good' corporation is required to act.
Chris:
Corporations were originally created for the common good. They were chartered for specific purposes that met specific needs, then their charter was supposed to end. Over the past century, this beneficial situation mutated into the ugly situation that we have now, where corporations act only for their own/shareholders' good, and as you say “without regard for social responsibility”. Why predatory, antisocial corporations don't have their charters revoked is easy to understand when you consider political campaign contributions and the revolving door in Washington.
If we were looking at this from a strict corporate perspective – which would assume the ultimate goal of maximizing shareholder value – at first blush, you would think that the price rise would track directly with the buzz created by the artist's death.
However, I do think that, as the price rise reached a certain point, there would be a countervailing downward pressure resulting from the perception that “the evil corporate entity was profiting from a celebrity death”. How significant that downward pressure would be is hard to say; likely it would correspond to how revered that artist was. If it were someone like Paul McCartney it might make a difference; for someone like, say, Courtney Love, maybe not so much.
It is easier to understand if you read Dartmouth College v. Woodward.
Yes, Dartmouth v. Woodward is at the core. It's a pity, though, that any legislation that would revoke or alter a charter must not cause harm to the charter members, while campaign contributions and the revolving door all but guarantee that corporations suffer little or no consequences for whatever harm they do to the public or environment. I agree with Anonymous that this is an ugly situation.
The smart thing to do would be to quickly create a “Whitney Houston Tribute Package” of songs and videos, for a “premium” fee — they'd have cleaned up, but looked pious and worshipful of the singer while they did it.
Her music is absolutely rival goods. She will be making no more recordings and releasing no new singles unless there are still some unreleased recordings. Even those are not of infinite supply.