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Jack White Ebay Flip Out - The Right Action For The Wrong Reasons

Jack White seems to have realised one of the cool side-effects of people pirating your works - free market research! His reaction to this free research, however, leaves a lot to be desired.

The Guardian recently discussed a move by White’s label, Third Man Records, to sell some of its own products on ebay. The company started off with a very smart realisation: when people are selling your products on eBay, either as an illegal imitation or just reselling it at a higher price, your first reaction should be to start taking notes.

The fashion industry has understood this concept for a long time. They will often watch the sales of bootleg products to indicate demand in new markets or with a new type of customer. Louis Vuitton did this quite famously when it entered the Chinese market - it didn’t have to take a big financial risk or do huge amounts of research because it could see that fake LV bags were already hugely popular. Their official product was almost guaranteed to sell.

This is a technique we use here all the time at Amp. If a musician is popular enough to have bootleg merchandise the research can be invaluable. A recent ebay search for one of our clients turned up a huge amount of fridge magnets and buttons for sale with her face on them. If a bootlegger is continuously producing and selling these items you can be sure there’s a demand for them, so we’re now incorporating official versions into her next launch. These are items we never would have thought of by ourselves (or at least, we’d never have thought they’d actually sell).

Jack White’s label apparently did something similar:

Third Man was inspired by profiteers who “flipped” the label’s releases on eBay.

“We sell a Wanda Jackson split record for 10 bucks, the eBay flipper turns around and sells it for $300. If $300 is what it’s worth, then why doesn’t Third Man Records sell it for $300? If we sell them for more, the artist gets more, the flipper gets nothing. We’re not in the business of making flippers a living. We’re in the business of giving fans what they want.”

As the title of this post implies, there’s both wrong and right in this move. Looking at the pricing dynamics of your product in the marketplace is definitely a good thing, but raising your price from $10 to $300 might not be as wise.

Even more puzzling is White’s assertion that he’s “not in the business of making flippers a living.” My initial reaction was to wonder how a “flipper’s” income effects him, but then I realised that it did make an impact - a positive one!

I’ll use car sales as an analogy to explain why. Imagine you’re about to buy a new car. The price is $15k. You ask yourself “Is this good value?” When you think about it, your perception of value will be based not just on the price and quality of the car, but also on the re-sale value. If I tell you it will be worth $500 or $10,000 in 5 years time, “Is $15k good value?” becomes a completely different equation.

A car that holds it’s value well can command a high price. When economists describe this situation they say that a strong secondary market (used cars) will increase prices in the primary market (new cars).

This is also completely true for limited edition merchandise, deluxe box sets, collectable vinyls and other items that musicians often sell. Part of the reason fans will pay a high price for limited edition stuff is that they expect it will increase in value in years to come.

When we look back at Jack White’s comments in this new light we see that not only is he ignoring the fact that “flippers” represent a strong secondary market (which should allow him to increase his primary price - from $10 to $50?), but that he’s also actively destroying this secondary market by competing with it. Removing the secondary market could actually lower the perceived value, and therefore the number of sales, of the item in question.

To top it all off, when fans expressed their upset with a 3,000% price rise he called them “whiners” and gave this wonderful response to his loyal customers: “Don’t want them to be expensive? Then guess what? Don’t WANT them.”

Don’t worry Jack, I’m sure they won’t for long.

P.S. I could have used property as a more apt example of paying high current prices based on expected future prices, but it’s currently a sensitive topic here in Ireland!

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