Saturday, September 24, 2005


Last week, the battle between the record companies and Apple over the pricing of iTunes went public when Steve Jobs suggested the RIAA owners were being "greedy" and shortsighted trying to force Apple to introduce premium charging for some songs on the network.

Yesterday, Edgar Bronfman Junior - the guy who bought Warner Music Group to play with - hit back, with his claim that content (which is what he calls songs) wants to be differently priced:

“There’s no content that I know of that does not have variable pricing,” said Mr. Bronfman at the Goldman Sachs Communacopia investor conference. “Not all songs are created equal—not all time periods are created equal. We want, and will insist upon having, variable pricing.”

We've always loved the music industry, whose best and first response to any challenge is to suggest that there's something organic about their solution. So, if you complain that the same record costs more in Newcastle than in Chicago, and you'll be told "lots of things cost more in the UK", as if that's an explanation. Now, Bronfman is hoping to pull a similar piece of wool-pulling with online prices. "I can't think of any other service that charges a flat rate for access, so naturally iTunes shouldn't."

The trouble is, not only is the logic here weak - a couple of years back there was no content that I knew of that was hobbled by DRM, but the music industry didn't seem to accept that that way of doing things should remain forever - but it's based on absolutey nothing. Hire DVDs online? It's a flat, all you can eat rate - no more for a new blockbuster movie than for a Guy Ritchie film. Fancy reading an old article from The Times? It'll cost you one pound - for a front page story or a news brief. Want a ringtone? Most comapnies will be set up so you pay the same, no matter what it is that is going to piss off your colleagues for the next few weeks. And so on.

But, of course, Bronfman isn't thinking of his own wallet. As in all things, it's the artist who he's thinking of:

“To have only one price point is not fair to our artists, and I dare say not appropriate to consumers. "

Ah, it's the poor artists he's worried about. And the customers, too. We have to be honest here - we've not actually met anyone yet who has been clamouring to pay more for their downloads. If I've missed a large lobby group pushing to pay more, or who feel ashamed by paying an inappropriate price for their downloads, I would like to apologise.

Bronfman, it seems, has confidence in the market:

"The market should decide, not a single retailer."

Ah, market forces, of course. Seeing the music industry insist the market be allowed to do its work is always a fine sight; it's like models lambasting Kate Moss for being on cocaine. The music industry was so afraid of market forces it colluded for years to prevent them from working in the consumer's favour - it took the intervention of the US authorities to point out that the labels were working together to artificially inflate the price of albums. And, in extremis, if the market value of music was allowed to settle itself totally unfettered, the price of a download would be much nearer to zero - it's only the artificial imposition of a ban on filesharing that stops the big four labels from crumbling.

Bronfman, though, is keen to see the market work...

“Some songs should be $0.99 and some songs should be more. I don’t want to give anyone the impression that $0.99 is a thing of the past.”

... but only in one direction. Surely if Bronfman is right, there should be quite a lot of songs that cost less than ninety-nine cents?

But Bronfman has more to say. He's pissed off about Apple not sharing the cash from iPods with his company:

“We are selling our songs through iPod, but we don’t have a share of iPod’s revenue,” he said. “We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only.

Well... actually, you're not selling your songs "through iPod", Edgar - maybe someone should wake him up next time he's got a person with a clue in his office carrying a flipchart.

Why should you get a cut of iPod revenue, when you're still making as much from a track on iTunes as you did from a track on a CD, despite massively reduced costs?

Why should you get a cut of iPod revenue, when your company hasn't paid anything into the R&D and taken none of the risk?

Why should you get a cut of iPod revenue, when you wouldn't expect Technics to send you a cheque everytime they sell a record player?

Why should you get a cut of iPod revenue, when without Apple building iTunes as well, most people would be filling their iPods with songs ripped from their CD and found on the net, meaning you'd also not be making shit from iTunes either?

Why should you get a cut of iPod revenue, when the market you value so much would happily allow you to develop, create and flog an alternative product yourselves? Why should Apple be expected to reward you because your company chooses not to enter a sector?

“We have to keep thinking how we are going to monetize our product for our shareholders,” added Mr. Bronfman. “We are the arms supplier in the device wars between Samsung, Sony, Apple, and others.”

No you're not, you silly old duffer. We've said before that there should be some sort of camp for anyone who cares so little about the magical importance of music they use phrases like 'monetize our product for our shareholders' when they're talking about it, but you're clearly not at home in this world anymore so we'll let you off. But you're not the arms supplier, are you? Because you deal with all sides - if anything, you're more like the red cross.

At this point, Bronfman wandered off onto another thought, fuming away that satelitte radio is robbing him blind, too:

“It’s now time for satellite radio to pay. We gave them a seven-year license at vastly below-market rate to allow that business model to occur,” he said. “There is no reason for their content cost to be one-tenth of what everyone else is paying and have this done on the backs of the music industry while they pay market rate to the NFL, Howard Stern, and Major League Baseball.”

But Bronfman... there's a difference here. There's only one Howard Stern (thank god), and so there's a market for his exclusive services, which forces the price up. If you decide to try and play "market rate" games with the satellite radio companies, what are you going to do to make it worth them paying more? Guarantee them exclusive access to your catalogue? And in doing so remove your songs from FM radio, and the marketing opportunity of selling to the FM audience?

No, you can't actually reduce supply enough to force the price up. You could try and compete in the other way - by offering to cut a deal where you and only your label provides music to a satellite station. But that would be in your favour, not the broadcasters, and would drive the price down.

The only way the labels can make their world come about is by getting someone to change the rules in their favour. Expect lots more large cheques being written to congressmen.

1 comment:

Sethos said...

well said, pretty much exactly my opinion on the matter.

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