Bryan Caplan  

Another Puzzle from the Tower Bankruptcy Sale

I Wish I Wrote That... Robin Hanson's Intelligence Co...

I just made my life's final purchase from Tower Records. Perhaps it's insensitive to be pondering economic puzzles while my favorite store is on its deathbed, but I can't resist.

Here goes: How come the prices for Rap/Hip-hop were slashed vastly more than those of every other genre of music?

Back when other CDs were 40% off, Rap/Hip-hop was 70% off. Now that everything else is 80% off, every Rap/Hip-Hop CD costs $.25. Yes, a quarter.

Is rap so much more of superstar genre that there's virtually no demand for rappers who are "five minutes ago"? Are rap fans who aren't willing to pay full price inelastically married to downloading? Or what?

I suspect that my ignorance of rap, much like my ignorance of liquor, makes me uniquely unqualified to figure this out on my own. Help!

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COMMENTS (19 to date)
Les writes:

The answer is obvious: Rap is crap.

j-man writes:

maybe they rap is cheaper to buy for the store so they're willing to unload it cheaper? Or maybe the typical consumer of rap music is less afluent.
but i agree with les, rap is crap.

eric writes:

Well, when the price is zero, demand seems the other way. Remember in Katrina when rap CDs were gone but Country CDs remained in looted stores (see here)?

Ever since the bobby-soxers people have known that popular kid acts are ephemeral, only interesting later to those for whom it brings back wistful memories (ergo, Led Zepplin sountrack for Cadillac ads). I wonder if rap containts proportionately more such acts, because it's based less on melody, harmony (does rap have harmony?), or lyrics, than a performer's charisma and a beat, which is easily replaceable.

With few exceptions, pop music is melodically obvious, harmonically non-existent and lyrically stupid. On the other side, it's fun to dance to, which for a kid is what it's really all about. But rap is especially filled with pretentious profundity and cliches (see Jesus Walks on YouTube--deep!). The perpetual peevishness of rappers suggests that anger is seen as a sign or moral superiority, street cred, authenticity, as opposed to an inability to deal with life (how much easier is it to be angry than happy?). This genre has turned out a succession of illiterates more conformist than any Objectivist meeting.

Carl Marks writes:

Bryan I think you touched on the answer. Rap music gets old fast, and there is not much of a market for last years rap. The same may be said of pop, but other genres can continue to sell cds over longer periods of release. Because of this, Tower may feel that they can unload their classic and country music at wholesale, but may not be able to for rap.

Lord writes:

I also believe the cd to download ratio is much higher for rap so most that would buy already own.

Dale writes:

Clearly, lowering the sale price in stages over time is a mechanism for price discrimination. Normally, it acts as a Dutch auction with all of the items on sale simultaneously, but not all of the bidders present all the time.

That raises the question of whether similar groups of buyers exist for each genre. There is a simple explanation that might explain why not that has nothing to do with the quality of the product, its lasting appeal or even the ages of the buyers. Simply put, rap is a newer genre than country, rock or pop. More of the rap owned on physical media is on relatively new CDs. They have had less time to get lost or damaged. Unlike an old Led Zepplin album on scratchy vinyl, there aren't as many old copies out there that a fan would consider replacing at a price somewhere between full retail and 25 cents.

I'm sure the real answer is either much more complicated, or much simpler. The simple answer is that the sellers set the highest price that unloads their inventory fast enough for their needs. Retailers don't need to know why people buy things at particular prices. They only need to know that people do.

b real writes:

Bryan Caplan,

For a guy who doesn't know anything about rap, you sure know a lot about rap.

(And this is from a guy who b*tched out Tyler Cowen--who knows everything--for having silly and confused ideas about the genre.)

I'll give you an example. Run-DMC are the Beatles of rap, only far more important. More or less undeniably the most important group in the history of rap. When they started with rap, it was basically disco with weird vocals on top of it. But then they famously "took the beat from the street and put it on TV."

Their career took a long, slow arc downward culminating in a poorly reviewed, mostly ignored, final CD called "Crown Royal." (It's actually quite good.) Then they had the tragedy of losing their DJ (Jam Master Jay) in a senseless murder which reawakened interest in the group. Insofar as many people have made a career out of being murdered--notably Tupac, Biggie, Kurt Cobain, etc.--you would think this would reinvigorate sales.

Nope. Run and DMC each put out solo albums. At first there was a little yawning, then the silence was deafening.

Hip-hop is absolutely brutal to "older cats." Most people who have one successful album don't have a second one. And the number of successful rappers who go back more than 10, 15 years can be counted on your hands.

Rap's greatest successes are tossed like, well, liked candy wrappers: into the trash. Chuck D, Ice-T, KRS-One, Rakim, etc. etc. not to mention the single greatest rapper of all time—the incomparable Slick Rick.

blink writes:

A theory of superstars explains why recordings by older rappers are priced lower than other CDs; it does not explain why their prices are slashed more quickly. If a superstar effect is involved (or “rap is crap”), the difference will appear in the undiscounted price.

I think we need another explanation for this phenomenon. My theory: there is less complementarily within rap/hip-hop than within other genres. For example, if a particular jazz CD appeals to me, other jazz CDs are likely to interest me as well. When they are discounted, I may pick up several. Not so with rap: if I am a Nas fan I am almost obliged to maintain that Jay-Z is a hopeless imitator. In any case, I am unlikely to pick up one CD by each artist at the same time.

This matters because a customer incurs costs beyond the price the CD. Usually transaction costs are minor, but now the prices are very low. In fact, with such steep discounts, the cost of making a trip to the record store and waiting in line may overwhelm the cost of the CDs. In this case, the opportunity to pick up several partially discounted jazz CDs moves the jazz enthusiast to make the trip. The rap/hip-hop fan may be interested in only one additional CD at the discounted price and the potential consumer surplus is insufficient to motivate a trip. Instead, steeper discount must be offered to move the rap/hip-hop CDs.

Testable prediction: Rap\hip-hop CDs are more likely to be purchased individually.

b real writes:

It's a nice theory but I don't think it's true.

I have plenty of Nas AND Jigga in my collection and, beefin' aside, I don't think I'm alone. Check out their sales figures: are we to believe that among their millions of followers there's no overlap? Implausible.

But maybe you're right about the broader point. There's a lot of crap-rap out there—copy-cat artists who are indistingushable from one another. (Note this is NOT saying anything bad about the genre anymore than saing that there are many bad Chinese restaurants implies that Chinese food is bad.) For every Chingy/Chamillionaire/Juelz Santana, I yawn loudly in order to avoid dying of boredom

On the other hand, the underground is EXPLODING with talent. (see, inter alia, Necro, Prince Paul, All Natural)

aaron writes:

Rap and hip-hop are probably such big sellers that they over stock it. They probably price them higher originally as well.

I'm not a big fan of contemporary rap, but I've started to rebuy some of my old school gangster rap and a bunch of old school hip-hop.

There definitely a difference in quality. Not many contemporary producers are very good and most of the sampling now is a sample of a sample. When a sample comes from an original recording, it sounds much better.

aaron writes:

Also, I agree that the market for rap is driven mostly by fashion and not quality or style. That means it gets old fast.

aaron writes:

And, the low quality of the samples used and poor production make rap especialy agreeable to downloading. Not much is lost to the lower bit rates of online music vs the original CDs.

Monte writes:

Could rap be the Giffen good of music? It certainly seems to meet all the criteria.

Consider that, by most accounts, it is perceived as an inferior good when compared to other types of music, with the possible exception of disco (which, I’m glad to say, died a very timely death years ago). There also appears to be a lack of close substitutes, as some familiar with this genre have already observed. Snoop Dog or Fat Joe isn’t likely to quench the thirst for sex and blood inspired in fans by the lyrics of 50 Cent or 2 Live Crew. And I suspect that the purchase of rap constitutes a substantial percentage of the income of its primary consumers (rock music certainly rolled my allowance as a teenager). Finally, and most compelling, the ultimate litmus test of a genuine Giffen good is its simultaneous fall in price and demand.

Dr. Kaplan’s tragic loss of his favorite store, Tower Records, might well have resulted in the discovery of economic’s version of the missing link: The Giffen.

Kaveh Pourvand writes:

I believe that the explanation could be in terms of the 'costs' of musical production. Namely, hip hop records have musically lower cost forms of production. By cost, I mean in terms of time. A rock or pop band might have four members playing different insruments who all need to contribute to the record. This takes a greater amount of time to co-ordinate then a musical project between say a lyricist and a beat composer. Therefore, given the same production costs and time to produce as other artists, rap artists can produce more records.

The end result is that there are more rap records on the markes then other genres. Demand and supply would imply lower prices.

Christina writes:

I love hip-hop, but I barely bother to browse through Tower's selection because so much of it is complete crap. Basically hip-hop has always been close to the streets and many artists have had very successful, but cheaply produced albums (think Wu-Tang's 36 Chambers)and mixtapes. Of course, more often the results are just bad.

On the "star quality" front, the tradition in hip-hop is for established stars to discover their own proteges to to manage and produce records for. For instance, Dr. Dre is responsible for the careers of Snoop Dogg and Eminem (who in turn have their own proteges), in addition to a myriad of lesser-known artists. Most of his money probably comes from his record label and producing work on other people's albums, despite the huge commercial success of his own solo albums The Chronic and The Chronic 2001. But for every Snoop Dogg success story, there are many more who never amount to much. I can't count how many times I have said of an MC, "he's good as a featured artist on someone else's album, but he can't carry an entire record by himself." Unfortunately the record companies make those records anyway. If anything the short-lived rapping career of Mr. Britney Spears, Kevin Federline, shows that record companies don't really care about the talent of the artist until the sales numbers are in.

eric writes:

I think K-fed is an idiot, but when I heard a snippet from his rap album, it seemed pretty good for the genre. But clearly people hate him, and this killed his chances. It seems to me that a compelling persona is necessary to be considered a good rapper, so the music isn't evaluated solely on its acoustic merits. You could say the same thing about any pop music, as no one wants to hear an ugly or awkward person sing even if they hit all the right notes.

Barkley Rosser writes:

The answer, Bryan, is to take up drinking. Then all would be very, very clear...

dsquared writes:

I think that the puzzle could be clarified if we are absolutely clear about what the genre is here; not "rap" but "rap artists stocked by Tower Records". It would take quite a lot to overturn in my mind the prior belief that Tower were simply a lot worse at buying hip-hop than other genres and those records are so cheap because they are appalling.

Ray G writes:

The short tenure of star status in the hip-hop genre is, in my opinion, definitely the key.

I'm 36, and listened to rap whenever I was an adolescent. No one had ever heard of it in the mainstream, we had to go to these little independent record shops downtown and buy the 12" singles. No complete album had yet been made. (I have long since outgrown pop music of all kinds, thank you.)

Anyway, without understanding why, my peers and I were constantly trying to find the newest, unheard of rapper or record. The hottest song was so quickly forgotten, that it was considered a social faux pas to be heard listening to that "hot" song a mere few weeks later.

We have classic rock stations coming out of ears, but nothing ages well in the hip-hop world.

Thus, regardless of why rap has such a short shelf-life, such a brief life span necessarily translates into cheaper prices in a clearance scenario.

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