Tue. Jun. 18, 2019

Discount spiral – The system of survival?

the discounting spiralDiscount spiral: a system of survival…
We first had “discount” as a response to the economical crisis in America back at the end of the 20’s. We then would go to the upper gear almost 20 years after with a tougher version of it. In other words, the coherently if not cynically called “hard discount”. Itself appearing right after the World War II in a then 90% destroyed German economy.
70 years have gone since, and the hard discount seems stronger than ever day after day. With thanks to the ongoing globalization process of the trade. Flashback…

Back in 1946, two brothers, Karl and Theo Albrecht, took over their mom’s little grocery which was in operation in Essen since 1913. From then, they would launch Aldi (the contraction of Albrecht and Diskont). A chain which operates 9,600 stores in 18 countries nowadays. Their goal: cut the costs by seemingly any means necessary. This with the highest turnover and charges at their lowest!

/ˈdɪskaʊnt/ Alteration of French descompte, décompte. From Old French disconter, desconter (“reckon off, account back, discount”). From Medieval Latin discomputare (“to deduct, discount”), from Latin dis (“away”) + computare (“to reckon, count”).
noun a deduction from the usual cost of something.
synonyms: reduction, deduction, markdown, price cut, cut, lower price, cut price, concession, concessionary price, rebate.
verb deduct an amount from (the usual price of something).
synonyms: deduct, take off, rebate; informal knock off, slash.

Discount spiral: the low cost at any price!
Since then, one would apply this model to almost every domains one might think of. From airlines… With Ireland based company Ryanair CEO Michael O’Leary promising $100 round trip fares to and from the United States in his latest public relations effort. To telecoms, cabs and whatsoever. But also manufacturing along with reputed brands increasing their profits. Meanwhile relocating their production in emerging countries…

Nothing to complain about nor to criticize on a consumer (and also short term) point of view. With people (us) benefiting from the cheapest access to things. But at which cost at the end? When most of the employees of these companies are left with ony two alternatives. Meaning either work at unceasingly harder conditions from a year to another. Or leave and add their names to an ever growing list of unemployed as time goes???

As for music, this became almost the same… Far are the days when, back in the Disco days, producers would spend US$ 35,000 for the recording of a track. The evolution of technology progressively allowing them to put music together eventually without musicians. Then to release music without labels, by creating their own structures. But also the consumers to freely reproduce music. Then to most likely download it for free. With the latest trend being the streaming process with platforms like Spotify. A commercial music service in the domain allowing paid premium users to download music to listen to off-line. Although the company got accused countless times of failing to compensate artists fairly. With a bunch of examples one could find on Wikepedia

Discount spiral: the modern slavery!
In 2009, Swedish musician Magnus Uggla wanted to pull his music from the service. Thus stating that after six months he’d only earned “what a mediocre busker could earn in a day”. Norwegian newspaper Dagbladet reported in 2009, that record label Racing Junior had only earned NOK 19 ($3.00 USD) after their artists had been streamed over 55,100 times. According to an infographic by David McCandless, an artist on Spotify would need over four million streams per month to earn US$1,160. The latter being the equivalent to working full-time at a minimum wage job!!!

In other times, some of us would have called this nothing but modern slavery. Feel free to let us know about your thoughts…

  • In February 2014, the late Karl Albrecht (he died in July last year) was ranked as 21st richest person in the world on Rupert Hoogewerf‘s famous Hurun Report. Meanwhile, his brother Theo was ranked by Forbes as the 31st richest person in the world, with a net worth of $16.7 billion back in 2010.
  • Ryanair Michael O’Leary‘s stake of roughly 4% was worth around €400 million, based on the company’s market value of €10.5 billion back in 2013, according to Barron’s.
  • As of 2012, Spotify head Daniel EK got ranked 395th on the British rich list with a calculated worth of £190m, meanwhile his company estimates that the average song generates between $0.006 and $0.0084 per stream in royalties!!!

Editorials – Discount spiral: The system of survival?

Previously in the series…
Technology: Look wot you dun (to music)!

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