Music Labels May Seek Higher Download Prices

punxking writes "Some of the big music labels are now clamoring to raise prices for digital music downloads. From the article: 'Music industry executives said introductory wholesale prices for digital tracks had been set low to stimulate demand for online music sales but the success of Apple's music store had prompted concern that they may now be too low.'" Relatedly, the BBC is reporting that iTunes is under investigation in Britain for charging disparities between the UK and the European continent.

Comments

Costs?

[BWJones]

Can I simply ask somebody who really knows? What are the costs associated with digital distribution versus printing and distribution of physical media? Is this simply a case of music labels being greedy? Come on now. This is an industry that simply does not get it. Music sales declined through the late 90's because the music that was being promulgated on us by the music labels sucked. Big time. Throughout the entire decade of the 90's, they waited for somebody else to innovate the digital distribution of music (Napster), and waited for Apple to do it right with the iTunes Music Store, and now they want to profit on top of all of others hard work. I guess it is a business model that works, but come on now, have some respect for what you do! Are you making a profit with iTunes with the current pricing scheme? It would certainly appear to be the case, so why are you now trying to increase prices? The cost of distribution through the Apple iTMS has not changed. Apple has not changed the terms for distributing music in your contracts. Apple is not making any more money on it than previously agreed. I guess we should not really be surprised though. Remember when CDs first came out? Remember the cost of a vinyl album at the time ($7)? Remember the cost of a CD at the time($12-15)? Remember the music industries promise that CD costs would drop when they became popular? Consider especially that shelf space could hold more CD's and the distribution costs for CDs were significantly less than they were for vinyl. Consider that the costs for pressing a CD were/are significantly less than those for vinyl. I would assume that there is an order of magnitude difference in the distribution costs for Internet delivery versus physical media delivery that would make Internet delivery significantly less expensive and thus more profitable.

Here is a prediction: If the price for music increases right now for digital distribution, sales will fall and piracy will increase. Apple did the hard work of market research on what folks want to pay for music downloaded from the Internet and they concluded that .99 cents/song was the sweet spot where they could offer a service, make minimal profit from the songs themselves, and distribute most of the music profits to the music labels. Of course the iTMS should be considered a loss leader of sorts as it drives sales of iPods, but Apple themselves are making almost nothing on music sales specifically.

Re:Costs?

[Fizzlewhiff]

I still pay between $12 and $15 for a new release CD. Record stores and bookstores have too big a markup so I get them at the large discount stores like Target. If I want to get ripped off really bad I'll shop at the mall. It is the same for buying clothes, shoes, and jewelry. Want to be over charged, shop at the mall. Why don't you kids get it?

Re:Costs?

[Ironsides]

Can I simply ask somebody who really knows? What are the costs associated with digital distribution versus printing and distribution of physical media? Is this simply a case of music labels being greedy?

Well, for the labels the recuring cost of online distribution is zero. They suply the song, but the distributor pays all the bandwidth and associated costs. Their costs deal with producing the song and administration.

Throughout the entire decade of the 90's, they waited for somebody else to innovate the digital distribution of music (Napster), and waited for Apple to do it right with the iTunes Music Store, and now they want to profit on top of all of others hard work.

Remember, they own the music. Quite literaly in most cases. Unless an artist retained the rights, the Recording Companies own it. It is up to them to set the price.

Are you making a profit with iTunes with the current pricing scheme? It would certainly appear to be the case, so why are you now trying to increase prices?

To make more money, of course!

The cost of distribution through the Apple iTMS has not changed. Apple has not changed the terms for distributing music in your contracts. Apple is not making any more money on it than previously agreed.

Frequently when a new product comes out, a company will test the waters with various prices to find the one that maximizes their profits. Sometimes fewer sales at higher margins means more money. Sometimes more sales at lower margins means more money. They are trying to find the peak in that equation. Personally I think they should go lower. But that is up to them.

Here is a prediction: If the price for music increases right now for digital distribution, sales will fall and piracy will increase.

No argument here. But the main questing from the recording execs is, will sales fall so much as to offset the increase in revenue per song?

Sure I'm analyzing this from a money grubbing point of view. But then again, that's what you have to do in order to understand what the labels are doing. They want to make more money.

I personally won't buy lossy formats. I don't consider them good enough quality for what I listen to. (Classical) But many people will, especially for pop and rock. All this is, is a basic exercise in Econ 101.

Re:Costs?

[nine-times]

...Is this simply a case of music labels being greedy?...

Not simply a case of greed. Record labels don't *want* online distribution methods to work. Sure, it saves them money. Whereas packaging and shipping used to cut into the price of a CD, no money needs to be spent to produce more copies of an digital/medium-less album.

However, the fact that iTMS is working means that people aren't buying CDs, which is an indicator that the "music industry" is obsolete. The fact is, you can produce an album on your own and get it on iTMS, use internet/viral marketing for your promotion, and bypass major record labels altogether. We don't need them and there business model anymore, and they know it, but they don't want you to know it.

Their big hope is to convince everyone that p2p sharing is immoral and online music stores are too expensive-- it would cost more than a CD and you don't even get a lossless copy or the medium or liner notes or anything. As long as they can scare us into sticking with medium-based distribution models, they still have a business.

So what I'm suggesting is, this raising of prices is just sabotage.

Re:Costs?

[Macadamizer]

Just a question -- when you buy a box of Corn Flakes, are you concerned with how much the corn farmer gets? Or when you buy a car, how much the designer got paid? I know this is kinda flamebaitish, but it seems like everyone justifies that "CD's are too much" because the artists gets so little of each CD sold -- when in reality, the artists signed a contract agreeing to so much per CD sold -- if they didn't like it, as many others have pointed out, nobody held a gun to their heads to make then sign the contract...

Re:Costs?

[91degrees]

Now explain to me why I have to pay $12.49 - $21.95 for a single CD that cost under a $1? I would not mind if the artists saw $5 of that cost. But usually they are lucky if they see .25 cents.

Now, hang on...

You get a skilled songwriter to spend months of their lives writing songs. A skilled artist to write the cover. A musical genius to record and mix it, and removing any risk of total failure from the band, all for that $12.49.

It's certainly true that the record industry does not play fair, but I don't think there's anything wrong with the band's percentage. The rest of the contract for a new signing are pretty onerous, but royalties are obvious things that the band has the right to negotiate.

Re:Costs?

[ducomputergeek]

When I was a teen and in college using Napster back in the glory day's, I didn't see anything wrong with it. It really wasn't until I starting working in the video production business that really changed my mind. A lot of the music and stuff we use in projects are licenced or commissioned from local music producers that literally feed their families from those royalities and work.

Its just like I wouldn't want to see someone use the work I've done and use it for their own purposes without asking. I might not care on most of it, but there is a priniciple there that if someone is going to produce the work, they should be rewarded for it.

You can spew crap about how evil the recording empire is, etc. etc. but at the end of the day, sharing copyrighted works is theft.

Re:Costs?

[hackstraw]

However, the fact that iTMS is working means that people aren't buying CDs, which is an indicator that the "music industry" is obsolete. The fact is, you can produce an album on your own and get it on iTMS, use internet/viral marketing for your promotion, and bypass major record labels altogether. We don't need them and there business model anymore, and they know it, but they don't want you to know it.

That is worth being bolded and repeated:

However, the fact that iTMS is working means that people aren't buying CDs, which is an indicator that the "music industry" is obsolete. The fact is, you can produce an album on your own and get it on iTMS, use internet/viral marketing for your promotion, and bypass major record labels altogether. We don't need them and there business model anymore, and they know it, but they don't want you to know it.

Music is thousands of years old. About as old as humans could first figure out how to hit two things together to make a sound. The music industry is less than 100 years old. Their need is gone, yet believe it or not music will survive without them. Just like diamonds are a new facet of love, love predated the need to pay "2 months salary" for a love rock, and love will keep going after the diamond industry.

Music is best experienced live. Even if its "live" via LPs or whatever at a dance club or what have you, that is where the real money and human enjoyment is. All recordings have always been and always will be second to the live experience. Porn and to a lesser extent TV are pretty much the only entertainment means that are enjoyed alone.

Their big hope is to convince everyone that p2p sharing is immoral and online music stores are too expensive-- it would cost more than a CD and you don't even get a lossless copy or the medium or liner notes or anything. As long as they can scare us into sticking with medium-based distribution models, they still have a business.

Morals are so medieval. At least as far as I'm concerned, morals were only relevant when good people kill and torture bad people for the sake of being good like in the witch trials of Europe and early America. To me is immoral to take my hard earned money and give it to some record exec that I don't know. I pay for my music just like I pay for my television. In fact, its on the same bill. I have a cable broadband connection and cable TV. I pay about $45 a month for each TV and music, not including the thousands of dollars (many of it Sony) for electronic equipment to enjoy said entertainment.

I also believe that its immoral to butcher fine music files and convert them to MP3s that have no internal integrity to ensure that the file is complete or not corrupt, but thats just me.

I just hope that governments can stay out of this whole record label demise and let them simply fail like they should. They had their heyday, but we simply don't need these couple of companies out there to put our music on a half filled piece of plastic and an often void of relevant information piece of paper.

Re:Costs?

[nine-times]

You can spew crap about how evil the recording empire is, etc. etc. but at the end of the day, sharing copyrighted works is theft.

No, theft is "theft". Distributing copyrighted material without permission of the copyright holder is "copyright infringement". And not all music distributed on p2p is even copyright infringement. Yes, in fact, some recordings are public domain, and some are posted on p2p networks by the musicians themselves.

You can spew all the FUD about how inherently evil p2p networks are, but at the end of the day, p2p networks are morally neutral.

Re:Costs?

[Sloppy]

I'm tired of all this bitching about lossy compression being horrible and blah blah blah.

I'm a metalhead/rocker and I don't mind listening to lossy formats at all. The problem is, even if I don't mind playing lossy-compressed files, it's unlikely that the format I want to play (or can play), and the format they're selling, are the same. So I would end up transcoding, and there's the artifacting from two lossy encodes. That's noticable, even if you're a half-deaf metalhead with a shitty car stereo, like me.

And it's not just a question of what equipment you have, and uses of the music you can imagine, today -- there's the future too.

So, even if one has lower standards than an "audiophile", lossy-compressed files are still a dubious purchase, unless they cost a whole lot less.

Now having a 60 GB hard drive, I actually have the space to put my 8000 MP3/AAC files on my laptop. With lossless, you don't have that luxury.

Yes, you do. You buy the music in lossless form and store it on your home fileserver's humungous RAID (which dwarfs your laptop's disk), or store the CDs inside big cardboard boxes. Then you lossy-encode it for use on your laptop, or your tiny portable player, or whatever. The problem with buying already-lossy-compressed files, is that you don't know that the player you'll have three years from now (much less 20 years from now) will play them. Unless you have lossless originals to work with, you're going to be transcoding. Or maybe you'll just buy the music again, like RIAA wants you to.

Re:Costs?

[Reene]

As far as I'm concerned, if someone copies and uses something I created (a painting or drawing for example) without permission or regard for my rights as its creator, even if it doesn't technically "cost" me anything monetarily, it is still theft. This has happened to me before, and I'll be damned if I didn't feel like I'd been stolen from. It seems that people only understand the concept of "intellectual property" once they've actually dealt in it and understood what the theft of IP can do to a person, not just monetarily but creatively.

That said, no, intellectual property is not property, it is intellectual property. That is why it is called intellectual property and not just plain property. Now, while this term has been heavily abused by certain organizations and used to guilt people into buying overpriced crap on a sliver of silicone, it's still a valid term that refers to a perfectly valid state of being. If someone really thinks intellectual property is a load of FUD because it can't possibly be "property" in even an abstract sense, that strikes me as the equivilent of saying the Mona Lisa is only worth the canvas it's on and the paint that was used to make it. If anything is really the equivilent of shitting on the actual artists' rights it's that kind of thinking.

All that said, yes, I do download copyrighted music without paying for it and I do occasionally share music with friends. However, I'm not justifying my actions; what I do is theft, barring special circumstances (like PD works or stuff released with the musicians' blessings, like with much of NIN's stuff). I don't try to deny it and I don't try to justify it by saying "well intellectual property isn't _really_ property so I'm not _really_ stealing anything!"

Now, you (general you) may be unable to live with your actions without going on massive tirades to justify it and convince others what you're doing is not really stealing, but some/most of us don't really buy it. It's a piss-poor way of justifying your actions. I'm getting tired talk about how theft of IP doesn't "really" hurt anyone and talking about how the concept of IP only exists to crush the little guy etc etc ad nauseum. Bullshit. Try going through the process of creating something only to have someone rip you off and see how you feel about it.

So, just curious...which one of us is spewing FUD, now?

Is this a joke?

[cot]

They want us to download the songs with our network connections that we pay for, in lieu of them pressing CDs and printing inserts, and now we're supposed to pay MORE than you pay in a store for a CD? At $1 a track, it's already not a very good deal. For more than that, the only thing they'll be stimulating is a new resurgence in p2p.

Even my reply is a dupe.

[afstanton]

http://apple.slashdot.org/article.pl?sid=05/02/28/ 1738239&tid=141&tid=3 Can we please stop this nonsense?

Financial Genius, I tell you!

[drakaan]

"Oh no! They're buying lots and lots and lots of music! Raise the price and stop them, stop them now!"

These are the same people who are trying to say that piracy is the reason that they're not making wads of cash? Did they miss the whole supply/demand/equilibrium price part of economics class in high school (okay, some of them may have gone to college).

Let's see. We have a product that is being sold at a price point that has people drooling, there are very low distribution costs, no need for shipping or inventory maintenance, and people can buy from home. Sounds good...*too* good...let's raise the prices and kill it off.

asshats.

Re:Financial Genius, I tell you!

[vrtladept]

Well if they raise the price of online music, they automagically raise the number of money lost to piracy.

10 Million songs stolen valued at $1 = 10 million lost

10 Million songs stolen valued at $2 = 20 million lost

Brilliant!

Not just one, but TWO dupes in this article!

[Harik]

The main "iTunes raising prices" is a dupe from yesterday, and "iTunes under investigation in the UK" is _ALSO_ a dupe from a recent article. Jesus christ, Taco, if this were a free-site and you were not getting PAID for it, I could see slacking off. But damnit, you have advertisers and subscribers. That implies a certain level of responsibility. Live up to it.

Re:Costs? - COST DOES NOT AFFECT PRICE!!

[Anonymous Coward]

People, economics 101... please repeat after me:

COST HAS NO BEARING ON PRICE!

Get over it. It could be completely FREE for them to offer music for download, and they could legally charge a million dollars a tune. Or it could cost them dollars per download and they offer it for only pennies... it is WHAT THE MARKET WILL BEAR. If they can raise it, GREAT, then they need to raise it; that's the market.

Sheesh.

A dollar is too high

[Sloppy]

A dollar is too high for a lossy-compressed, DRM-wrapped song. That's roughly in the same neighborhood as audio CDs. They need to either get the price down to, like, twenty or thirty cents, or keep the price where it is and start removing the disadvantage that make them inferior to CDs (i.e. sell un-DRMed FLAC-encoded files, plus offer some kind of free backup or free re-download-it-later service to make the information roughly as durable as CD media, also make them transferable).

Or well, I guess there's a third option to make 99-cent downloads competitive: raise the price of CDs. ;-)

The very idea that download prices are too low, is just ludicrous.

Dupe posts

[Darth Maul]

It's a shame that all these dupe posts are getting modded down. It's about time the Slashdot editors actually see what a mess Slashdot has become. They seem to post a dupe every day now.

Please, stop modding those posts down. This duplicate posting must stop.

Re:Ha!

[SirChive]

Nope. The music industry is not just a supplier. They are a cartel that has a legal lock on an entire segment of our culture.

They will charge Walmart the same as the other download services because they just don't care. If they drive customers away from downloads and back to physical media it doesn't matter. They own that too.

Bingo

[Hlewagastir]

You see, if they make it painful enough to buy tracks online, we'll all revert back to the old model of taking it up the rear at our local record store for a 25 cent chunk of plastic. Online music sales scare the crap out of the recording industry because they become obsolete the second somebody can simply make their music available online to whomever wants to download it. If recording industry can kill online music sales early, they won't slowly fade away into obscurity as recording artists choose other venues to promote their wares. iTunes has somehow, despite the industries best intentions, (through extremely high prices for what you're actually getting), become a viable alternative to the old way of getting music. Therefore, they raise the price even higher to discourage sales. If the price is high enough, people will return to the old business model.

.99

[Lord_Dweomer]

The reason raising prices will hurt them more than it will help them is because of what it means when a product costs less than a dollar.

For the vast majority of people who would be considering buying online music, anything less than a dollar is change not worth worrying about, so it is much more "disposable" than things that are priced more than a dollar. That is why retailers list things as .99 instead of 1.00.

And while I know prices can never stay the same due to inflation, I have to say that the industry deserves no more out of this than they're getting. I'm using MY bandwidth that I pay for to get their product. They're not even providing me with the method to do so, Apple is.

Re:Heroine or heroin?

[inkey string]

Except this never actually happens. I wouldn't expect slashdotters to have any first hand familarity with heroin or the drug trade, but let's just think this through in a few steps.

1. Demand for heroin is extremely high.
2. Supply for heroin is extremely limited.
3. This lack of supply, coupled with extreme demand, will produce very high prices.
4. Extremely large profits can be made easily in this trade, as there is a large volume of willing buyers with little "brand" loyalty, and a consistent "regional price" (compared to a "world price" in macroeconomics) due to easy (local) transport and a highly liquid market.

So the major problem in the heroin chain is not selling (very deep liquid market relative to supply), but instead obtaining supply to sell.

Now that we know this problem, ask yourself why dealers would choose to give away supply? Answer: they don't. There is no benefit to them, as there is already a large volume of willing buyers. There is only downside, namely the opportunity cost of not selling the damn stuff instead of giving it away.

Too many people have this vision of a guy hanging aroung with a truck of heroin twiddling his thumbs wondering how to addict people and make cash. Doesn't quite work like that.

Re:Dupe City

[Anonymous Coward]

You got modded as funny, but if it's not a joke, try Technocrat.net. There is much less discussion but much higher signal to noise (no ACing; horrors!). And I don't know if they have ads, but if they do adblock works just as well as it does on slashdot.

Between them and hackaday, I only check slashdot once or twice a day now.

Re:Dupe City

[Holi]

Fine if it's a dupe then DON'T READ IT.

Some of us may have missed the original and now there are no comments in this article except for replys to your stupid "IT'S a DUPE" post.

If your not going to add anything worthwhile to the conversation then do us all a favor and don't comment.

Re:This isn't the answer

[symbolic]

P2P doesn't work to solve the problem. It only antagonizes, and what's worse, it provides the with the rope that they have used to slowly hang us- in the form of ever-restrictive laws that govern copyright and fair use. If you disagree with the price increase, don't "share" the music. Do what you'd do with any other product - just leave it. Let the RIAA wallow in its own muck until someone finally has a lightbulb moment, and "gets it".