Saturday, August 27, 2005

MAJORS WANT MORE, NOW, AGAIN

Pretty much everyone is agreed that 99 cents is the wrong price for a digital download: every consumer wants to see the prices come down to reflect the much reduced costs involved in digital distribution (or, in the UK, for prices to at least make it down to the UK level); the labels want to see an increase. They want to introduce a flexible pricing structure so that "hot" tracks sell for more - they suggest an upside of this would be that not-so-hot tracks could sell for less than the current price, which demonstrates that the majors still don't understand the digital music industry at all - it's precisely because you're able to make the same profits on any track that you sell that should be enticing them - a sale of a forty-year old Lonnie Donnegan track bringing the same benefits as a U2 song, something they could never have imagined happening a decade back. The millions of songs they've been sitting on and not able to exploit as anything more than by virtually giving them away through Time-Life compilations suddenly offered the potential to hit way above their weight. And they're now trying to throw away that advantage on millions of songs for a short-term gain on a handfull.

And that's even assuming that customers will be happy to pay more for songs - every ten cent increment in prices makes the free networks seem so much more attractive...


4 comments:

zenbubblegum said...

Honestly, is 99p really too much to pay for a song you might listen to hundreds - if not thousands - of times during your lifetime? Are you (and apparently "pretty much everyone else" who agrees that 99p is excessive) going to start lobbying the brewers to lower beer prices? After all, you pay twice as much for each example of their product that you consequently piss away and never get to enjoy again after only a couple of hours' use. See also, food, magazines, petrol, etc. I don't agree with the majors, but I dislike just as much the opinion of people like yourself that see no actual value or lasting worth in music per se. All you can see is that the price of a CD surely only reflects the cost of the plastic bits that make up the physical product and now that there is no case or nice sleeve, shouldn't the music be free? Er, no. Like all art, you're paying for the idea. If 99p is too much for you, I can only presume that you are capable of generating a constant stream of sufficiently good ideas that you don't need anyone elses. You must be amazing.

simon h b said...

Zenbubblegum...

I'm not sure where you got the idea that I believe music should be free from, but since you have apparently completely misread the post on which you're commenting on, I'll try and explain my position again in a slightly simplified manner:

- I don't believe in 'flexible' pricing for downloads, because the listener could extract the same degree of utility from a forty year old song as a new one; the majors merely want flexible pricing to earn more off new material because they can, not because there's an economic reason for it

- I don't believe 99 cents (not pence - that's roughly two dollars) for a download is a fair price - although, if it was, I would be happy to pay 50p in the UK. But if a ten-track physical album would be priced somewhere around the ten dollar mark, how can the same thing which doesn't involve shipping, storage, risk of overstock, a wholesaler and a retailer, a sleeve, a physical disc and so on cost the same - or sometimes even less than - a purely digital purchase?

Either record companies have been selling CDs at a shocking loss for the last few years - which seems unlikely, or they wouldn't be making such a fuss about declining physical sales - or else downloads are overpriced. I can think of no good reason why I should pay the same price for something tangible as I do for something intangible.

I am well aware that there is a part of the cost of CDs which covers the actual content, and I am more than happy to pay that. I am not happy to pay any extra because its digital.

Let's leave aside the possibility of playing the song thousands of times, as there we enter the vexed issue of locked, proprietary files which I suspect won't be much use in ten year's time, never mind at the end of my lifetime.

The talk of beer is, I'm afraid, meaningless - there is a fixed supply of any one sort of beer, and it has to be transported at enormous cost, stored under controlled conditions, served by staff in a property for which rent has to be paid, and money charged on top to go to the Treasury. You're not comparing like things - a physical, finite product with a virtual, functionally infinite one. Regardless of which, I don't actually drink beer and have very little interest in the price.

It's curious, though: the 'other things cost lots of money' argument is one which the BPI and its members regularly use in an attempt to distract attention from their overcharging.

Anonymous said...

"I can think of no good reason why I should pay the same price for something tangible as I do for something intangible."

Because you're paying to reward the artistic impulse that has struck a chord with you to the extent that you are willing to pay money to enjoy the feeling over and over again.

That doesn't change whether you download the song or buy the physical product.

A real human being came up with the idea. A lot of other people helped bring that idea to fruition. And even more people helped bring that song to your attention.

Really, is none of that worth 99 cents to you? 99 cents, at current exchange rates, is such a pitiful amount of money that I'm staggered that anyone would object to it.

And actully, like it or not, music is a product, a commodity, just like beer, bread, Coca-Cola, bubblegum, whatever. So it has a price that delivering that product to market incurs that can fairly be demanded.

99 cents is not excessive, taking all that into account, and leaving aside the simple human-centric notion of rewarding the artist that created a song you say you love, but which you're too mean to give them 99 cents for. It's financial applause.

simon h b said...

Anonymous, I can't decide if you really misunderstand the point, or work for a record label.

Agreed, artists should be rewarded for their work - that is only fair.

If I buy a CD, there is a portion of the price of that CD that goes to reward the artist for making the record. There is also a portion that covers the physical cost of the disc, the distribution, the packaging, the storage, a premium to cover the cost of unsold copies, and so on.

If you call the amount the artist gets 'X', the cost of making the recording 'Y' and the cost of physical distribution 'Z', you can see that the cost of a CD is

X + Y + Z

Clearly, artists must be happy, more or less with the size of X, otherwise they would have ceased to have contributed to the manufacture of CDs in the past.

Now, when you take out all the physical distribution elements, why am I still being expected to pay element 'Z' for something I'm not getting?

In the UK, by the way, it's not 99 cents, it's closer to the equivalent of $1.50.

Is a song worth 99 cents to me? That's an interesting question. I would happily fork out a tenner, maybe even twenty quid, if I came across a copy of Incredible Force Of Junior's first single, because the song on the B-side is very, very special to me. Online, though, I'd reckon it would be worth about 30 cents.

Maybe 30pence.

Valuing a three minute pop song performance at 99cents, suggests USD20 an hour, which seems fair: until you remember that this one performance can be sold literally millions of times.

At 30 cents, if it sells 10,000 downloads, you're looking at $3,000 for a single, three-minute performance with continued unlimited earning potential in future.

And actully, like it or not, music is a product, a commodity, just like beer, bread, Coca-Cola, bubblegum, whatever. So it has a price that delivering that product to market incurs that can fairly be demanded.

I don't actually know what you mean by this - I think you meant that "it will be sold at the price the market will bear", which is obvious - but, equally obvious, if you lower the price in a market where the supply if effectively unlimited you will sell more, and almost certainly make a larger return.

Music, by the way, doesn't behave in the same economic way as Coca-Cola does: Coca-cola is limited in production, and each can of Coke is like the next can of Coke. If 10,000 people fancy a can of Coke, and there are only 9,000 cans of Coke available, the price will rise. If 10,000 people want an mp3, it shouldn't have any impact on the price as to all intents and purposes the supply is finite.

It's not a question of being "mean" - I have spent thousands over the years on music, certainly more than I could afford. I'm not prepared, though, to continue paying prices based on a physical product when I am no longer getting a physical product.

If Coke suddenly stopped coming ready made and instead supplied a powdered 'just add water' formula, you would expect the price to fall to reflect the change in delivery method.

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