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Would You Pay 5 Cents For a Song?
irikar writes "An academic at McGill University has a simple plan to stop the plague of unauthorized music downloads on the Internet. But it entails changing the entire music industry as we know it, and Apple Computers, which may have the power to make the change, is listening."
When the record companies sell what i want to hear. everything i pulled off of napster back in the day was 80's rock and metal stuff that has been discontinued. For god sake guys, put your back catalogues on line, (or even press a cd or two on demand) and then we'll talk. :(
In addition, a 1 per cent sales tax would be placed on Internet services and new computers -- two industries that many argue have profited enormously from rampant file-sharing, but haven't had to compensate artists.
This is the same scheme that we have today on blank CDs and the like and it is total BS to apply it to computers. I have no idea why anyone outside the entertainment business thinks that it's OK to put a music-stealing tax on every computer, or DRM on every computer when not every computer is even considered for such use. What about the company that buys 10,000 computers per year and because some 12 year old is "stealing" music they have to pay an additional tax and further have to have their computers crippled with DRM?
I'm a big tall mofo.
"Just a FYI Apple, no matter how cheap something is it is NEVER as cheap as free. Free will always win out."
Until there's nothing left to be free. Then free loses badly.
No, no and fucking no! I refuse to finance any industry which I don't have anything to do with.
When I buy computers for my business, I don't buy them for anything music-related, so I see NO reason to pay a tax, or levy or whatever the fuck they want to call it to support any music-related thing.
I'm tired of corporations and government thinking society exists for the sole purpose of ensure their profit.
AC comments get piped to
To a certain extent, he's somewhat right. It would substantially lower the bar and you'd have far more impulse buys (and drunk song-buying binges wouldn't hurt as much. Fear the drunken one-click shopping spree!)
However, I am not such a big fan of his idea of taxing PCs. However, the last line of the article is THE MOST INFORMATIVE OF ALL:
These guys don't even get *OLD ESTABLISHED CONCEPTS* let alone "new fangled concepts." Pearlman's response is that if you double the price, you cut the sales by more than half, so you actually DECREASE your revenue.
They just don't get it. [I'm not saying Pearlman is necessarily right with the
When in doubt, parenthesize. At the very least it will let some poor schmuck bounce on the % key in vi. (Larry Wall)
Their bean-counters decide that well if we can make billions selling songs for .05/download we could make 10x as much if we sell them for .50/download and 20x as much if we sell them for .99/download.
Unless their bean-counters have taken Econ 101 and know the most basic things about supply and demand. As you increase price, you decrease volume. There is always a sweet spot that maximizes profit.
Mr. Pearlman seems to understand economics pretty well, but not IT. Here's the breakdown of an ITunes purchase of $0.99:
Label(s): $0.55
Apple: $0.34
Artist(s): $0.10
Now, let's chop that down to $0.05 instead of $0.99. Let's break it down this way:
Label: $0.03
Apple: $0.02
Artist: $0.1
So, when a customer goes to ITunes, they'll surf through several (large)-database-driven webpages to find the songs they want. They'll make a purchase against their already-paid-for credit through ITunes (of probably $10 increments), then download the 5MB song.
So, Apple now has to run power-hungry servers with a large staff of IT guys making sure they're patched and running correctly. They gotta hit customers' credit cards and give probably 5-10% back to the credit card company.
All of this... for $0.02 per song?!?
His model makes sense, but maybe for $0.25 per song... there's no chance Apple would make money by giving up that much bandwidth.
just my $0.02.
Their bean-counters decide that well if we can make billions selling songs for .05/download we could make 10x as much if we sell them for .50/download and 20x as much if we sell them for .99/download.
Please look up the term "elasticity" in your friendly neighbourhood economics textbook.
Bitchslapped. Neat.
As you increase price, you decrease volume. There is always a sweet spot that maximizes profit.
Well if you would take Marketing 101 you would learn a couple of other formulas too. You notice at Pizza hut that they sell pizza for $10 dollars for the first one and say $7 for the second one. There is a profit point during the transaction that you can maximize returns buy adding another one to a product that you are already going to buy. Now you have $10 for the 1st $7 for the 2nd and 5$ for the third. Well as you eat more and more pizza there becomes a point where you wont buy another no matter what the price is and then you have reached saturation at that price point. Therefore even though you have saturated the market you can still gather further funds from a fixed sale/profit point.
While you're completely right that nothing beats free, you can't deny the number downloads iTMS has garnered since its start. While free music will always be available, don't underestimate the 'guilt-free' factor. A clean conscience for 5 cents/song is about as good a deal as you can get.
"...Pearlman was careful to add, though, that he doesn't see his plan killing off demand for CDs."
*BLANK* CDs maybe.
i mean $.05 x 13 songs = $.65
factor in $.25 for a blank CD and voila, that's still under a dollar. Unless they plan on *severely* reducing the price of retail CDs, I don't quite see that working out.
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I'm not so sure about that. Granted free is better than paying even a penny, but regardless going via the "free" route is not only more difficult, but leads you down a road of problems. On the extreme end of the scale you can end up having the RIAA knock down your door. Then theres the problem of having spyware/virii ridden software (to this day I still clean/remove Kazaa from people's computer and slap them on the hand/head). Furthermore, theres the issue of not having an entirely clean track. You have to be concerned about having the right song, having the entire song, and then quality, AND the amount of time it takes to be in the queue and to finally download it. All that for what? To save you a few pennies? Unless you're a complete cheap bastard or simply bent on the idea of ripping off musciains, then a major drop in prices will DEFINATLY help. Essentially if they can devise a system where you are a click and a couple minutes (assuming bandwidth conex) away from getting an album for a couple bucks, then I'm positive that pirating would go down.
Much like the scheme presented in the article, please remember that the "free" file sharing networks requires a broad base of participants to make them run. The utility of the "free" networks improves or deteriorates based on the numbers of people engaged in the activity of sharing freely:
even at US$.99, I would bet there has been an affect on the quality/quantity/availability of music on the "free" sharing networks. Presumably, that would deteriorate further if "legitimate" online services appealed to an even broader audience (as some or all of that broader audience would likely participate less in the "free" networks).
No, free won't always win. Convenience will always win, and free is part of convenient. But I would rather (for example) pay US$1 to download an episode of a TV show instead of messing around with BitTorrent, as long as they genuinely make it more convenient -- which means a big fat pipe and a choice of unDRMed video formats.
The big mistake that the music industry is making, and the TV and movie industries are stumbling into, is to make their products less convenient on other grounds as well as more expensive -- region codes, release windows, DRM, etc. Once something is released to the public, it needs to be released to the public -- TV shows and movies need to be available for download on the day that they're first shown.
There would also be questions of anti-trust involved. We wouldn't want them to become monopolists.
With only 4 major labels, and all of them coordinating distribution and pricing to various degrees, we're basically at the monopoly point anyway.
The suggestion that it's a good idea that the computer companies buy up record companies and become media conglomerates fills me with dread.
Agreed!
There are independent studios that you can record at as well. And yes, they CAN come out sounding really damn good when it's all said and done. Would Britney Spears be able to do it, if she had no money and was just starting? No. But someone who relied on instrumentation and vocals from within the band COULD do it, quite easily. I have TONS of music for you to listen to that sounds wonderful (even if it isn't what you particularly like) that is done independent of anyone. I even have some stuff of two guys who did much of it in their LIVING room and it sounds superb (if you're interested in hearing THAT, go try out Pinback - Microtonic Wave or "B"(Offcell EP) on Launch - if you don't like the music itself, that's fine, but focus mostly on the quality of the production).
It can be done. It may be more work on the part of the musicians, but it's also cheaper. The only thing that would be prohibitively difficult would be in the distribution of physical CDs (but I guess that's where Amazon comes in, eh?). And when you get to the internet...shoo. It all comes together there.
And this is exactly what the article is adressing.
That they are wrong about their pricing, and people have moved on, but not to radio, to downloading the songs for free. The only way to win back these people downloading for free is to offer a price of nearly free. Most people downloading 1000 songs a month would never pay $1 a song. But would they pay $0.05 a song? Maybe. And more likley are the people downloading 100 songs a month. $100 is a lot of money.. but $5? Do you think there are 20x the number of people downloading 100 songs a month than buying 100 songs a month? Probably. Therefore, there is money to be made.
And any mention of artists not liking this sort of distribution system is crap. "Um.. no I don't want to sell my songs for cheaper so that everyone can hear them, only those spending lots get to hear my songs"
Someone mentioned above something about higher pricing to make it appear the CDs (and by association, the music) 'worth more'. Well it's obvious by the number of downloaders that the CD's are not 'worth more' because of their price...
But illegal downloading far outstrips legal downloading. What the article is really talking about is what would it take to get nearly everyone downloading music legally. I believe that his price point would probably do it as it is an almost disposible amount of money to consumers. And hey, you would have a legal download, too.
Now the why not 10 cents argument is valid, but I think its still basically a curve. Where 5 cents is the point at where almost everybody leagally downloads music, I think 10 cents might be the point at which half of the people leagally download music.
The music industry is being greedy, not logical when they determine their pricing right now. We we already burned on the change from cassettes to CD which were going to be much cheaper once they were adopted. So the real feeling allowing people to live with the fact that they're illegally downloading music is that the price for music is obscenely high. No CD is worth $ 16, most aren't even worth $ 13, some aren't even worth $ 2.
In real manufacturing, real market forces cut the margins down, but with the recording industry prices are artifically set by the RIAA.
If the recording idustry took an honest look at their options this 5 cents/download option would make them huge amounts of money and save them boatloads on legal fees and bribes for government officials.
I'm confused at your point. The "sweet spot" he was talking about was the maximum profit point. That is, selling 100 units at 1$ each earns you $100 whereas selling 10,000 units at 5 cents a piece earns you $500 dollars. The question is where is price*volume at a maximum and that requires understanding the volume that people will buy as a function of price.
"They feel that 99 cents / song maximizes their reveues. Their choice - it's their product, and if you don't like it, move on and listen to the radio."
That's true. Any company is allowed to do things less than best for themselves and even drive themself into the ground. It certainly doesn't mean 99 cents actually is the sweet spot to maximize their profits thought. They might make a lot more money at 5 cents per song if that entices more than a 20 fold increase in sales.
The point is that the RIAA aren't a monopoly any more. They are competing with "free" downloads.
The other points are that "free" downloads are not free. You need to spend time searching for songs, wading through the crap, learning new tools as the RIAA fight the old ones, and there is a risk of getting caught, etc.
The final point of the article is that legal music distributors can regain the advantage if they offer a cheap, quality service as a competition to the eDonkeys of the world.
Hence there is competition going on, and as long as the RIAA doesn't understand it at that level, the situation will not improve for them.
To be precise, cartels only work when consumers PERCEIVE that they can't "do without". Most American consumers can't distinguish between wants and needs.
Well, I don't know about you, but my perception is that the music industry is way over to the right of the "sweet spot" on the sales-against-price graph. I hardly ever buy CDs these days, because I hardly ever see them for a price I'm willing to pay.
When Mute Records released a sizeable chunk of their back-catalog for under $10, I sent in a $150 order--as opposed to a $0 order while the prices were $15 and up.
As I wrote to a record store owner who was wondering how he could stay in business: I could easily put together a list of ten CDs I'd buy tomorrow if they were $10 or less. But they're not, so I spend $0 and wait for a sale.
GCHQ Quantum Insert installed. If only our tongues were made of glass, how much more careful we would be when we speak
So a 5 cent song will break before a 99 cent song?