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Apple iTunes to End Flat Fee Pricing?
MdntToker writes "According the Forbes, EMI has an understanding with Apple that flat fee pricing will end within the next 12 months, and more popular songs will be priced higher than 99c, while lesser known acts will be priced lower than 99c." From the article: "Label executives have made multiple arguments for flexible pricing. They argue, for instance, that almost all retail businesses have different price points for different products. But they are particularly interested in boosting their revenue from digital music sales, which aided by the sale of mobile phone ringtones, are increasing but not quickly enough to replace the continuing drops in compact disc sales. EMI said today that digital sales, made up 4.9% of the company's sales in the last six months, up from 2.1% a year ago." We've previously reported on this story.
Why complain ? It is their stuff, and they can price it at any level they want. You can always buy from somewhere else or refuse to buy it altogether if YOU think it is too expensive, but I'll bet you that lots of people will keep buying at the new, higher prices. Why leave money in their pockets if they are willing to give them to the record companies ?
Happy Posting.
I wonder if 'flexible pricing' will allow them to adjust prices 'on the fly' - let's say 10,000 users download Song A priced 99c and software automatically then adjusts the price to say 1$ 29c or similar price.
Then again, there is no end to corporate greed so I'm expecting to see this in action.
Shouldn't B-sides actually be cheaper than the hits? New material more expensive than oldies? People have been justifiably complaining for years of having to buy whole albums just to get one or two songs they want, and now they don't have to.
If Apple were actually able to leverage lower pricing on lesser-known artists, it might benefit many users. Most of what I download is not consdered "popular music."
The reason people complained before is that the record company exec was insisting that Apple raise prices but not lower any prices, which is just foolish. You can let the market help you set pricing to maximize profit, but you can't have it both ways. If you just raise prices that's not letting the market decide, and you'll lose money from people who would pay $.49 for a less popular song but not $.99.
It makes sense to me that the one good song on an album would go for more than the rest. The record companies are ticked that they're losing revenue that they used to get; it used to be you had to buy an entire $12-$16 album to get the one non-sucky song. Perhaps $.99 is too low for that song, if people are willing to pay more, as evidenced by the fact that they used to spend MUCH more.
There will be the inevitable replies to this about how you can get it all for free on P2P, but Apple has demonstrated that people will pay for music if it's convenient. Now they get to fine-tune the pricing model.
Personally, I look forward to it. If the latest top 40 goes up, and the older and obscure stuff that I want goes down, I win, at the expense of the rubes paying $2.49 for whatever is hot today.
If they are going to use demand for a product to determine pricing, they should also be required to factor in supply. The supply is infinite, so then the price should be practically nothing!
Comment removed based on user account deletion
... he'd say "You want variable pricing? You got it! You can charge anything you want, but the cap is still 99 cents!"
Meh.
I like ITMS - a lot. But if songs start rising in price I will simply use AllOfMP3.com any time I consider a price to be unreasonable, possibly dropping ITMS altogether if variable pricing gets too crazy.
What I see happening is the EMI song sales on ITMS start dropping substantially.
What I would do if I were Apple is tell EMI they would be happy to drop thier music altogether. Apple can only do that to a certain extent of course as ITMS wouldn't hold up well with no major label support (or, perhaps it will would with indie stuff? Hard to say) but record companies are getting a fair amount of money out of ITMS and I think being cut out cold might have a few exec heads rolling at the loss of many milllions in recurring revenue, and probably some arsists chafing to drop the label. Record labels can only afford so much heat and if new acts wont sign with you because you're not on ITMS then it could affect the bottom line substantially.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Wait, this record company exec released information about iTunes Music Store and Apple wasn't available for comment? I don't think Jobs like being put on the spot like that. If a deal has been struck and EMI jumped the gun, will they be punished like ATI for "leaking"?
Yes, many people who purchase iPods do so because they know that it will only cost them $9900 to fill that ipod with 10,000 songs. If the price goes up even 20 cents a song, ipod owners will suddenly be out an extra $2000!
Badass Resumes
I walk into my local big-chain record store to buy CDs, and lo! The newest stuff is often on sale! I can buy the newest CD for $16... or 2 for $30. But I go looking for a band from a few years ago, and I've seen prices as high as $40 for an old album.
Now, to me, this makes sense. It's supply and demand. New hot CD, lots of people buying, money can be made at $16. Older band, only a few CDs sold a year, price has to increase.
Why would iTunes go against that simple formula? Shouldn't the less-known/rarer music be more expensive and the popular stuff cheaper?
I know, I'm crazy-thinking.
- In hell, treason is the work of angels.
From the article: "Label executives have made multiple arguments for flexible pricing. They argue, for instance, that almost all retail businesses have different price points for different products." Who decides the price points, however? Who decides which albums/songs are popular vs. less popular? Would Apple decide, or the music companies? Is it "according to traffic on iTunes" -- e.g. when more people buy it, the price goes up, like a stock -- or "measured by radio play or CD sales or Billboard ranking", or "what the record companies are declaring as popular"? What's the reference???
$nice = $webHosting + $domainNames + $sslCerts
1) Start signing bands on a 50/49 cent split. (OMG...can you imagine it, artists getting more money than the label for a change)
2) File a lawsuit on behalf of the artists...that said artists only negotiated "analog" recording distribution rights. That none of the old contracts covered digital distribution. And that all of the artists retain the rights to their digital distribution, including the right to negotiate a digital distribution contract.
(Think about it, a) the common people would support it as I would buy a lot more music at $0.99/song if I knew the artists actually benefited. b) think of how many artists would support such a move? big names too like "Paul McCartney"... As many artists were screwed over big time. Even big name artists saw very small percentages of their songs. This would allow Paul McCartney to regain ownership of his music (for digital distribution only). RIAA would still retain the analog rights (but we all know that's a dying medium). And with RIAA pushing so much legislation distinguishing the difference between Analog and Digital (DMCA) there may in deed be enough cause for a court to decide in Apple's favor especially if 90% of the artists and consumers are in favor of it as well.
RIAA would find themselves the owner of an extinct business model. Left with a rotting carcass...
- The Saj
You are correct in the normal 'physical' world. But with an unlimited supply, the per unit cost of manufacture and delivery is nearly negligible. (Only nearly because there actually are costs involved.) In fact, this is one of the pro-DRM arguments. Once a copy is made, legal or illegal, it can be made over and over again at next to no cost.
The real question is the actual cost of manufacture and delivery for a given song on iTunes. Does a more popular song cost more to create and ship than an unknown song? Do you put more icons on the screen to increase it's availability to download? (Think having more copies at the retail store to make certain that you can buy a copy.)
The economics of the physical world are in a world of hurt when it comes to the digital world. This is the key reason why there is so many mis-understandings.
except that we already have heard from the RIAA robber-barons that they want to be charging more for new releases.
if they really understood, well, anything, let alone economics, they would not be giving their customers the middle finger on a daily basis.
what I want to know is, what the hell happened to Jobs calling them greedy and standing firm on the flat pricing scheme?
Come read my stupid blagablog. Rants and Giggles
Of course, the real issue isn't really legality-- it's whether the record company will sue. If it's illegal and they sue, you're screwed, and if it's legal and they don't sue, you're fine. However, if it's legal and they sue, you're still screwed, and if it's illegal and they don't sue, you're still fine.
To date, I have no knowledge of anyone being sued for copyright infringement for simply having mp3s on their computers. It's always the sharing that gets you, partially because it's easier to find you if you're sharing, but also because it's easier to demonstrate you did something illegal-- copyrights were intended to deal with unauthorized distribution, not unauthorized viewing/reading/listening.
Ok, all that to say, it's not that clear. You pay your money, you take your chances.
Retail space is expensive. Server space is cheap.
Only a small percentage of published music ever reaches the level of "hit album" that qualifies it for sale in big-box retail stores. Stores have only a limited amount of space they can store CDs in, so they choose to carry the ones that sell the most copies. They are more willing to buy 400 copies of Green Day's "American Idiot" because they know they can sell them all in a month than they are to buy one copy each of 400 unknown experimental jazz albums that might not sell at all (and keep taking up shelf/warehouse space indefinitely). Because the store's cost is higher for the unknows, they have to charge more for them than for the popular stuff to recover their costs. An online distributor (like iTunes) only has to store one copy of each song, so it's storage costs are the same whether a song sells one copy or 100,000. That means they're free to sell both the popular music and the less-known stuff for whatever people are willing to pay for them. If that means they can gouge Green Day fans for an extra two bucks and have to dump Dexter Squeekenwhistle And His All-Clarinet Orchestra for 35 cents, that's what will happen.
0 1 - just my two bits
I am totally with you on the problem of the artist getting nothing from AllOfMP3.com. I find that distasteful myself.
So then AllofMP3.com is basically outright piracy (which is why I do not use it now). However it is a form of piracy that:
1) Cannot get you the size of fines that use of P2P gets you (making for a relativley risk-free form of civil disobedence), and more importantly
2) Provides a monetary and numerical record of demand for cheap online music. The discrepancy between AllOfMP3 sales and sales figures elsewhere across the globe can eventually be used to make a compelling case for the lowering of song prices at home based on pure mathematics of consumer demand(which may work where common sense has failed).
So while I would feel bad about not giving artists money (I might try to buy T-shirts or other fan merchandse) I would at least feel like I was doing something useful at the same time.
Note that I use the term "Piracy" carefully; I do not consider P2P piracy, as others have noted edlessly that is infringement. But in the case of AllOfMP3 I am knowingly giving money to someone else when I know the artist will not see any measureable amount from it. When money starts changing hands I think things go from infringement to piracy. Ironically while it is worse in my mind to pirate than infringe, the laws as they are now make the piracy basically legal while infringement is not.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
You contradict yourself. If the consumer feels 'the person selling it is asking more than I want to pay', they are likely not to purchase the item anyhow (if it is a luxury item). The industry loves to declare emphatically that since 1000 people made copies, they lost 1000 x manufacture suggested retail price. Considering that making a digital copy does not deny the original person the use of the item (like theft of a physical item) the only thing denied is a 'potential' sale which was unlikely to happen in the first place.
Look at the recent investigation into Sony which found that instead of embracing the online distribution technology of the Internet to decrease overhead, they jacked up prices to online sellers so that items are just as expensive online versus brick and morter. These guys have no shame.
"cheap it is to make a close to professional sounding recording given a home studio and some know-how?"
and most bands lack the know how; the vast majority of home studio albums I've heard were technically aweful; a few even to the point of unlistenable. (I listened to tons of indy and smaller bands albums as a dj at a college radio station). close to professional quality is not nearly good enough. Heck, there's even some professional quality albums aren't good enough.
Well, they could not renew the contract. If Steve has the balls he might just remove all of that labels' songs from the store and see how they like losing all the potential earnings. iTunes has a huge market share and I don't think people are going to just up and switch that quick to another store (especially when so many people have iPods). Steve has lots of bargaining power here and one of the big things about the music store when it was released was the simple pricing (although, the album pricing is more flexible than it used to be, so you can no longer predict how much an album will cost, unfortunately). I will not buy a single song for more than a dollar, so if they do raise prices, I just won't be those songs. Also, who knows, it might give a big push to the smaller labels like CD Baby when all their music is much cheaper.
Also, in reply to like the great-grandparent, I do believe iTMS is profitable these days. I think they are making a nice little profit, actually (nothing compared to the iPod sales, but nothing to sneeze at either).
Andrew
Whoah. Well said. Well said.
I would like to say, however, from experience, that it's not so much "singing at a microphone for a couple hours." It's more like "honing your craft for years at one's own expense, laboring over every note and word of the song--sometimes for months, and sometimes spending days on each track before you're happy with it, then sometimes days working with your engineer and/or producer (I prefer fewer cooks to spoiling the pot) agreeing over a basic mix, THEN you can go home and let the staffers take care of the rest." Not that I've ever enjoyed that last step.
Still, you make an excellent point. A CD is a product created by a company that spent a LOT to get it out to you, and it does make sense that they make the bulk of the money--they had the biggest risk. And I'll say it again: Just because artists don't get much, it's still nice to get a pretty steady check for the royalties, even if it isn't much. You don't know when you're going to have to stop doing shows due to lack of interest, so having something that will give you at least a little money fairly regularly, about as long as you are alive (for a big act), is nice and you're taking that away from the artist you like if you don't buy the product he helped create.
All THAT being said, however, I find it apalling that I am already expected to pay $0.99 for a COPY of that product! A FLAWED, INCOMPLETE copy. I'm happy to pay $12 to $17 for a CD, regardless of number of tracks or age, and actually GET THE PRODUCT. Why people are willing to pay what often comes out to more for much less is beyond me. And that's not just from an audio standpoint; that's from a "doesn't have to stay on my hard drive" standpoint, and a "when people come over they can glance at my CD collection and it is a great conversation starter" standpoint, and from a "I gave real money for something and got a real object out of it" standpoint.
But well said. Well said.
This will only serve to increase market share of those services where for a flat monthly fee, you get to download what ever you want.
Bad move Apple. Steve Jobs must be calling the shots again.
---- Booth was a patriot ----
"sufficient to quit their days jobs"
I call BS. There are a huge number of small performers who are unknown beyond their local state but still make a perfectly livable wage, including my dad. He quit his job as a producer ten years ago to do what he loved, playing music and performing. He initially signed up with a temp agency to fill the gaps in his schedule.
In ten years, he only went in once.
Now, almost no one outside of Ohio has probably ever heard of Bob Ford the guitar player, but he definitely made enough to support us with it.
Easy:
Your turn... give me three examples of RIAA members who have stopped taking their customers to court.
I would gladly take 6 times the profit on one third of the sales. BTW, Death Cab for Cutie?? Who the hell is that? I guess the RIAA didn't pimp 'em hard enough, because I have no idea who you are talking about. Must be something you picked up on MTV or the radio cleverly hidden among the commercials for beer and stridex. I'd say it takes more effort to 'find' good music through those channels than it does on a website.
Payola is illegal. So is price fixing. Hell, most of what the record labels 'do' for a band is shady at best.
Yeah, and Brad Sucks does it all with a desktop computer. Your overhead is useless to an entire generation of new musicians.
Do you work for a RIAA member or something? It's music. People have been making it since the stone ages. Why do you think that it's all of a sudden impossible for someone to create, market, and distribute it without a management team? Indies have the internet. The RIAA is toast.