I remember the days of Napster, the peer-to-peer file sharing system that was popular in the late 90s and early 2000s before it was shut down by the RIAA and attempted a brief commercial reiteration. At the time, everyone thought that Napster was a creation of the new technology of broadband internet. And it was, on the supply side. It couldn’t have existed in that form without enhanced computer connectivity. But looked at another way, it was simply a broader, more anonymous way of sharing mix tapes and copied audio cassettes. In fact, I remember people sharing copied CD-Rs before Napster came along. Although the supply medium changed, the demand existed before and after. So what caused the demand? Today I came across this interesting idea from The Big Picture blog:
Albums were originally collections of 78s. Don’t let the format dictate the music. That begat Napster, when there were too many overpriced CDs with only one good track.
I find that to be a true statement of the demand problem and that’s one reason that Itunes succeeded when it came along. The “problem” was only partly free music. Many people were willing to pay for music, they just wanted it unbundled.
Again, considering both sides of the market and solving the right problem are key facets of economic analysis.