Record breakers

I have been out of touch for a couple of days and have only today found that Radiohead are letting people choose how much (if anything) to pay for their new album. I won't bore you with the fascination this causes from an economist's point of view because many, many others have already done that. I also won't do it because I'm not an economist. Let's just say that two noteworthy entries are The Economist and Vidico's piece too. It is really fascinating from an economics perspective, but I'll spare you that and just say that I hope that they publish the data on the average price paid as well as the distribution of prices.

What interests me most about this is how it might change the landscape for music publishing. Chris Anderson wrote in The Long Tail about technology democratizing the means of production, the internet democratizing the means of distribution and web 2.0 creating ways for content to find enthusiasts - meaning that people's tastes end up as niches of one. This has been possible for a number of obscure bands, and The Arctic Monkeys and Lily Allen are the two most obvious examples of how it is possible to become a big hit through this channel today.

If it becomes the norm for bands to publish music independently of record labels then the labels will be severely undermined - perhaps permanently. What is most interesting is that this will be a temporary state. In personal lines insurance, my current area, the move from brokers to direct insurers was significant. Now that there are so many direct insurers, shopping around becomes very labour intensive. Enter Money Supermarket, Confused.com and a host of other aggregators that claim to simplify the job for you. There are so many aggregators doing this now that there is even speculation that there will be an aggregator of aggregators soon.

This is a demonstration of the theory that all markets end up intermediated. If musicians start to publish independently on a significant scale, that market will end up intermediated again. There would be a market for a music aggregator just to allow you to sift through the vast choice. iTunes and others would soon find their deals with record labels inadequate and would need to change their business model fundamentally.

I will be watching the Radiohead album launch with great interest.

Sugar-coated sugar bombs

I must start with a couple of apologies - firstly, the lack of posts in the last week, and secondly, a pre-emptive apology for this entry - as Mark Twain said, "I am sorry for writing such a long letter. I didn't have time to write a short one."

One of my readers and I were discussing the ethics of Krispy Kreme Doughnuts at the weekend. The reason for reporting it is that the conversation took a different direction to that which I would have expected - that is to say, we took the opposite sides to those that someone who knew our jobs and normal approaches would have predicted. I was arguing the case of KK's moral bankruptcy, and he was arguing that they have a duty to act in the way they do. This is unexpected because he is a liberal sort (with a Che Geuvara haircut) who works in publishing, and I am a strategy consultant who is concerned with maximum revenue and profit (although I, to be fair, also appear to be growing a Che Guevara haircut).

I started the debate, after sitting opposite the same branch of KK (one which is in a row of many different restaurants) a number of times and observing the customers. Their average body weight must be in the multiples of the average body weight of the customers of the other restaurants. I also have experience of a diabetic friend testing my blood sugar before and after eating one KK doughnut and finding that just that one accounted for more than half of my safe blood sugar range within 10 minutes of eating it.

My view is that Krispy Kreme have an unethical business model, by trying to sell as many doughnuts as possible to people regardless of their health or level of activity. His argument was that it is right that these doughnuts should be available but that the consequence is unavoidable because they have a fiduciary duty to their shareholders to sell as many of the doughnuts as possible. He pointed out that it isn't a sustainable business model to sell one doughnut a week only to people who do plenty of exercise.

I think it's pretty fair to say that it wouldn't be a valid business model to do that. As far as I am concerned, they should reduce the level of sugar etc in their doughnuts to a more sensible level, because they are always going to need to sell as many as they can. The point is that they have created a product that should not be eaten regularly and a distribution model that demands that it be sold in the greatest volume that each customer will accept - meaning that they are entering into a business that they know will worsen (and possibly shorten) their customers' lives.

I have never been drawn on the debate about whether ethics are good business or not. As far as I am concerned, ethics are a ticket into the game and the question of whether or not they are good for business is irrelevant. But there has been some interesting work recently on the cost of bad ethics to business. I will dig out some things and post more on the subject soon. In the mean time, stay healthy.