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Digital Music Stock Market?
tommertron writes "Adam L. Penenberg has a column on Slate about about
the pricing of digital music, specifically, iTunes'
99-cent-a-song model. Basically, he suggests that song prices be determined by
market forces, just like stock and commodities markets. The more a song
gets downloaded, the more it would cost. Song by big-name bands would cost
more, and lesser-known acts would cost less (with a minimum of 25 cents.)" From the article: "Steve Jobs, who has been willing to take a few pennies per download so long as he sells bushels of iPods, calls tiered pricing 'greedy.' That view is shared by millions of consumers who believe the record companies have been gouging them for years. From the buyer's perspective, however, Apple's 99-cents-for-everything model isn't perfect. Isn't 99 cents too much to pay for music that appeals to just a few people?"
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
... oh ... just for example ... 99 cents); buy two songs, pay 2x, etc. People want their music, they don't want to have to solve an accounting problem to figure out how much they'll pay for it. "Ten songs, ten bucks, plus I save a dime. Cool." That's how people want to buy music, and that's why iTunes has succeeded while every other pay-for-download system has pretty much crashed.
... and you know, given the long sad history of stupidity in the music industry, that's saying a lot.
No, apparently it's not.
This is a striking example of how dumb the "popular=good" meme is. When I buy music, or anything else, I don't care what it's worth to other people; I care what it's worth to me, whether I'm one of a hundred, a thousand, a million, or a billion.
Aaargh. Why the hell are people trying to fix something that's not broken? (Well, okay, I know why the RIAA is trying; what's this guy's excuse?) Tiered pricing, supply-and-demand pricing (hey economist guy: the supply is unlimited!) or any other fancy pricing scheme that requires people to pay more than 99 cents per song doesn't work. 99 cents per song, OTOH, does work. That's what online music buyers have decided, en masse, they'll pay for legal music downloads. Charge more and piracy looks a lot more appealing that paying for it. That's the reality.
Not to mention that it just makes sense: buy one song, pay x, where x is some reasonable amount (say
Stock market pricing is one of the stupidest ideas I've ever heard WRT the music industry
The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
Digital song prices is determined by market forces, and with unlimited supply and limited demand, the price can only fall, because for every demand, there is a supply (and more) to match.
If music industry really wants to command the price, they should limit how many downloads per song iTunes is allowed to sell, then iTunes will automatically change its pricing to maximize its profit.
And the music industry on the other hand, will also automatically change its limit based on a song's (expected) popularity, so that it won't sell less than it should have been because of the stupid limit.
However I think the major problem here is, iTunes is not set up to make profit out of songs, it just wants to sell as many at the cheapest possible price because the profit comes from iPod.
Maybe it's time for the music industry to drop iTunes and find a proper online music store that is set up to maximize its profit, then the supplier and retailer will have the same goal.
And as a side question, are music CDs currently priced differently based on their popularity? I haven't been to a music shop for 5 years, but last time I went there, "Vanilla Ice" sold for the same price as "Step By Step".
Rock that crushes, Paper & Scissors that don't matter.
Commodity pricing is based on the idea that supplies are limited. Likewise with stocks, as there are a finite number of shares of any given company in circulation. Even if every person with a computer on planet Earth bought a copy of the same song, it would not be in short supply.
That's not to say that there isn't value in a variable pricing scheme, but it wouldn't really be commodity pricing, or a "digital music stock market."
-JMP
Who cares how many other people like the song. That shouldn't effect how much I pay for it. Supply and demand does not apply here, since supply is infinite. If anything, the more popular should be cheaper, since the expenses get recovered faster.
If you're going to set a floor price, you'd better be prepared to set a ceiling price as well. Otherwise the model is both unfair and unstable because it's subject to unlimited inflation, which is just as unfair to consumers as unbounded deflation is to the artists and vendors. Either take both the upside and downside risk or ameliorate both.
licet differant, aequabitur
This is great -- as long as the maximum price is 99 cents.
Gee, there's a wonderful concept. Don't put it into their heads that the "flat cost" is a bad thing. "Graduated cost" works both ways, you know. Some songs will get cheaper (crappy ones, no doubt), but a LOT will get more expensive if their demographics get based on popularity.
"You will pay for your lack of vision..." - Emperor Palpatine to Ray Charles
Well, no... because you will only pay .99 for the songs that appeals to you!
DON'T STEAL MUSIC!
Such a model cannot be accurately applied to the digital media market.
Busiesses are trying to offer products with a variable pricing scheme with a commodity that has infinite supply. It doesn't make any sense.
It barely costs them any more to sell 20,000 albums than 200.
Even though more downloads seems to indicate more value and therefore justifying higher cost - these are digital files!
There is no scarcity!
The file has the same value to me no matter how many people download the file.
Know what I like about atheists? I've yet to meet one that believes God is on their side.
The record industry should hire a few economists. This is a great idea, but they've got the pricing completely backwards. The more popular songs shold get cheaper and the less popular more expensive. Why? That's easy.
The stock market works the way it does because supply is fixed and demand is the only variable. With digital music, the supply is infinite, and the demand is variable. Theoretically, that should mean that the songs could be free, except that the creation of the media has fixed up-front costs. That means that after a fixed amount of revenue is generated by a song, all additional revenue is going to be 100% profit. In order to make the maximum amount of money off any particular song, you want to increase it's appeal as much as you can through price lowering, while at the same time making sure you charge enough to recoup your costs before you break even, and as much as you can without pushing away customers after you break even. If there is a lot of demand for a song, you're going to make a profit on it, but you could potentially make even more money by lowering the price, because the drop in price could attract more than enough customers to make up for the loss in revenue. For songs without a wide acceptance, it doesn't work that way. You probably don't have many people out there who like the song but have price holding them back from a purchase, and the people that are buying the song are probably the ones that really like it and would be willing to pay a bit extra to have access to music that would otherwise be unprofitable to publish.
The only way charging more for popular songs is a good idea is if your goal is to punish your customers for being mainstream music listners, or if you have a complete lack of understanding of supply and demand. If the goal is to actually make money, they've got this plan completely backwards.
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
.99 cents.
No. If it appeals to you, it has worth. A song is easily worth
If I made 6 dollars an hour, I would easily work 10 minutes to have a song by a band that appealed to me forever. Just because they aren't popular doesn't mean it should cost less
...it doesn't matter whether they are a well known act or not, they already going to get less money than a well known act. I think it should actually be inversely done. The small guy gets 99 cents a song. The big guys, when they break a certain barrier, should have the price drop. The first million songs are 99 cents, then the next million are 75 cents, then the next million might only be 50 cents. This would entice more and more people to buy into popular songs making the charts. The trend setter type would buy it on opening day, and the rest of us buy it a little later.
I don't see a problem with flat rate pricing. Why should what the song is worth to other people matter to how much it's worth to you? If I like a song, it's worth the same to me no matter how popular it is.
Basing your price on other people's taste makes it seem like you're buying the music for someone else.
If YOU like a song enough, it's worth $0.99. Just because other people don't like it doesn't mean it's not worth $0.99 to you.
Get paid to code OSS
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
I don't think so - as long as the music appeals to YOU, why should you expect to pay any different?
That view is shared by millions of consumers who believe the record companies have been gouging them for years
Records cost $6, tapes were $8, CDs which cost even less to produce cost $15, and now an 18-song album will cost you $18 to download. How come the less it costs to produce the media, physical or virtual, the more it costs? If anything, music shoulc cost less, not more. It's not like the artists will actually see any extra revenue anyway...
Prices for music to fluctuate like stock? Somebody explain this one to me. It's not exactly a supply and demand commodity. It's not like said online music vendor can suddenly run out of 1's and 0's and become unable to provide another copy to the consumer. It's like giving the music industry a legal way to price fix their product - all they have to do is jurry rig the numbers and make it look like some new carbon copy of a band's new single is selling like hotcakes.
...so why should that have any effect on what I pay? All that matters--the basis for my perception of value--is that I like it.
2) These can also be traded again in the stock market.
3) You cannot get free stocks from a P2P stock market.
Hence the mathematics and economics for stock isn't applicable to songs
Isn't 99 cents too much to pay for music that appeals to just a few people?
Uhhh, no.. That's what market forces are all about. It's about what it's worth to the people wanting to buy it. In fact, if it only appeals to a few people, it would stand to reason that it should cost MORE, not less. Granted, the more popular songs need to pay for things like bribes to Clear Channel, err, uhhh, I mean "promotional considerations", since payola is a thing of the past. Even so, the more niche something is, either the more cheaply it is made, the less its profit margin is, or the more it costs, simply because of the economy of scale.
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I pay 11.99 for some popular cd at Best Buy when it comes out, because they know they will sell millions of them. I pay 18.99 or more for the obscure stuff that only a few of us want.
Song by big-name bands would cost more, and lesser-known acts would cost less (with a minimum of 25 cents.)"
I see a problem here, as 25 cents wouldn't even cover the cost of processing the credit card transaction. I think there are good ideas in the article, but sometimes people don't think all the way through things, or they don't have all the information they need. A credit card transaction often times costs merchants as much as 50 cents.
If you've used the ITMS, you'll have noticed that Apple batches your purchases for a day and then processes them all at the end to try to defray the credit card cost some. However I doubt the record company would accept not getting anything for a song because they only made enough to cover the transaction cost.
On a side note, this is also one of the biggest hold ups in micro payments. The cost of transaction processing is so high that places can't afford them.
"Luke, I am your node.parent();"
Another drawback is that a stock market has both buyers and sellers - what value can be derived from an iTunes marketplace where buyers compete for a limitless supply?
Not that the model wouldn't work, but it sure doesn't have any easy analogs in the real world of markets and trading. That said, if iTunes would allow me to sell my used songs on their market, and cap a maximum IPO of song title quantities, I'd gladly give Steve Jobs a few pennies to offload my ex girfriend's Celine Dion albums (no URL link provided) and pick up a little microcap named Moxy Fruvus http://www.fruvous.com/
" Isn't 99 cents too much to pay for music that appeals to just a few people?"
No, it's too little. If you put demand and supply as 2 linear equations on a graph, you'll see they're related.
Let's go through a simple situation: demand is x, and supply is y. Now since we have infinite supply (since this is a digital work), we're going to say that y is not supply, but rather money supply (since the money is the only limited part as far as the markets are concerened). As demand goes up, price goes down. If we were at the far-right, with maximum demand, price would tend to zero. If we were at the far-left, with only 1 person wanting the work in question, the price would tend to the total production cost! For 0, infinity (which is why if no one wants it, it won't get made).
You're not going to get a perfect relation due to effects outside the market's control (such as non-market copying), but you'll see that 99 cents is too little for something this is in low demand, and 25 cents is too much for something that is in high demand.
--
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I say there should be an upper cap as well. I mean, how many times will someone download an old Indigo Swing album (besides me). So, that would be lowered.
Then, you have the throngs of "OMGIHAVETOBEPOPULAR" nausiating teeny boppers who will gladly part with her 1.50 for the latest BritneySync album. Let 'em. They will allow me to re-buy the Beatles Catalogue for cheap.
Of course, the only way that there will be trust in this is if Apple would open up the statistics/usages. That way there wouldn't be an overmind decreeing:
"This song shalleth be $2.25 due to popularity."
"They are all $2.25 now"
"Umm...yes-eth. Slum gullion is popular right now."
Make Apple tie their prices to inflation or something. At least then you'd have a reasonable excuse to raise prices, as opposed to what you have now, which is... nothing.
-Rob
Biblical fiscal responsibility
This is stimulating for artists: if they make bad music, they get little monney; if theu are good, then they will get a lot.
"The test of the morality of a society is what it does for it's children." -Dietrich Bonhoeffer
Variable pricing for a product is normal, but what makes anyone think that the more it's downloaded the more it should cost? Any other commodity the cost falls with the scale of production, availability lowers value. By what twisted logic do more downloaded tunes become more expensive? I think if you look deeply at the psychology here you'll see why people have no respect for the music business. I like music that is unique and only I know about, it gives me more value as a 'bragging piece' to impress friends with (in my childish teenage way). In fact I would pay a premium for scarcity, to know that I recieved one of the only 1000 copies that were made available for download and that nobody else can get that tune now, (humour me here I'm half serious), why not? I'll pay you 100 bucks for you to give me the music then take it off the server, now anybody who wants to hear it must be my friend and visit me at my house :) The assumption popularity == quality == desirability == value is why the business is faltering so badly, it's just wrongheaded.
I have lot of asian friends who go back to their home country and buy paper back low price editions. It is hell lot cheaper if an average text book costs $70-80. So even if these textbooks are widely used, the prices are still high.
Dover publications is lot more wallet friendly. They publish the classical texts in science and engineering for more affordable prices. (I am not a big sucker for hard bound books). These books may not have a big audience, but still are available cheap.
How is this market sustained ? Yes it is little offtopic.
Isn't 99 cents too much to pay for music that appeals to just a few people?
It's probably the wrong way around. People are smarter than that. They know about marginal cost and that less commercial artists still have to eat. £2.00+ is the going rate for high bitrate mp3s from DJ download sites such as XpressBeats and DJ Download.
What about the struggling indie artists who are trying to both make their music accessible and simultaneously make an honest wage with it? Offering their songs for $.25 isn't doing them any favors.
Rather, if you're going to offer a pricing structure (for indie artists who submit their music through sources like CDBaby), leave it up to the artists to decide what the selling price should be. In that regard, if an indie artist's priority is just to get their mp3's into the hands of other people, then sure they'd opt to sell for $.25. But if the artist is trying to make a living, a quarter per song sure doesn't go that far.
401 - Attention span not found
Not to mention that the idea of having songs go down in price as demand goes up will appeal well to peoples' egos. There will be people who will buy the early copies of a song for $2.50 each (I'm considering that an upper limit because I saw it as a proposed upper price somewhere) and consider themselves to be the "trendsetting elite." There will be those who will buy obscure songs that don't sell well for $2.50 each and feel it inflates their indy cred. People like me will hang around and see what seems good, then buy it for $0.99 or whatever the lower price is, and feel good about being thrifty in our patience. The music industry gets its extra money and most of the smart people will still be paying the low prices for their music.
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One problem with this idea is that it increases the winner-take-all effect. That is, it encourages producers to chase big hits while ignoring niches (the "long tail" mentioned in the article). It used to be selling a million was worth 100 times as much as selling ten thousand. Now it will be worth 400 times as much or more.
But that's a sociological objection. From a technical standpoint, I think it's neat!
Another weird line from the article:
But each obscure indie rock or klezmer song that gets sold for a quarter is almost pure profit...
How is that true? Seems like the profit margin would be much lower for these tracks.
Free, legal music for iTunes users.
Look at it from the merchant's point of view.
It takes a certain amount of manpower to convert a song and make it available in the iTunes store. Let's say it costs $100.
Once available, the actual purchasing/downloading of the song is automated, and has only a negligible cost.
Now let's say only one person (ever) buys the song once it's up. As the merchant, you'd like to be able to charge the full $100 to recover your costs.
The less popular a song is, the fewer people the cost must be distributed among, and the more the merchant must charge to recoup expenses.
Now obviously, this isn't the way the market works. My point is that the merchant has an economic incentive to deny that ridiculous statement: "Isn't 99 cents too much to pay for music that appeals to just a few people?"
It's applying supply-demand economics... Except the writer forgets that there's INFINITE SUPPLY! You can "create" as many copies of the song from the supply song as much as you like via download. I suppose the only limiting thing is bandwidth but that's far, far less than 99 cents per 5 Mb.
And even if you don't want to pay for that and not rent the music, you can get songs at a variable price for the competitors at $0.79 or less. They just don't work with the Ipod - which really blows. Going off on a rant, it is so vastly inferior to other players like the DJ it is simply on the strength of it's design that people must like it. CAn't use it with gloves or cold hands. Hard to operate without looking at. With the Pocket DJ, it's very clear when you hit the skip/play/pause and volume buttons while running or biking or lifting. Not so with the Ipod where you can't even use the scroll wheel during the winter.
Basically, he suggests that song prices be determined by market forces, just like stock and commodities markets.
While an interesting idea, I think this premise is flawed. Gold is not priced based upon how many people have bought it over the years, or even in a given year, but by how much people are willing to pay for it. Here's an extreme example. Suppose some very fringe singer produces a song called, "If you're not rich you're a stupid pussy" that appeals to to very wealthy elite and basically no one else. Perhaps this song names a dozen particular wealthy people and extolls their virtues. Say the total market for this song consists of about 500 people, but among those 500 people are individuals who would be willing to pay upwards of a thousand dollars a copy for the song and may buy a copies for relatives, friends, and even enemies they wish to taunt. According to a free market we could estimate the value of the market as 500 times and average of two copies per person times an average price of say $500. That gives us half a million dollars on a truly free market. Now consider the same market valued based solely on popularity and you get a song that is so unpopular the market is only worth a few dollars.
This same principal applies to the opposite end of the spectrum as well. What is someone makes a funny, six second long song that billions would like to own, but no one wants to pay more than a quarter for. The market price may be 25 cents for optimal sales, but based on popularity would price this song at $10, which no one would want to pay, especially as the price would continually rise.
I just don't think this is workable or desirable.
How about since the cost of distribution is nil, songs cost .25 max and crappy music costs .10?. That seems fair and logical to me. Especially since they are insuring that I can't resell my music once it's in digital form.
.99.
.99 let alone 2.00 for a less than CD quality file than has DRM to boot isn't my idea of bargin. But what do I know?
See you get all of these people supporting the idea of tiered pricing and now we'll see every song on the next Green Day album going for 2.00. Meanwhile the "cheap" price will now be
I honestly like tooling around the Itunes store and listening to samples. But
If you wanna get rich, you know that payback is a bitch
People are already confused about buying digial music with the multitude of incompatible devices, stores, and formats. Let's add another variable into the mix with changing prices. That's completely stupid. Jane just wants to buy music, not try to figure out how Suzy got X for Y price.
If a million monkeys randomly pounded on keyboards, they would all log into AOL.
The reason prices rice and fall on the stock market is because people buy and sell certain stocks causing the prices to either rise or fall respectively. If a stock is not bought or sold it could maintain its price point (though this doesn't happen too often since people are almost always buying and selling listed stocks). Without a "sell" model, how would you lower the price on music? You would have to implement a sort of timed decline in pricing, which would have to lower prices not on some hard constant but at a good variable rate to maintain interest before the one hit wonder becomes worthless, again.
There are also cases of insider trading which occur on Wall Street. In order to regulate this the SEC monitors the trades and activities of stocks. This means that someone at Apple would have to do a similar job on a model based like this. If no one was monitoring the purchases properly then I am sure you would see big labels paying individuals to purchase songs in order to raise the price. If a song were popular enough they could quickly drive up the price forcing people to pay $1.59 a song instead of getting the lucky starting price of $0.99 a song, or whatever it might be.
Let us not forget that the industry is already fairly well dependent on a supply and demand style. Obviously some people are willing to pay $0.99 for less popular songs, while others might be willing to pay more. The true magic here is that Apple found the perfect price point to appeal to both side, which keeps the pricing and market simple for the users to follow.
Tiered pricing schemes make a bit more sense because they would not be affected by spikes in song purchases or by the temporary decline of a song or by the aforementioned conspiracy. However, they also have their own set of problems. You would quite effectively remove some purchases by raising the songs price. Fewer people would be willing to pay $1.49 or more for the song they were willing to pay $0.99 for. At the same time you might find a few people who are more willing to pay $0.79 or $0.49 for a song then they were to pay $0.99, but I highly doubt the $1.49 songs could outpace the $0.79 or $0.49 songs.
Let us trust Steve's decision for now. I am sure the folks at Apple had enough sense to ask some economists to look at the system and analyze the effects that a tiered system would have. Going on this assumption, it would be safe to say that $0.99 songs are here to stay (so long as the RIAA continues to play nice).
"Some days you just can't get rid of a bomb."
If such a model were applied to Operating Systems, Windows would cost $200 and Linux would be free... Oh wait, it is. And like the music distribution model, the higher priced stuff is crap.
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
You can't be serious. It depends on the listener what music is worth. Beauty is in the ear of the beholder.
Anything by Albinoni (or any other dead baroque composer) is worth vastly more than the latest Jessica Simpson pablum.
Sure, I'm all for this. A minimum of 25 cents per song. A maximum of, what, 99 cents? Yeap, that would work for me.
They didn't mention the maximum price they were planning to charge but I assume this is just an oversight.
Oceania has always been at war with Eastasia.
The more a song gets downloaded, the more it would cost
The reasoning is upside down. Cost per item goes down with increase in number of item sold, which allows to sell cheaper, which allows to sell more.
Since millions of tunes sit on servers waiting to be downloaded, the vast majority of them quite obscure, sellers would benefit because it would create increased demand for music that would otherwise sit unpurchased. If a single climbed to $5, consumers couldn't complain that it costs too much, since they would be the ones driving up the price.
Consumers couldn't complain? Why, because they have no choice but to download 'unpopular' music?
Also, what if a company was able to figure out a way to artificially inflate sales or download figures? You say it couldn't happen? I am not so sure. Who would be checking these statistics anyway? The RIAA? The guy in the Slate article talks as if the Stock Market is essentially a fair model, but for whom? Is there a limit as to how high a song could go? 99 cents may be a better price after all.
I would say that driving up the prices of the most popular songs will only provide an incentive to download these songs for free elsewhere.
He who knows best knows how little he knows. - Thomas Jefferson
Songs are like processors, software and pharmaceuticals in that they have a very high development cost but almost zero production costs. In theory, the company that makes them could just sell a fixed number at a fixed price to recover costs plus some profit margin, then drop the price to virtually nothing. In practice the price starts high and drops off over the first few months/years/whatever.
iTunes should make songs cheaper as they become more popular.
No, it's too little; if you want to support that music (arguments about profits not reaching the artist aside for now) then you should be willing to pay more to encourage an as-yet unpopular artist and help them on the path to greater recognition. On the other hand, 99 cents or 25 cents or 1 cent (must not... make pun about... 50 Cent...) will make no difference to a band that has just sold its three billionth album.
I know economists out there will argue with me about supply and demand; and I don't necessarily disagree with that, but I'm not sure that it's the dominant force when supply is essentially infinite.
The more a song gets downloaded, the more it would cost.
Right, because supply and demand dictates that... oh, but this is digital media. There will never be a physical shortage of that song.
From the buyer's perspective, however, Apple's 99-cents-for-everything model isn't perfect. Isn't 99 cents too much to pay for music that appeals to just a few people?
Right, because rarity typically dictates that something should cost more, so... oh, but this is digital media. There will never be a shortage of that song.
Yes, you have to pay for the bandwidth, the infrastructure, the yadda yadda and et cetera. It costs money to provide the media. Granted. And I personally think that $1 for a copy-protected, sampled audio file in a proprietary file format is ridiculous, but that's another can of worms. The point is that pricing by popularity when supply is not an issue reeks of greed, just as Jobs says.
Wow every single post here is redundant except one!
If you're not the first one to own a song, you're going to have to pay the penalty for not being as cool as the other kids. Great.....
Beyond that, it seems like you get paid more if the music is good, because you sell more of it. If only a few people like a song, dosen't make it good or bad. This is art, and it's subjective. Don't punish both the artist and the fans by decreasing the value of the music, or price them out of the market altogether (respectively).
Another thing I see, is that if the price goes up with the popularity of a song, wouldn't that just encourage people to pirate the more popular music even more. I mean "hey, that guy only paid fifty cents. Why should I have to paya dollar?!?"
Just my two cents. Care to boost my share?
As long as they allow everyone who has ever purchased the song to sell back to the market I am ok with this idea.
It shouldn't be limited to iTunes being able to sell. Since I purchased my copy, I should also be able to sell it back, or to anyone that would want to buy it.
Buy low, sell high.
What about option contracts? Damn.. this can get out of hand.
Live forever, or die trying.
That said, if I become a content provider and am releasing songs via my own small "private internet label", do I want to be locked into 99 cents per song? No, I don't. I might want to offer the songs for a minimal price to build following, but not be locked into that price long term, because if one of my groups or artists turns into a "mega hit" artist, I need to cover my bandwidth expenses and then presumably enjoy a reasonable profit.
The real problem is this: I don't want my offerings to be perceived as low value, or be locked out of participating in an iPod type setting because I don't want to go along with the rest of the industry's pricing structures. Or am I missing the point here?
...Open Source isn't the only answer -- but it's almost always a better value than the alternatives...
Not only is there no scarcity in this model, as several comments have already made clear, but there is also no way for a consumer to enter the market as a seller. If it were a true, market driven exchange, I would be able to take the track I bought for 25 cents when I liked Indie Band X, and sell it on the exchange for $3.00 when it becomes popular. I could then compete with the recording studio, who might be offering the track at $3.25.
But this won't work, again because of the fact that there is NO REASON for the price to go up as demand increases.
So, to review, we have a market for a commodity that isn't scarce, with a single seller, artificially fixing prices based on volume alone. Where's the market force in this?
I feel bad that the online msuic sellers have to take a hit for greedy record companies (no, actually I don't) and probably wouldn't mind paying a teired fee for music (since I rarely buy any anyway), but I think there should be caps. 25 cent minumum, as well as, say, a $1.50 maximum.
I kill harmless processes for sport
The stock market is based on the idea that one item is worth more to someone than it is to someone else. But the only reason the price fluctuates is because there's a scarcity of the item. If everyone could buy as many shares of Google that they wanted, without having to require someone else to have lost that share, then the whole system would fall apart. So I don't think the stock market model can apply to a commodity that is essentially of unlimited number. Plus, the value of an item is equal to all owners of that item. Person X and person Y who both own one share of Google will end up earning or losing an equal amount of money from a given point in time.
To answer the question, is a less popular song worth $0.99? It certainly is to the person who is buying it at that price. By the proposed logic, a song which perhaps I do not like at all would be priced much higher than what I am personally willing to pay for it. Perhaps I am willing to pay $1.99 for a song by Orbital, but only $0.25 for a song by Norah Jones. My prices for those items are inversely proportional to their popularity. To make them proportional to popularity might result in less income (although perhaps more sales) for Orbital and vice versa for Norah Jones. I'm not an economist so I don't know the right math to apply here.
So maybe you want to try personalized pricing. That's only going to invite major consumer backlash as people discover they're being charged more for a song than the person sitting next to them. Best case scenario is some sort of trading community where song purchases are traded so that everyone can buy their songs at $0.25. And now you're back to the original flat-pricing scheme. Worst case scenario is everyone drops iTMS because now Apple is being evil and greedy.
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
No. Especially if you're one of those few people.
If you don't think it's worth $0.99, then don't buy it. No one is forcing you to accept the terms of sale.
Who loses? The seller, by not pricing the good at the ideal price to maximize profits.
Sure, you could argue that fans of the music lose, since they don't have the option of buying it at a lower price... but that's how the market works. Someone offers a price, and people choose whether or not to purchase at that price. If the seller wants to, they can adjust the price. It's a little trickier with a middleman who controls pricing, but look at it this way -- if you choose not to pay $0.99 for something you think is worth only $0.25, well you won, since you didn't overpay for that song.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Isn't 99 cents too much to pay for music that appeals to just a few people?
I like listening to classic Yes. It appeals to a few people. Due to the average Yes track length, at 99 cents a track, whole albums only cost me about $2 or $3 each.
is what it's worth. End of story. Doesn't matter if there is infinite supply or only one buyer.
And this isn't about recouping costs of production, but recouping marketing costs. I am fairly certain there will be a high correlation between marketing costs and demand and, thus, increased prices for heavily marketed songs.
If no one will pay more than $0.25 for Einsturzen de Neubauten, so much the better for their fans. If people want to pay $5 for R. Kelly, well, what can you say about people who like R. Kelly anyway?
Anyway, there is no intrinsic fair price for anything other than what the market (i.e. buyers) reflects. Otherwise, we would all be shorting GOOG with impunity.
I, for one, would be happy to buy some songs below $0.99 as a result of my eclectic taste, particularly since I only use iTunes for one-off songs not rippable from my or my friends' CDs.
Hey I love the idea of stock pricing model for music. That means if I buy a song that isn't popular and it suddenly becomes POPULAR then I can sell it back to someone ELSE via iTunes.
And you might just strike it rich if you BUY ALL the copies of the music from the iTunes store!
(but I think this isn't exactly how it will shake out...) more like the RIAA will make more and more than they ever have before. Here's a thought....just SELL MORE MUSIC.
I do think the idea of tiered pricing makes sense, as long as the max is still the appropriate 99 cents. I personally would buy more music if it was priced as cheap as 25 cents! If I was browsing the iTMS, and saw some track that looked interesting, at 99 cents I'm unlikely to buy it (because I can't afford to just throw dollars away on frivolous purchases). On the other hand, if it's only 25 cents and by some indie artist, sure, I'll toss a quarter out to give it a shot.
Some people have mentioned that the price of microtransactions is too high for 25c pricing (the record label wouldn't get anything with a 25cent price). But if apple added up all your purchases, say, over a month, and then charged you one bill, all of a sudden the concerns over credit card transaction prices would go away. Since most people who buy from the iTMS buy more than once, I don't think this would be problematic.
Could we create two markets and arbitrage between them? It seems a bit crass, but this is what would be. Perhaps we can purchase / sell options on various songs. "I would like to purchase a "put" on the latest CD by so and so, I know it will flop."
One ring to bind them - should probably have more fiber and less rings in their diet.
No!
A million times no!
This premise is flawed. RIAA members want more than whatever they get out of 0.99 per track for as many tracks as possible.
Stories like this attempt to justify their position.
Just Say No!
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
Since things bought online are done via credit card or paypall, the fees charged by paypall or the credit card company must be covered. These will add up signifigantly if the cost of the items is very cheap (i.e. 25 cents). That is probbly part of why it is dificult for companys to go much lower than a dollar a song.
If it's dead, you killed it.
It's obvious that market forces just don't apply, no scarcity, blah blah blah. I'm not likely to pay 99 cents for the latest Britney Spears single, and I'm sure as hell not going to buy it if it's 5 bucks just because it's popular. On the other hand, it might help out lesser-known bands. I'm more likely to buy a 25 cent song from an unknown than a 99 cent song from the same unknown. In fact, since the music I like is not that popular, I'd stand to save a metric fuckton of money, that is, if I were inclined to buy music at all. As far as I know, it's hard to improve on 0 cents per download.
Guess I'll be showing my age here but I still buy CDs and then create my own digital copies of them. A CD is usually 8-18 tracks with a great fold out with band bios, photos, etc. and, of course, the CD actually becomes my backup media for the music I payed for.
I still prefer to get my music this way, but that's not the point. I get up to 18 songs and all the "extras" for $17.99 (actually less) if I buy at the mall (which I never do). So, at about a $1 per song plus the cost of backup media and the fun band bio foldout I really don't know why people would pay much more than 99 cents per tune anyway.
"A government is a body of people, usually notably ungoverned." - Shepard Book Quoting Malcolm Reynolds
Just what I was thinking. Supply and demand (the basic principle behind free markets and stock/commodity markets) doesn't apply when supply is virtually unlimited. However, the economics do work on a different level. Whether a company is willing to produce a product at all is based on whether there is enough demand for the product at a given price. Recording studios might be willing to produce a greater variety of music for online sales if the prices were variable enough to adjust for maximum sales (quantity purchased * price).
I've suggested to my economics professor that this idea be debated in class, I'll post a summary of our conclusion if to topic comes up.
-Tim Louden
Seeing as my musical tastes tend to lie outside the mainstream this would mean that the majority of what I would buy would save me money. At the sam time, the reasoning is flawed. People will buy what they like. The model pioneered by iTunes is ala carte music. The buyer is not forced to buy an inferior (to them) product because they buy a song at a time. The $ 0.99 price takes into account royalty, credit card transaction, and infrastructure costs. A lower price would make a break even venture turn into a cash blackhole. The offset of the higher priced songs would need to be enormous to make financial sense. The author argues if 99-cents is too much for a song you want. Is $1.99 for a song too much? A tiered price structure like the one proposed would cause more "popular" (not better quality to some subjective buyer) songs to go more than $1, maybe $2. By pricing evenly across the board, it remains pretty fair. Possibly a more "fair" price structure would involve a minimum price for all songs (the break even point for Apple) then a scale or graduated growth based on song length or production costs.
> Commodity pricing is based on the idea that supplies are limited.
Exactly. Which is why comparisons to a stock market, supply and demand, etc are all daft. Listen up people, copyright is all about providing the producer of a work an explicit MONOPOLY on reproducing (and public performance, not at issue here) the work. So anything other than seeking the absolute maximum return by picking a pricepoint to generate maximum profits is doomed longterm.
That IS the market functioning correctly as it is currently designed. Of course when one realizes the negative implication of this for society in general it leads to the notion that, just perhaps, we are granting a little too much in the social contract called copyright and that we might need to rethink it. Specifically I'd propose a drastic reduction in the time to ten years renewable with a non-trivial fee for a second ten year term and am open to discussing mandatory licensing of recordings as in done for composers now.
Democrat delenda est
I've been here for 5 years and I will never understand why people are this dull.
If the music industry adopts a stock market model, does that mean that bands can now be owned by majority shareholders?
Just think...Slashdotters could organize a hostile takeover of bad bands and shut them down. Voila, no more Kelly Clarkson albums!
I am still waiting for the cost of CD's to become cheaper then tapes like the Recording industry promised. Now it is more expensive to buy the songs individually without any media...... WTF??? It does not cost any more to pick up a guitar now then it did back when I bought tapes; and I am supposed to pay up to 5 times as much to get the right to listen to the same music. Yah Right!!! P.S I would not be so pissed if my money went to the bands. Instead it goes into talent-less corporate executive's pockets..
"I myself am made entirely of flaws, stitched together with good intentions."
...and allow people to sell their music back when the prices go up.
...if I wanted to read garbage like that, I'd go to \.
Hmmm... so if you're a small-selling artist, you'll make even less than before. And bigger artists will make more than before. It would really exaggerate the long tail, since the drop off would be even steeper.
Yup, sounds custom made for the RIAA.
Although, I suppose, the counter is that people would vote with their checkbooks, but how likely is that? "Well, johnny, I couldn't afford Britney Spears' latest, so here's 3 CDs by artists you've ever heard of". Hmm.... no. Although, considering the weird-ass music I listen to, I'd be saving money.
The music industry has become too greedy, taken too much advantage of me as a consumer. They think that just because they spent $20 million dollars on a music video and promotion I'm going to be willing to pay $20 for a CD. It just isn't happening. I buy CD's because I want to be entertained, want to hear a story told through music. Not because I saw an awesome music video.
The music industry just needs to get back to fundamentals. Focus on gathering talent and then letting the talent speak for itself. For too long they've been resting on the idea of throw money at slight talent and let the promotion do the rest of the work. Once there are artists worth paying for online I'll be happy to pay. Not $20 for the cd, though, and not $15 for mp3 format. There just isn't enough value there to justify the price. Plain and simple.
What would be cool is if the consumer could re-sell music back to the open market to allow for speculation. This way if you are an early adopter to a band you can make some extra cash if they hit it big. Or at least get a quarter back if you get sick of the song or find that the song really sucks.
That idea is completed ridiculous. Tierd pricing? Unreal. I'm not even going to go talk about suppy and demand, but that idea is crazy. I'm not a big fan of buying cd's or downloading singles for $.99 per song because it seems like these days, you need a different type of mp3 player for each site. If I pay for something, I want to be able to use it how I want to, not how the company wants me to. But off that, the recording industry is now making the consumer pay for all of their mistakes. Pay for them failing to recognize new markets emerging with the speed and dominance that they have (i.e. Internet). If you want to go buy a new cd, look at spending around $20 or so, maybe a little less. How much can it actually cost to produce a cd from one of today's top artists? Contrast this with how much a brand new DVD costs if you were to purchase it on the first or second day of it's release .. around $15 at Wal-Mart. I cannot see a feasible comparision on the price it costs it produce a blockbuster movie to a music cd. Yet the music still costs more.
Maybe if the greedy bastards controlling the price of the music would ease up and take to see that music is not worth that outrageous price that they charge, sales would increase.
While piracy obviously contributes to losses running into millions of dollars, I would bet that a near equal amount of money lost can be attributed to the recording industry fail to act on new markets and see a potential for profit early on, before piracy erupted into the large scale market that it is now.
> Isn't 99 cents too much to pay for music that appeals to just a few people?
.99 is to much... so would 15c or 1c. If you don't like it.. it's not a deal at any price.
Not to those "few people".
Yes, to the "mainstream" who it doesn't appeal to...
Shadus
With stocks, you have a finite number of shares. A lot of people want to buy a stock, they have to buy at a price that corresponds with the price that a seller finds agreeable. If I buy a million copies of Weird Al Yankovic's latest hit on a "digital music stock market", there are still an infinite more copies left to sell.
What I'd be inclined to do, if a digital music stock market were to exist, is to buy a copy of a song and distribute it free (aka "pirate it") to others. By creating an "alternative distribution channel" (aka "p2p network"), I would be doing consumers a favour by keeping the costs low. Heck, with current laws, a music pirate is treated like a murderer; if digital music were treated like a real stock market, music pirates would get a slap on the wrist like Conrad Black or the CEOs of Enron and their ilk. Heh!
The problem with this idea is that it's completely backwards. The more popular a track is, the more people buy it, the less the artist needs to be compensated.
Flip it around 180 degrees, and you have something that is quite sensible - early buyers who simply must have it spend the most, and once a lot of people have bought it (and, therefore, the artist has been fairly compensated), the price drops to the cost of delivery.
Of course, a scheme such as this assumes that the idea is to fairly compensate the artist for their work; not to milk the public for every possibly penny you can get out of them.
Bogtha Bogtha Bogtha
The numbers of downloads, books sold, visit to a website, etc all follow Zipf law, which means that the most downloaded song will have N downloads, the second N/2, the third N/3, etc. In particular, this means that the range of price is extremely broad.
If the price is to be proportional to the number of downloads, the most downloaded ones will cost an arm and about two legs unless a max price is set.
I agree with much of your reasoning, but I think you're leaving out a factor. There are two different things that make a song worth more:
1. Many people want it
2. Few people want it, but they want it a lot.
That's why you'll end up with a U-shaped curve: very popular music will sell for a lot because so many people want it that you can raise the price until listeners squeal. And some unpopular songs will have higher prices because they appeal to a market with few people willing to spend a lot of money (say, "rare" jazz recordings or concert bootlegs).
In other words, "demand" is measured in terms of dollars, not in terms of people. The low price is for stuff in the middle, where some people want it but there isn't massive demand, either in terms of people or in terms of dollars.
By "rare" above I mean that they can try to artificially keep rare things rare with DRM. If they decide that DRM really, truly, genuinely doesn't work and everything sells a single copy and is instantly available for free, then everything changes. (I'm not taking a position for or against it, just talking about the economics of it and explaining a technical assumption.) This artificial scarcity corresponds to a completely flexible market, where they can make as many copies as are necessary but will make only as many copies as necessary.
The price to produce sets a floor on how much they can charge (and that price incorporates a company's total expenses, including overhead and the expense of producing records that flop), but that only affects how low the price can go before the company just goes out of business. It doesn't set the top of anything, and there's no economic reason for them to charge less just because they don't need the extra profit.
And for the unpopular stuff there's no particular need to take the floor into account because any sale is worth more than no sale; the expenses are sunk costs. The only floor is the management overhead needed to keep it on the web site, and in fact that may be so low as to be zero compared to the sex appeal of being able to make EVERYTHING available.
Market forces are diven by supply and demand, but digital goods have unlimited supply and so are completely unaffected by demand. In fact, I would think that for digital goods demand actually should have the opposite effect of normal market forces. As demand (sales) rises, the cost drops, and so should the price. If this is true then popular music should cost LESS than less popular music. I think Jobs is right on that the music industry are greedy bastards looking to gouge consumers like they always have. That said, Steve is looking only to sell high margin iPods, and just as guilty on that point. In any case, I wonder if anyone else agrees with my hypothesis that demand should decrease the price.
Actually, this is a good idea. The optimum pricing for any product creates a balance between how much you charge and how much you sell. You are trying to maximize your profit using the equation: [cost] * [sales] = [profit] The optimum solution is the Nash equilibrium point (The A Beautiful Mind guy...not Russel Crowe). If you sell 10 items at $.50, you make 5 times the profit you would selling 1 object at $1. The point of decreasing the price is that you generate more sales...would you buy the new [insert band name here] album for $20? How about $15? Or even $3? If you're interested in the album, there is a price point where it's worth it (to you) to buy the album. For popular acts, a high price point is the Nash equilibrium, for less popular acts and cult bands, a lower price point will generate the most profit. Supply is irrelevant because the commodity isn't lost if it isn't sold. If you flood the market with oranges, they have to be sold at some point, or they will spoil. A music distributor can sit on a song essentially forever without losing money on it, since it's an electronic copy. Brick and mortar stores are still subject to the 'orange' issue because they have a limited space for physical CDs, so it's in their interest to get rid of the low-priced ones which don't generate any profit (or generate larger losses if the disks are primarily loss-leaders). Market-based song pricing is the theoretically most efficient pricing scheme, especially if the pricing is updated close to real time (on the scale of days or weeks).
I read the article but the author doesn't really understand basic economic theory very well.
The general thrust is 99 cents is not the right price for all music to maximize profit. This we can all agree upon. But the formula of "less popular" + "cheaper price" = "more profit" is not correct.
Yes, if you price things lower, you do get more buyers. But this does not mean that pricing unpopular music means you make more money. It's possible that music that fits a certain "niche" such as, say JPop tunes, the optimal profit point is $2.50 per song not $.99. (Plug: http://gomorning.com/scene/itunes )
In addition, companies need to consider strategicly in deciding optimal pricing -- meaning, if all pre-1990s Jazz music is priced low, it impacts the profits made in new Jazz release. People may not buy any new Jazz music, and instead collect only older Jazz music. In some respects, it affects all music purchased, regardless of genre.
What record companies want to do is price older music fairly high to encourage the purchase of newer music. Which is why old music then is priced similarly to new music, though the demand is apparently much lower. (This is also one reason why retaining effectively indefinite copyright is in the interests of record companies. A large public domain does remove incentive to buy new work.)
No, 99c isn't too much for music that appeals to a few people. Either it holds more appeal than having 99c in your bank account, or it doesn't. Its value is only relative to the single purchaser, not any others who may have purchased the song.
$6 30 years ago is like $14 today. 6 times (1.03 to the thirtieth power). Assuming 3% inflation.
While I agree with your point (that since CDs are pennies to produces its all profit) I'm just sayin' is all...
In the future, I would want to not be isolated from my friends in the Space Station.
Scarcity is the key factor in demand-based pricing. The marginal cost of producing a copy of a piece of music is near zero, which makes demand-based pricing usless.
Back in the day, you had to have expensive equipment to duplicate records or even tapes at a high quality level. That limited to supply of music to what the music industry decided to manufacture.
That's the point of DRM -- to create "virtual scarcity" by making it impossible to transfer a license or make usable copies.
Conformity is the jailer of freedom and enemy of growth. -JFK
There are a couple of issues you'll have to consider too; as the recording industry sets prices from their position of monopoly supplier of each specific product they are already exacting more or less the maximum available amount of capital from their market. Increase the variety and they compete with their own products for more or less the same money, so increased variety is not necessarily in their interest.
Thanks for providing the voice of sanity. No scarcity = no market.
I suspect this might become a new tactic for companies that want to introduce variable pricing models for their products/services (maybe companies like Apple, Netflix, TiVo, etc.). Just say higher/lower prices are due to a "music/movie/show market", and hope that everyone failed Econ 1. Jeez, guys. If you want to charge more for some songs and less for others, just say that. Don't try to doll it up in quasi-free-market drag. That just looks lame.
I ususally buy cds at concerts I go to and ususally never pay more then $10 for a cd when that same exact cd at best buy might be over $17. Even with the cost of going to the show I still usually, at the end of the day, make out on the deal as almost everything is cheeper when you buy it at a show more or less directly from the artist. This way the artist recives most of the profit. Of corse this is not true accross the board most big name bands are always going to be at the whim of the record company as much as that may suck.
The Apple 99-cent-per-song is not only a rip off to consumers but more importantly to the artists. The money from most of the sales does not go to the artits it goes rather to the service provider (Apple) first then to the record companies then to the artists. The more you move away from the source the less money the source will reciveve. This is not a big deal with most popular bands that you will see on MTV but smaller bands need closer support.
I much rather support the artist directly. Also support independent labels who treat their artist fairly.
Reality is a big nasty dragon. Fortunately I don't believe in dragons.
Disclaimer: IANAE (I am not an economist)
Music, like everything else in a capitalist economy, can and probably will be sold for as much as the desired number of people are willing to pay for it. Logic dictates that maximum revenue will be generated at the point where number of buyeres multiplied by price is at its highest value. Furthermore, number of buyers is probably rougly inversely proportional to price, to a point (as there will only by a finite number of buyers interested in any given product in the first place, even if it's offered for free) Now, make up some numbers and you can come up with an easy algebra problem. I'm sure economists already have books on this type of stuff, but I didn't take any business classes in college so I wouldn't know.
Getting back to my original point, what's going on is that the value of music as a product has decreased now that the Internet can be used as a distribution medium in place of CDs. As a result, businesses are now fumbling about trying to find the sweet spot at which they can maximize their profits using this new distribution medium.
Also, to those who have brought up supply and demand: Supply effectively no longer exists with Internet distribution but demand still does, and demand should still be a valid factor in pricing.
Arguing about vi versus Emacs is like arguing whether it's better to make fire by rubbing sticks or banging rocks.
this idea can't be supported with prices that go above 2 dollars per track - in fact, i would say that apple should look a little more closely at the market for ringtones authored by big and small bands - the labels take is huge, and the artists are doing better - and the carriers get serious change for every rington...until it fades, at which point prices plummet from over 2 bucks to 'way lower' (or free, if plans are throwing in monthly allowances like 5 bucks, which some do - like sprint) ...and on the flip side, why not allow artists to submit and take nothing in return for lower prices to get their tracks out there in the right playlists and categories?
in fact, why doesn't apple just get with the crowd and do what myspace is doing - start a label and manufacture want for bands by massaging the data from (in apple's case) itunes activities...they should just open up a networking utility, band pages and all of that crap...it's basically message board software, right? then it's just dumped into an itunes upgrade...
enjoy life, and Gmail.pro
I actually posted a comment about this concept over a year ago (http://apple.slashdot.org/comments.pl?sid=78748&c id=6978433). Basically, the RIAA, Apple, Sony, or whoever could leverage a private currency (think of it as a complex application of gift certificates) in order to offer sub-one cent pricing for independant, emerging, or otherwise distribution-challenged artists.
This is an excellent opportunity to meet the market demand for lower cost songs. I may be willing to pay less than 99 for a b-side from a one-hit-wonder, but I doubt Apple will find much market in songs priced great than $1 - no matter how popular.
Leveraging a private currency, however, would allow Apple to fluctuate the value of songs without changing the "price" - and change the price structure as a whole based on market forces simply by changing the conversion rate.
There's a lot off interesting ideas here, from a purely economic perspective.
"Adventure? Excitement? A Jedi craves not these things."
If fewer people like a type of music, the cost of that music will go up. This is because the cost of producing one extra download is approximately zero after artists costs have been covered. Before this point however, income needs to be sufficient to supply the artist with enough money to decide to carry on making music rather than go to their next best alternative (painter + decorator, plumber, soldier, publicity milker, reality tv show contestant, etc.). To raise this money, a higher price must be charged for their music. This is why specialist software is so much more expensive than generic stuff, because the market is so much smaller.
This idea is nothing like a real market, stock or otherwise. Whoever claimed it was is an idiot. Take an Econ course.
That said, the idea of lowering prices for less popular music isn't a bad one. You don't need a pages-long essay to explain why: at lower prices, consumers will be more willing to give unknowns a shot. If an obscure band finds fame due to budget-priced songs online, it could potentially become a big hit and grow the industry as a whole. This benefits pretty much everyone.
If, for whatever reason, you just want to make online music sales more like a real market, songs should become less expensive as more time passes without anyone purchasing the song. Once a song is digital, there's no way they can lose money (no further production costs), so if no one is buying lowering the price can do nothing but help sales and hence profits.
Glog!
As others have pointed out, the reasoning in this article is mostly wrong. More popular stuff should cost less because of economies of scale, but they're suggesting the opposite.
However, having said that, most mass-market music is total crap, and most of the really good music is not very popular. Yes, there are exceptions, but on average this pricing scheme would probably reduce the price of worthwhile stuff and increase the price of the total crap "music" that the marketing machines spit out.
So, I'm all in favor of any system that raises the price on crap and lowers the price on the good stuff. I think they should go with this recommendation.
Does this mean that people can classify the 'Britney' stock (Stock Ticker:BPOS Blonde Piece of Shit) and the 'Aguilera' stock (Stock Ticker: BPOC Blonde Piece Of Crap) as JUNK STOCKS?!? I'm game! Sign me up!!
the future is but past forgotten
Commodity pricing is based on the idea that supplies are limited. Likewise with stocks, as there are a finite number of shares of any given company in circulation. Even if every person with a computer on planet Earth bought a copy of the same song, it would not be in short supply.
The problem with your (and the dozen other posters) assertion, is that supply != number of copies possible, supply also includes availability!
If there are limited outlets which can make something available for use, then supply is limited. For example if only 1 store can sell a digital song, because it is the only store it is available at the price increases. People are forced to pay the higher price because although there are infinite copies there are no alternative distribution channels to access them.
The idea that prices for digital music drop to 0 the more popular they get works in the P2P realm. Where as the popularity increases the availability also increases. Hence you might donate to get access to a song that is unpopular because it is hard to find, but the latest pop hit would be free because it is available everywhere.
D6 63 0D 70 89 81 BB 8E 7B 7C 5F 5D 54 EA AB 73
Okay, and why not 99 cents at a maximum, since there is a minimum. Because 25 cents per track might be expensive if you figure I can get a good range of used cds from $1-3.
Truly, if you are for market forces, putting an artificial minimum on it is contradicting your own argument. Also, the whole argument of supply and demand which this argument is based upon is on a nonexistant foundation - there is no "supply" in a product such as this - virtually unlimited amount of tracks can be downloaded with no "supply" diminished.
Making such a popularity method will only have people pay more $$$ for tracks when they come out and then those same tracks will be cheaper a short while later. While that exists in the real world to some extent, it's only going to give iTunes a bad rap for predatory pricing.
The model iTunes exists on should be economies of scale - where the more is downloaded, the cheaper per track (album) production costs is that each consumer has to bear. And those savings could be passed on if the consumer buys more tracks of the same album.
And how exactly are you measuring demand? ;-)
I'm curious at the moderation though, here I was thinking this was funny... For everyone else, this might be a good read.
-- it's ridiculous how many people misspell ridiculous... (damn, damn, damn...)
Right now, the channel producers charge the cable operators $0.50 per package subscriber for each channel (for example). I receive both Comedy Central and SciFi, but I only ever watch Comedy Central. So could I save $0.50 on my cable bill by subscribing specifically to that and cutting SciFi? Well all the people who watch SciFi but not Comedy Central would try to do the same thing. Then Comedy Central would say to the cable operator: "You're claiming that you have half as many subscribers as a year ago so we should charge you half the total. But that $0.50 rate was based on the knowledge that only half of your subscribers were watching our channel. Now we know that *all* of the subscribers want our channel, so we're raising the price to $1.00." Since extra channels cost nothing to deliver, an a la carte model just creates overhead that can only add expense.
I agree that cable prices are high and I'd like to see some downward pressure through competition. My Comcast bill is $80/month whereas my DSL (which provides comparable entertainment and utility) is $20/month. I live in an apartment building, so satellite TV is not an option. But if I could get TV through my phone line (like shows on iTunes) then maybe there'd be hope.
If you think you'll get music for less than $0.99 per song, you're dreaming. And if your scheme makes some of the songs I want cost more than $0.99 than you're giving me nightmares.
AlpineR
Stocks are not physical things either. They are limited in supply arbitrarily. When the price of a particular stock becomes high the company will often split their stock one or more times to make it available to more people at a lower price. Existing share holders have the same dollar value in stock but with double (or whatever) the shares. Outstanding shares simply double in quantity and half in value, or whatever the case may be.
Downloads wouldn't have the same arbitrary limitation on the maximum number of downloads available, of course, but the basic principals are the same.
The value of the stock is obviously based on demand, but initially based on the financials of the company. Similarly, the value of a music download would initially be based on the perceived popularity of the song in question. Over time, this value would fluctuate in much the same way a stock does. Not because of scarcity, but because of popularity... the same way a stock's price soars not because the company is all of a sudden doing better, or because the stock has become more rare, but because people desire the stock more.
It's not exactly the same, though. It is possible for all shareholders of a company to hold the stock regardless of the offering price. This would simulate a lack of supply. In the downloads world, I don't expect iTunes would refuse to sell a song regardless of the price people were willing to pay.
I see as the two largest shortcomings. First a little background, the point of an exchange market is to find the market clearing price, the minimum price at which all sellers can be satisfied. Movements in the price are perceived to correspond to the sellers and buyers changing opinion about what the fair price should be.
Now to the problems, the first is how to establish the initial price. Typically this is done in some sort of IPO process but the point of an IPO is to raise cash for future activities not to fund a return on what has already been done. This problem could be worked around by using a market to fund artists but I'd estimate that would not work any better than the current system of bar bands, demo tapes and talent shows. I cannot imagine a market that can set the price for an existing song based on popularity though. Unless someone can explain why there'd be a rush to buy the song immediately, I'd imagine that everyone would just wait a period, at which point the song would be assumed to have no value its price would drop and everyone can pick it up on the cheap. This is a coordination problem but it should be easy to set up a system that can game the popularity rankings in that fashion. Which leads to the second problem, buyer's remorse. If a song becomes popular and rises in price there'd be natural resentment among those who bought it at an higher price than those who had it before. This isn't a problem for most markets because the goods must actually be exchanged in the transaction. If I buy a stock at a higher price from you, you get cash but now I have the stock that I can sell to someone else at an even higher price. If you just copied the song to sell it to me then you still have the song and now you have my cash and can always undercut me for future sales of the song. Why would any rational person enter such a market? Or why would any rational person think there is a DRM scheme that would prevent buyers from copying the songs?
Dude, it's just 99 cents. If you can't foot the cost to download it, then you deserve to have the rest of us sit on the sidelines and laugh at you.
Seems to me that the balloon is being floated from many directions, getting more so each coming month.
I still think that the studios will get a third party to write software to put DRM songs on iPods without requiring iTunes. They will then market songs to iPod users that Apple no longer carries or is allowed to carry. In fact they may just seek to portray Apple as "the problem".
Remember, the buying public isn't filled with millions of the brightest people. Many believe that big portions of their dollars go to the artist. So its not beyond reason to see the studios do and end-run or attempt one to force Apple to comply.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
If I recall my college level economics, cost to supply is not necessarily a trait of a supplier of a good, but of the entire market. That is, iTunes might have an essentially unlimited supply of a given song, but the market does NOT. Hear me out... sure, we can all make essentially costless digital copies of files. But if I want to do this, I have to obtain a source for the copy. I have to get my friend with the cd to lend it to me, or go on bittorrent, or whatever. In this sense, my friend, or bittorrent is the supplier of the good.
What's interesting and different about this market is that the cost to supply is inversely proportional to the number of units that have been disseminated... its very hard for me to find a copyable source of some random indie band that just printed their first disc, but its VERY easy for me to find a source for the latest billboard topping pop tune.
To be honest, I'm confused as to how such a supply/demand graph would look... but intuitively its actually starting to make sense to me to have price fall as demand increases.
Another way of looking at it would be that when a song hits a certain level of popularity, it becomes so easy to get a copy that I'd never consider actually paying. When its hard for me to get a free copy, its worth paying.
Thou shalt not begin a subject line or post with the word "Umm".
The reason prices are allowed to rise in a free market is that more sellers would enter the market seeking the excess profits, expanding the limited supply of that good. Eventually prices would return to their original levels. In this case there is NO limited supply, and NO increase in supply as prices go up. The "Perfect Competition" market structure fom the textbooks simply does not apply to this case because prices are not playing a role in the allocation of resources.
Specifically I'd propose a drastic reduction in the time to ten years renewable with a non-trivial fee for a second ten year term and am open to discussing mandatory licensing of recordings as in done for composers now.
I wouldn't mind a 10 year perpetually renewable. First 10 years is free. Second ten years is $1000. Then double the price for all follow-on ten year periods as well as correcting for inflation. At some point it no longer makes economic sense to keep the copyright. The current situation is deeply flawed in that works are kept under copyright even if there is no intention to make copies.
Lasers Controlled Games!
But if there are any others, customers will just go to them and find the track for 99c. A better solution is compulsory licensing, where any service could make up whatever cockamamie scheme to get paid that they want (advertising, monthly-fees, per-track fees, etc), and the record labels get paid. This would allow the services to offer ALL music, without having to re-negotiate with every label.
Quote:
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
You are looking at if from the LABELS POINT OF VIEW. Obviously, if you are the CONSUMER, and you are interested in purchasing that song, it appeals to you.
This game the labels are playing is just so obvious: find any possible reason--any--to have the power to adjust the pricing. That's their Trojan Horse. Once they have it, they'll get busy gouging and fucking the consumer. If we let that happen, better just bend over and lube up.
I like the 99cents model. If a band wants to make more money, they have to make better music to sell more copies. The more copies sold, the more the musicians make. While it is not a perfect model, it at least gives the same chance for real musicians to be on the same field as over-marketed/produced pop puppets. Good music is not the same as popular music, but if everything was on the same, level playing field... maybe the consumer will stop listening to the image and start listening to the music.
BARS have been doing this with BEER for a WHILE and it seems to work...why not music?
Parent poster is completely wrong when he says there is an infinite supply (in terms of market forces). The reality is that supply is always identical to demand.
Digital supply == Digital demand.
That's the key to understanding Apple's success with iTunes; the magic 99 cent is what people will pay for a song. The price won't necessarily go down since market forces will tend to keep the price the same, at the product's real value. So if songs are worth 99 cents to consumers, that's what the price will be. If the songs are worth more by being popular or hyped then their value and so their prices will naturally increase. You can think of it like this, where if you were to re-sell iTunes songs for less you would be losing money since people value them higher then you are selling for.
What really confuses the issue is the non-market forces, the primary one being altruism. Your friend lets you copy his 5tb music collection because he likes you and wants you to have it; otherwise he could make considerable cash from it. Same with the p2p sharer... he shares things he wants other people to listen to. These forces are the ones the companies really are scared of, because that's supposed to be their job.
Regarding "supply and demand", the thing that makes this situation somewhat unique, as others have pointed out, is that the supply is virtually unlimited. To put this is economic terms, the marginal cost to the supplier of providing one additional unit is effectively zero. The only thing that really matters is demand.
Specifically, what's known in economics as demand elasticity. This is a measure of how responsive consumers are(in terms of quantity purchased) to a change in the price of an item. Simply put, how much of a change in quantity sold will there be in response to a change in price? This is what a seller needs to know when he is thinking about chaning the price of something. Gasoline is the classic example of an inelastic good. Remember when Katrina hit and gas prices spiked? You probably still had to get to work, school, etc, and probably bought about the same amount of gas as before. Plasma/lcd televisions are an example of a good with elastic demand. Not many people have them now but when the price falls by half you'll start to see a lot more people buying them.
Count on the fact that as we speak, there are economists being paid six figure sums by the record labels to do *nothing else* but try to analyze and predict demand elasticity for online music purchases. There's nothing magical about the number 99(cents). I'm not up on current popular music, but when Kanye West's latest album came out, if iTunes had charged $1.00 per track I doubt if they would have sold significantly less copies. Conversely, is there any artist who would sell a lot *more* songs at 98 cents? Probably not. But is there an artist who could sell a lot more songs at 75 cents? Would the increased sales make up for the reduction in price? The answer to both questions might be yes. Is there an artist who might sell less songs at $1.25, but the increased revenue per sale would offset the lost sales vs. a $1.00 price? Quite possibly yes.
Simply put, there's an optimal price for any good. If demand elasticity is known(I explained it conceptually above, but it's something that can be numerically quantified for the purpose of performing calculations) then one can use calculus to easily determine the optimal price for a good. The optimal price is the price which yields the highest revenue. Anyone who's taken even basic calculus has probably done problems like this. You're given the formula, you make the calculation, and then put the result on a graph. Vertical axis is revenue, horizontal axis is price, and your result looks like a parabola in the shape of an upside down U, indicating there is an optimal price to sell the good at. Price it too high and you lose revnue, price it too low and you lose revenue.
Fairness doesn't matter, there's nothing special about the number 99. It's all about how to maximize revenue. My own gut feeling is that some songs are underpriced and others overpriced at 99 cents.
This isn't the stock market or a commodities market, because in both of those you can resell what you've bought to another buyer. You can buy pork bellies or a share of XOM, wait until the price goes up, then resell it at a higher price (or cut your losses as the price descends). In fact, you CAN'T resell what you've bought barring some innovation in hyper-perceptive DRM that allows you to transfer ownership of the media file without violating copyright. Therefore, once you have bought the song, its value to you is at a flat zero. All this article represents is a pricing model of instantaneous movements up and down in price to follow the movements of the demand curve and maintain a revenue stream.
As such, I think it would work well from an economic standpoint. I can see the fun of watching prices bounce around on a screen.
'Be always mindful, even when ditch-digging.' --D. T. Suzuki
Lots of people have come up with the same argument. Now, I know for a fact that there are a number of Slashdotters with a decent (i.e. degree level) understanding of economics, and nobody has been called up on it, so it seems reasonable that this is the generally accepted consensus according to economic heory.
Which leads to the question - who is Adam L. Penenberg, and why the hell do we give a damn what the moron thinks?
You're completely correct with respect to the fact that there's basically no limit to the supply of digital music. It's infinitely reproducible so that's not the issue. What the author is clearly using in place of a limited supply of music is a limited supply of time and bandwidth, and the fact that you have to download your digital music at some point during the day.
For example, perhaps the folks at iTunes have discovered that for even the most popular of songs, there are never more than 100 persons downloading that song at any given point during the day. So they base the price of the song on the current number of contiguous downloads. If forty-nine other people are currently downloading the song that you've got to have right now, the song will cost you $0.50. But if you can wait a half hour, maybe it only costs $0.35. The media companies could also use some form of moving average I suppose.
But for the most part, I think the author of the article is just making things far more complex than they need to be. Introducing the complexities of a market system to price the songs will only drive up the cost of supplying the songs.
Futhermore, what's questionable after the recent "black friday" sales is whether actual CD's are even ligitimately priced at $10+. Many stores were offering CD's in the $5 neighborhood. We're all aware of the low cost of physically producing a CD, the expensive part is supposedly the marketing and the fact that many CD's fail to pay for themselves due to insufficient sales. But music downloads are even cheaper still, having neither the cost of physical production nor additional marketing costs.
In many respects music downloads could be considered a revenue generating, rather than revenue sapping, form of marketing. Especially considering the ways online recommendations can fuel the demand for similar but lesser-known products. I really think that the most popular songs should be priced at 50 cents or less to get consumers eyes to the website reading the recommendations and fueling additional purchases. And given how low of a price that is, I really see little need to price less popular music at a lower price.
would I want the hit songs to cost more, and increase in costs as they get more popular?!? So the "google" of pop rock or some crap comes out, and all of a sudden it jumps from 50 cents to 5 dollars? Is it so those people who got in on it early can say, "I got in with band X when their songs were only 25 cents apiece". What's the incentive to buy the music if the more you buy it, the more expensive it gets? Now, if you could buy and sell "songs", and get credit for it, that might be interesting :-). Like getting paid for your torrent ratio?
Bah. Just auction off each song ebay-style.
.95+ tax or something like that)
First day available, only allow 10,000 downloads, priced based on bids.
Two days later, release another 10,000.
A month later, release another 10,000 of an album-rejected REMIX!!!
Yes, I'm trolling. I just think the whole idea's stupid.
It's like why I make my own coffee now. Dunkin' Donuts used to charge a dollar for a medium. Sure, it was cheaper to brew at home, but a dollar was *so* convenient and simple. (actually, it was
I surrendered my money *every damn morning* without thinking!
Well, now... coffee's between 1.70 and 1.95 depending on where I go. I always think about stopping... but I don't anymore. The coffee in the office tastes just as good and it's free.
And one more thing to wrap up my point: Let's hypothesize that DD ups the price to $3... and the coffee at work becomes $2 a cup... and the coffee at home is, um, poisoned. Guess what I'll do?
I'll stop drinking coffee.
Assuming mountain dew remains affordable.
I'm done with sigs. Sigs are lame.
You could listen to bands and invest money to help defray their production costs in exchange for a portion of the sales of albums in the future. The bands wouldn't get the big upfront advances, but the contracts could be much more reasonable!
Mike Mangino
mmangino@acm.org
One nice thing about my iPod is that it can play MP3 and WAV. One bad thing about my iPod is that it doesn't support any DRM other than Apple's... (But, I have never had the problem where something I wanted to listen to wouldn't play on my iPod. In part that's just because my music sources tend to be either Apple DRM, or have no DRM at all...)
dave
In a free stock market, the prices are dictated not by what the seller thinks they are worth, but by what the buyers are willing to pay. The RIAA has never been very concerned with what people are willing to pay, all they want is money, more and more money, and they will NEVER do anything that puts their consumers in a position to dictate their pricing.
It doesn't work that way.
The marginal cost of distributing music via internet download is almost neglible. The costs are almost entirely upfront costs to produce the music in the first place. These costs have already been incurred by the time the music is up for sale.
Since these costs have already been sunk, they have no bearing on the price of music afterwards. There is no opportunity to change the past, so the best overall outcome is achieved by maximizing the profit from this point forward.
As a comparison, say you were to purchase an apartment building for one million dollars. You're already a million in the hole. If you decide to lease the first appartment for 8x the market rent, the second for 7x the market rent, and so on, you'll have a completely vacant building. Your revenues will be zero and you'll be out a million dollars. On the other hand, if you rent all the apartments for below market prices you'll get some revenue - which may or may not be enough to cover your costs but will always be better than not renting any.
The maximum revenue in a transparent marketplace, and therefore (assuming zero marginal costs) the maximum profit, is attained by setting the price such that volume X price is at a maximum. The area of that square on the demand curve is the operating profit.
This however, leaves two roughly triangular areas of lost revenue, the triangle above the square which indicates the amount of discount some consumers received and the triangle to the right which indicates the amount of revenue that could be recovered from additional consumers at a lower price. The real trick, then, is obscuring the marketplace so that no consumer knows what any other consumer is paying. Then each consumer can be convinced to pay their own maximum and the entire area under the demand curve could be realized as revenue.
Currently, publishers attempt to collect this additional revenue in a course way by segmenting the market. This is why books are sold as both hardcover and softcover, DVDs are sold as "special collectors editions" along with the regular release, and futhermore DVDs are region encoded. They are all attempts to sell the same product at multiple price points.
I,
;)
want to rock and roll all night,
and party every day!
Though I fail to see how this relates to the subject at hand...
-- it's ridiculous how many people misspell ridiculous... (damn, damn, damn...)
Companies, especially those in the arts, have been creating "artificial" supply constraints in various ways; no reason they couldn't do that here. Disney did it for years with their annoying "vault" where they release classic movies for a limited period, running up demand for that period while it's available.
They could do something similar for digital media, ex: release a classic "live" track for only one week, or putting a download limit like, first 10,000 tracks only, etc. Hope that doesn't give them any ideas, I find that kind of stuff highly irritating (I just said forget it, they can keep Bambi or Snow White or whatever in the vault for all I care now--the danger of that system is that some people like me just lose interest while waiting for the re-release).
I, personally, don't find $0.99/song to be a reasonable price. If I wanted to buy an entire album, we're still talking largely the same cost as had I gone to the store to buy it, and they can't claim retail markup, or cost of CD production or cases or inserts or any of that is driving the cost up.
Ala cart is always more expensive than a bundle. What you see in record stores is a bundle price for the whole album, not a total if each song's price. You can't buy single songs that way. If you could, it would cost more than buying a whole album as a unit.
The solution would seem to be album pricing for online music. Buy the whole album. Get it for less than if you bought the songs separately. I'm not really into online music. Do any of the vendors offer album pricing?
There have been a lot of economic-related comments already; I have my own, but want to break new ground. I also disagree with the "popular->expensive, not popular->cheap" strategy, but for different reasons than I've seen listed.
Generally, much of "low volume" music can be thought of as filling a particular niche. There might not be a lot of people who like The Decemberists (well, there used to not...), but those who like them tend to really like them. If I'm a Decemberists fan, I'm going to buy their new album when it comes out; there won't be a lot of folks like me, but there are some. Us Decemberist fans are relatively insensitive to price (in economic terms, we have low price elasticity of demand). Therefore, it makes sense to charge more for music like this - few listeners, inelastic demand.
On the other hand, popular music is very fad-driven. The "new" song is only new for a little while. Some folks who have to have every new song they here on the radio will pay four bucks for the new 50 Cent single, but I imagine that most people would be turned off at that price. The "hits" are more price sensitive.
I imagine that price elasticity of demand in the music business is hard to measure, because each "firm" is a monopoly - only 50 Cent sells 50 Cent records, e.g. As a monopolist of "iTunes Downloads" with essentially zero marginal production costs, Apple should charge prices such that price * quantity is maximized for every song. How to find those prices? Demographic listener data, maybe? Try messing with the price charged and see how quantity demanded changes as a result?
beware the jabberwock, my son! the jaws that bite, the claws that catch!
Subject says it all, more or less. Generally, the laws of supply and demand dictate prices such that when you sell more of something, that something sells for cheaper, not more. Therefore, the rare/unpopular music track should sell for MORE not LESS. . .
The diminishing supply theory doesn't apply to the availability of the song, it is for the bandwidth to download it. The infrastructure providers (apple) should be getting any premiums applied to bandwidth-clogging popular songs ;)
-molofson
Another issue is that Price sends a Signal. Why do movie theatres have a static price instead of something that varies based on popularity? Because if the movie theatre tells you a movie's only worth $4.00 instead of the usual $10.00, they're letting you in on a secret. It's got Ben Afleck in it, and it's crap. http://www.joelonsoftware.com/items/2005/11/18.htm l
That's, probably, the most stupid question I ever heard! Why would anyone care how many people the music they are buying appeals to? Are you one of those imbeciles driving around with their car windows rolled all the way down and the car stereo colume all the way up thinking that people around them enjoy listening to the shit they are listening to? As long as the music appeals to _you_, you should be happy to have it for $0.99. How many more people like the same kind of music doesn't matter at all.
While more popular songs may garner a higher price in the Beloved Market, those same popular songs are also cheaper to produce per unit, simply because they're churning out a bajillion copies. With flat pricing, the popular songs are still earning the publishers more money than the unpopular songs simply because, with the economies of scale at work, they're getting a larger return on that 99.
(Not that it takes much work to make a digital copy for an iPod, but that just makes it even more greedy.)
The first issue the music industry needs to watch out for with their pricing, is the fact that the media they are selling is still available in other forms. If the pricing becomes too high for digital downloads, people will return to stores to buy the cds, or turn to pirating them again.
Another issue they should watch out for, and the consumer, is that with online downloads, you have no physical/resell value to the items you are purchasing. I would much rather go to the store and pay $11 for a cd that I can resell if it sucks, or after I get tired of it, rather than downloading the same album online for $18. If you have a hard drive crash, you could be out a lot of dough for the music you have purchased.
Music execs beware, you are toying in waters that are untested and presumed dangerous. The online market, although booming, is still a fragile beast. We can decide to stop paying for music online just as quickly as well all decided to start paying for it.
Cheesy Movie Night
If you want the market to determine your prices so you can reap big profits for popular stuff, then you don't get to set a minimum to cover your ass for stuff only a few people want. Your minimum is one cent, if that.
If you're going to play the capitalism game, play it fairly. Otherwise it's just more consumer-gouging, in a new suit.
-- http://frobnosticate.com
Well, shucks, I'm about as likely to download something that's on Billboard's Top 20 as I am something by Pat Boone. Which is to say, not likely. And so the music I actually enjoy and listen to would be down to pennies in no time! So this is pretty awesome for me.
That selfish reason aside, this is an incredibly stupid idea.
Isn't 99 cents too much to pay for music that appeals to just a few people?
Actually I pay 0.99 GBP (or ~$1.72) for a lot of music online. Why? Because I get it off of Warp Records' Bleep.com website where I can find extremely rare tracks and the money is mostly going right to the artist. And while most of Bleep's big stuff (Boards of Canada, AFX) can be found in many places, none of these artists are cracking out gold records. The fact you can find out of print Detroit electro vinyl (say Dataphysix stuff) is a real boon.
Why would I pay this? Because I've paid $50 bucks for an album that I can now find on there for $15. Sure, for connoisseurs half the fun is the hunt for new albums but in the end you just want to have it sooner so you can listen to it more. So $1.72 per track is a great deal.
What I can't understand is have some sort of adaptive cost. The cost of a single track could fluctuate every day and they could track to see what affect it has on sales. Sales drop: reduce price. Sales rise: increase it. As with simulated annealing have the delta decrease with time. Why does there need to be a static price? A six cent song that sells a million copies is just as good as a sixty cent song that sells 100k.
What is music when you despise all sound?
Short Selling - Think that Britney Spears is overpriced? Then sell first while it costs $5/song and then buy it when it devalues to 99 cents! (Note: will cause loss of ability to listen to sample)
Buying Music on Margin - Really want that new Sum41 CD, but don't have the bread? Just mark some old Nickelback tracks as 'margin' songs and then rock out! (Warning: will lose ability to listen to Nickelback until Sum41 increases in value enough to cover margin call)
Song Options - As a reward for working more than two years for EMI, you'll be able to purchase 1,000 songs at $0.25 each, regardless of their listed price! (Warning: Insider Trading is prohibited)
The entire post was taking a basics economics view on things, not considering non-market forces (just like basic econ). In real life, there are going to be other factors influencing production.
:)
I was trying to point out the stupidity of the stock-market view of a song's value as well. Anything that is infinite is fundamentally worthless, like tap water, or the air you breathe. Only finite resources have value (thanks to scarcity). A song that can be copied infinitely is never going to be the basis for a song stock market. Electronics have made a lot of the economics of entertainment silly, on a model somewhat like what I mentioned, but as you pointed out, it's also much more complex.
The true finite resource in entertainment is time. You trade your person time at a job for money, and you trade that money for someone else's time for making entertainment. Then you spend your free time to experience that entertainment. If you have no time for entertainment, you'll value it less. If there are other forms of entertainment vying for the time, you'll pick the one you find most rewarding. If you entertain yourself by making entertainment, you'll be supplying that infinite supply.
Of course, the record companies want to slide down that money supply/demand curve enough that a lot of people can afford it, and then freeze the price at that level so that they can maximize their profits on something which has a near-zero replication cost. This price fixing and gouging is what has been going on since the first record was invented. If we want to return to an economic model where people's entertainment incone is related to how much they can entertain (instead of popularity), we have to limit how long you get royalties on things (via copyright) if we're using entertainment reproduction devices.
But we also see that, at the same time, certain vested interests have been pushing to extend copyrights. Those vested interests are those of corporations who buy entertainers wholesale, and then publish them until someone buys it. Since the entertainers have signed the rights to the corporations, the corporations earn all the money. It's a vicious cycle.
Only drastic shortening of copyright terms and utilizing our technology for the free-content-copying can we evolve our economy more towards what it should be, a system where people directly exchange things based on a shared-value system, rather than as a means of sustaining economic creatures designed for the late-19th and early-20th centuries.
But a post like that's not going to get moderated up on slashdot
--
Internet Explorer (n): Another bug -- that is, a feature that can't be turned off -- in Windows.
Another issue is that Price sends a Signal.
m l
Why do movie theatres have a static price instead of something that varies based on popularity? Because if the movie theatre tells you a movie's only worth $4.00 instead of the usual $10.00, they're letting you in on a secret. It's got Ben Afleck in it, and it's crap.
http://www.joelonsoftware.com/items/2005/11/18.ht
This is just completely wrong and defies common market mechanism. A popular song should be cheaper and a niche song more expensive. That's what happens with all products in a market economy, there are economies of scale in production of goods. These economies of scale are even bigger in with virtual goods like music and software.
If popular songs are sold more expensive this is only to fill the pockets of very few (top stars and top label managers) at the expense of very many (normal artists and small labels).
Markus
Aaargh. Why the hell are people trying to fix something that's not broken?
but something IS broken.. people aren't buying as many CD's... their "solution" to online prices will drive people back to the shiny overpriced plastic discs which will look like a bargain compared to the latest $3.99 50cent track.
If you bear in mind that the recording industry HATES digital distribution of product.. this decision makes much more sense.
The title of this news item struck me as a fantastic idea. But then the body left me disappointed as it's not at all what I had in mind. A stock market for digital music could be a pretty good way to cut out the middle men in the industry. The issue is that bands need label money to produce and promote their albums. But if there was a stock market for digital music, bands would receive funding the same way as a public company. They would upload their demos onto some sort of market site, and then individual investors who liked the sound of it could buy shares. I recognize that there would be some added complexity. Bands perhaps get more from labels than just funding; things like production and marketing expertise. This would have to be provided by some alternative means, and there would need to be some protections against fraud. But it does seem like a more democratic and dynamic way of funding music production. Most importantly it protects us from the monopolistic power of the big labels to set pricing and content. There's all sorts of bonuses to this sort of scheme that I can envisage but can't be bothered to mention right now (plus I'm at work). just an idea,
Dude, forget iTunes. I use AllOfMP3. You pay per # of bytes you download. For 128Kbps a song typically costs $0.10. And they provide songs in MP3 or OGG Vorbis format. No DRM and Legal! You can get 320Kbps quality songs too, an entire album for $2!
No, I'm not trolling, I'm not trying to advertise, I just don't understand why people don't just use this or similar services like MP3Search.ru.
1. You don't take into the account of the perspective of the buyer. If you see a pair of jeans for $29 next to a $299 pair of jeans, you also assume that the $29 pair is cheap, or shitty. 2. and who's heads gonna roll when a flop song that a company invested millions of dollars in returning them 25 cents a track? 3. freeze the price? 90 seconds to make up your mind? another point of ITMS is the interface, same as the ipod. Same as Mac OS X. if you don't think that sells, then u shouldn't be writing. 4. if your tracks are .25 each, won't that destroy your CD sales?
also, your funded by MS. Slate shouldn't be taken to seriously i guess.
but you were linked by slashdot. gay.
I thought they were going to create some sort of digital media stock market where people can look up how much a song is worth and either sell theirs or if they don't have it, buy it from someone else.
Afterall with DRM they should allow transfer of ownership. A DRM'd song should be no different than a CD.
This would be awesome as some songs that have become less popular will come down in price, while others will remain at the full $.99 value.
A pipedream i know.
And by the way, this idea is copywritten, trademarked, and whatever else I want to call it. If you wish to use it/buy it, it'll cost you eleventy billion dollars.
My band, Johnny Roy and the RubTones (johnnyroy.com) has our COMPLETE CD for download and streaming on our site for FREE. Thousands of bands post their material on SoundClick.com for free listening. The bands are paying cash out of our very shallow pockets so you can listen to us for FREE. Please, go ahead and be our guests! Talk about tying a porkchop around your neck, geez!
> I wouldn't mind a 10 year perpetually renewable.
Nope, that falls into the trap of believing in "Intellectual Property". Copyright is strictly a bargain between society and creators, we give you a TEMPORARY monopoly in exchange for you releasing the work (and originally you had to deposit a copy at the Library of Congress, ensuring that when the limit expired a known good copy would exist) because we believe it results in a greater good. A permanent monopoly must, almost by definition, be a net negative for society. Beyond a fairly short duration the argument that continuing the monopoly grant generates more net benefit in new creations than it costs in the inability for anyone else to make use of the material gets very weak. The current century limit is already way over the cost/benefit line in my humble opinion.
The key point being that Copyright MUST encourage new creation or it should be eliminated. Especially here in the US the only authority for it is in the phrase "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;" That means if it doesn't promote progress it shouldn't be granted. And nothing in that implies that the author or inventor 'owns' it.
Democrat delenda est
If this is implemented. The rich artists get richer, and the poor artists get poorer.
I could see something working if (and only if) it were implemented as a 'ceiling based' paradigm.
IOW, "iTunes Music Store... where every song is 99-cents or less !" The highest any song could cost would be 99-cents, but older / less-demanded songs could be put on special for 77-cents, 66-cents or perhaps 55-cents. Daily specials perhaps. Albums could be on special for $8.88, $7.77 or $6.66. That would drive more demand.
Raising a track price above 99-cents is only going to hurt those who were not there in the first place, and caused the price to go above 99-cents. Punishing those who were late in line is *not* a good marketing ploy. This isn't a "scarce resource" folks. They can stamp out digital-copies as fast as the servers can serve them.
Right now I can get all the tracks I can afford from the used CD shop for ~50-cents (or less) per track (used CDs being 10/$50). Why on earth should I want to pay 99-cents (much less more) for the same tracks ?
This msg is brought to you by the letter 'W'.. for Worthless Wuss
Considering that music downloads cost less to provide the more they're sold, shouldn't prices be coming *down* as each track becomes more popular?
If they can institute a minimum of 25 cents, why not institute a max of say $2.00? Still reasonable and will cover the extra bandwidth to download (and I do mean "down") the latest Brittany Spears single. The trick is that I don't trust them not to try to charge $14.95 for a single...
2 cents,
Queen B
HDGary secures my bank
A closed mouth gathers no foot.
Don't get me wrong; this isn't a bad idea, and it makes a certain amount of sense, but there's a big problem in my opinion.
Once a song is downloaded enough to drop in price, it automatically becomes more attractive to others seeking to spend as little money as possible in search of music. They purchase the song and it's price drops some more, in turn attracting more people looking for cheap, "hopefully" good music. As more and more people gravitate toward these songs, checking them out because of their price, the price gets lower and lower, regarldess of their actual quality, while good yet obscure songs are doomed to obsurity because of their price.
Remember the industry we're talking about here: Britney Spears isn't popular because she makes good music.
On the other hand, there's something about her songs being $.25 each that makes me think, "Yeah, that's about right..."
People will pass up steak once a week, for crap every day.
Be who you are...and be it in style!
Of course, if you don't have a monopoly or your supply is limited, either the consumer or the producers are forced to compete, so this only works in music, movies, software, and patents. (and, to some extent, taxation.)
I forget what 8 was for.
Things like the stock Market, or Clothes (more fashionable brands are more expensive) sustain the price differential for reasons that do not apply to music. In the case of stock people are willing to pay more for high-value stocks because they have high resale value. A blue chip stock that is valued up is likely to be sold for more (or at least as much) as you paid. This is not the case for digital music where songs have no real resale value. Indeed doing that would require restricting the number of times a song can be copied, licencing individual versions, etc. All of this seems both a) technically unlikely, and b) entirely artificial. Once a song is recorded you can mint of 1 copy or 1,000 without reducing the "value" of each individual song.
With fashion items like clothes, cars, etc the more expensive ones are also the rare ones, the ones that you purchase to have a symbol of wealth, status, etc. Once everyone has one it is no longer a symbol and fashion moves on. Again, this is not the case with digital music. Yes it is cool to listen to the same thing as your friends but CD's are not rare and fashionable in the same way that cars and clothes are. Cars and clothes represent more significant investments and as such add status. A 99 cent or even two dollar song won't do that especially once everyone pays for it.
This proposal falls down because there is not external valuation (be it economic value or status) that props up and legitimizes the extra price. Digital songs are not scarce, fashionable, nor can they really be 'resold'. While I would argue that it is possible to convince people to pay $1.01 for a popular song verus $0.99 for a less popular one, the variance won't be much more than that. Any huigher value and people will only be more encouraged to "share" the popular songs with their friends rather than pay more. But the instant the public perceives that prices are being "fixerd" or artificially inflated for a more popular song. Then they will stop playing the game.
The record industry should hire a few economists.
Or maybe you should take a few economics courses.
Specifically, you need to discover the "demand curve".
Put simply, imagine a song at $0.01, and you sell 1 million copies. You'll receive $10,000 in revenue.
Now, if you triple the price to $0.03, but demand only drops in half, then you'll receive $15,000 in revenue.
Price goes up, demand drops, but revenue increases by 50%.
Seriously, this is basic Econ 101 stuff.
If I go to a music store to pick up a CD chances are if it's a new release or something by a popular artist it's going to be cheaper. However, if I want an obscure artist's work I am going to have to pay more. Each system is flawed and I don't think either helps promote anyone other than big name artists.
Ive seen alot of these around, so i decided to make one for myself:
1. Sell bushels of Ipods
2. Sell songs via Itunes
3. Make it so that more popular songs cost more.
4. Which causes more people to use P2P apps.
5. ???
6. PROFIT!!!
Proudly posting without RTFA.
I would expect that the price of the song would go down with popularity... and I would think that this would also be pretty optimal for artist's sales when considered against copying/trading, etc.
Pat
Storage, bandwidth, and processing power are all limited resources, but that doesn't translate to a cost increase for popular music. Ideally Apple desires to maximize its sales, which means minimizing space/sale. Then it's longer songs that reduce the available supply, not popular ones. If anything unpopular songs should cost more because they consume space that might be better used storing more popular music or providing more redundancy.
This doesn't appear to be a popular move, but I think variable prices could be good.
This article is mixed up of course, since supply is not limited and there is no secondary market, this in no way resembles commodities or stocks.
The first thing to realize is that cost has very little to do with price setting. Commercially deveeloped software has ver little distribution cost but sometimes sells for thousands of dollars. Now I realize what site I am on and many are dubious of softwares value, but the reality of today says that it does have a value.
No what would happen if we allowed Apple to attempt to maximize profits with variable pricing? The natural floor would be there low variable costs for serving each song. Upwards there is no limit except what someone is willing to pay. Apple would change the price (higher or lower) until Price x Quantity, Revenue was at its maximum. For some songs this would be higher than $0.99, for others it would be lower.
So for a big hit, the song would be released, the price would go up until sales started to drop off. As the song faded into obscurity, or everyone who wants the song has bought it, the price would go down. This would essentially allow everyone to get the song at what they value it at. People who need to hear the latest stuff will be willing to pay a high price.
For older stuff a price level would establish itself. Old unpopular music would be cheap. Classics might be more. The sales of popular songs would subsidize the offering of less popular music, increasing variety.
At the end of the day, something is worth what someone else will pay for it. These prices would allow consumers to signal what is popular.
The trick bit is setting prices when the costs are so low. This would require some research into algorithms for pricing, but there are already companies who develop systems for detecting the local shape of the demand curve through small changes in price.
Spencer Ogden
So, what you are proposing is that more popular songs cost more, and less popular cost less. Would that truly maximize the profit? The more they go up in price, the less people will buy them. Of course, then the price will come back down and eventually stabilize. But just because it stabilizes for awhile at a particular price, does that mean it's actually the optimum price point to maximize the profit?
Since most popular music stays on the charts for a very short time, people who are holding out might not even like the song anymore when the price drops enough for them to consider purchasing it. Compare this with just having a low price all the time. If the price is low enough, like say 25 cents, people won't even think twice about purchasing music. In fact, I would go so far as to say that if music was that cheap, people would buy stuff they don't even really like that much. It's not like music downloads really cost anything to distribute. The entire sale is pretty much pure profit.
Apple should convince the record companies to do a test. Say, for like 2 weeks, all music is 25 cents. Or, maybe just the top 10 are 25 cents. Compare the earnings over a previous 2 week period and see how they compare. I'm sure you could get all analytical on it, and I'm sure if they did something like this there would be more structure behind the study.
But, I just don't think 99 cents is the optimum price point for them to maximize profit. The record companies think they will make more by raising prices, I'm saying the opposite. I think they will make more by lowering prices. If I'm gonna pay $1 for a song, I'm gonna make damn sure I really like it first. At 25 cents, I don't really care. I'll buy stuff just to buy it at that price.
Need Free Juniper/NetScreen Support? JuniperForum
How do you allow prices to be set just like a normal commodities market when the items being sold are not commodities? They're pieces of information that can be replicated infinitely.
I have a website. It's about Macs.
My two cents is,
Why not cap the _max_ price at 99 cents instead of capping the _min_ price at 25 cents.
The answer is of course, because people are greedy.
The more a song gets downloaded, the more it would cost.
Why? What market force drives the price up? Is there a limited supply of this song that can't meet the current demand? What extra cost is there to the company that isn't covered by 99 cents per song?
There's no reason. There are a theoretically infinite number of copies of that song. Charging more for a song that is in higher demand is a direct money making ploy by the companies to take advantage of people. Why should I pay more for a song because a few other thousand morons downloaded it to?
So, I can see the stock market being declared artificial scarcity, since when you purchase a share in a corporation, you're essentially purchasing a small portion of that corporation, for which there really isn't any limit on how much that can be subdivided. But, in essence, you're subdividing something roughly equivalent to, say, a dollar bill, which you can only subdivide so far before it becomes practically worthless, anyway.
Digital music, on the other hand, unfortunately has little intrinsic value to it's purchaser except for enjoyment. There's nothing physical to it, being little more than a collection of bits that happens to be easily replicated. CDs, tapes, records, all have some natural scarcity since they have to be manufactured; money has scarcity because we can't easily replicate it ourselves (not to mention that there are all manner of laws against it, and that we assign value to it, so making more of it would be bad for the value that we assign to it); but a collection of bits has no value because it's inherently easy to replicate.
As a result, the only reason a collection of bits that we call "digital music" has no value except for the enjoyment that we get out of it, and even then, it's hard to apply varying prices to enjoyment alone - if people decide that what is demanded for pleasure is too much, they'll find something else to do that costs less, or they'll find a cheaper way to acquire it.
So, the only thing digital music sites have going for them right now are ease of acquisition and the pleasure of the end user. If the prices go up, then the ease of acquisition means less and less until it becomes worth their time to find what they're looking for - and I (and plenty of other people) think $0.99 is just pushing the border of where ease of acquisition stops mattering because they can do other things for less. Making variable prices, even if $0.99 is the maximum as well, changes that ease of acquisition to be more difficult simply because you can't assume everything will be the same price.
So, trying to make something similar to a stock market for digital music is likely to not work out well - if the only gain to music is pleasure, and the only advantage that online music stores have is ease of acquiring said pleasure, then changing the one advantage that they have over other methods ultimately for the worse is a Bad Idea.
Dogma: Dead (mostly because your Karma ran it over)
Stupid idea from a dumb or greedy american!
Wow a shill for MPAA, go away.
I'd go on a Vegan diet but the delivery time from Vega is too long. --brownkitty
It should really be the other way - the more it is downloaded, the cheaper it is.
Let's say you're an indie band distributed via CD Baby and iTunes. If you don't have a huge following, you'll be making less per song sale, even though it is usually a lot harder for indie bands to raise money and get studio time while working day jobs.
And if you're a huge name-brand act, who has all recording costs fronted by the label, you don't necessary NEED to make more per track because you're selling exponentially MORE tracks, so it all evens out.
Tiered pricing would just unfairly punish new artists and reinforce pop garbage by giving more money to people that already have it, and limiting the amount of money someone can make if they're just starting out.
Actually, now that I type that out, it seems to be par for the course for capitalism. Rich get richer, poor get poorer.
And in no way shape or form do I feel that 99 cents a track is too much for any song. I'd rather pay more to bands like Milk Cult and Steel Pole Bath Tub, who have released their latest albums on their own label with their money, to help them continue to put out music that is infinitely more interesting than anything the majors are pushing this week. If anything more popular songs could be priced lower due to economics of scale.
This was my first reaction to the article as well. However after thinking about it, maybe "supply" isn't physical supply. Perhaps the model works if supply is related to percieved quality. For instance songs I really like are in short supply.
Anyways, just playing devil's advocate against my own and your thoughts.
Of course, the irony of this is the tacit admission that music is NOT a free/stock market *now*.
I really think the variable pricing scheme would short-change the iTunes Music Store affiliates, if you ask me. Would their cut be changed at all?
"Right now, somewhere in this world, Scott Baio is plowing a woman he doesn't love," - Peter Griffin, *Family Guy*
The record labels will not want a secondary market for songs because they get no cut of the action. Could they charge a sales commission via iTunes for every user who resells a song? Perhaps. However, the main reason why it is not in their interest to allow a secondary market is because the marginal cost to them of providing a user a song is zero. Selling 1,000 songs costs them the same as selling 2,000. Why would they want any of those sales to be from one user to another when everyone involved could instead be forced to buy it from them in first place? Your idea about the way the studio execs are thinking of a profit curve is, however, spot on.
>> I receive both Comedy Central and SciFi, but I only ever watch Comedy Central.
You are heretofore banned from Slashdot, never to return
"Cats like plain crisps"
And I am saying if variable pricing is inevitable, then I would hope it would end up being something like this - driven by market demand and such, rather than having the *AA dictate it from on high based on what their artist contracts say or what they want to push. Whether the format is direct (where demand increases the price point, as advocated in TFA) or inverted (where more popular songs actually decrease in price, as advocated by others in this thread), the devil is in the details, and I wouldn't sign off on one plan or the other without more information.
It could result in a very interesting form of entertainment and groupie behavior - tracking trends in an artist's price point. "Britney Spears was down 10 cents today amid rumors..." "Gainers lead decliners by a margin of 2 to 1 in heavy trading..." "Overall the iTunes Music Index topped 10000 for the first time ever today, fueling speculation of an impending downloaded music bubble..."
cool.
There is already a stock market for popular movies and music.
It's called the Hollywood Stock Exchange
There is no media for sale. There are imaginary shares of upcomming movies, music, artist, etc to be bought and sold for imaginary dollars (H$).
Put and Call Options, "Star" Bonds, Mutual funds, are all available in some form. Despite the feel of endorsing or supporting the crap that is produced, it can be a fun site to check on once a week or month or whatever.
What the execs pushing for tiered pricing fail to understand is that scarcity DOES exist online - the current chart-topping hits are extremely easy to locate and download via the file-sharing networks, and they can be easily heard via radio and all of the various other forms of distribution. So their scarcity is very low to the consumer. For this reason, increasing the price of the hit songs will only serve to drive users to piracy for those songs.
Likewise, the obscure tracks do have real online scarcity- they can't be easily found on filesharing networks, so should retain their full value for an online purchase. But of course demand for obscure old songs will be elastic for all but the hard-core fan, so raising prices for those tracks would drive consumers to other choices.
did you read the rest of my comment? By doubling the fee to renew each time (heck quadruple it, I don't care) it becomes impossible for it to be perpetually renewable. At some point the cost of renewal is greater than then total wealth of the world.
Lasers Controlled Games!
One worrying possibility with any sort of market-based pricing is the possibility of the record labels (or anyone else getting a cut) secretly buying large numbers of the songs and then using that to justify charging higher rates. There will be no fair market, and I doubt it's even possible.
"Luck is the residue of design" -- Branch Rickey
This is a monopoly revenue maximization scheme. Since users cannot trade purchased songs and the store can sell items without significant production costs, they sell at the highest (price)*(willing purchasers at that price) like any good monopolist. A market would price items close to their production cost over time. This scheme only maximizes profit for the vendor.
Yes and the real problem is that most people don't just fail Econ 1 - they fail basic common sense.
It means that price is not being used as a marketing tool by the RIAA.
Everything costs the same price so people will not make purchasing decisions based on price.
I refuse to purchase 128-bit audio, even at a discounted $9.99 per album. I'd rather spend more to get a CD, rip it myself without DRM so I can load it onto any media/player I desire, and at a quality level I'm willing to tolerate. Any other "solution" is a greedy attempt to limit my choices with a substandard product.
The value of something for which any number of electronic copies can be created has nothing to do with how popular it is. When the iTunes Store supply can meet any demand, great or small, there are no issues of supply and demand. What's the legitimate price for salt water in the middle of the Pacific Ocean?
You can argue that little-known musicians might want to lower the price of their music to increase their appeal. But that is a marketing issue. They could just as easily argue that "musicians gotta eat too," and raise their price far above 99 cents, assuming that their few fans are real die-hards.
And the fact that a particular musician is popular offers no compelling reason to raise the price of his songs. He can be sufficiently rewarded for his popularity (which may or may not be linked to talent) by the higher sales at the same price. You can just as easily argue that an "efficiency of scale" means he does not need to be paid as much per song. He can spread the cost of production over more sales.
Last of all, you could argue that the music of already rich musicians can be sold for a pittance, since they now have so much money that the incentive to creativity provided by the income from a single new song must matter little to them.
The real issue is probably what price will keep people from stealing the music of any musician, popular or unpopular. And for that 99 cents seems a good choice.
--Mike Perry, Untangling Tolkien: A Chronology and Commentary to The Lord of the Rings
Charge a monthly fee per user (e.g. $20 a month) for all music on the labels. Then, the authors share in the profits based on a the percentage of downloads of their songs that month. I would imagine that the authors of the music would make more money this way, and consumers would get access to all music. The overhead would be extremely low compared to the bricks and mortar model.
No Sigs!
No, a buck is not too much if it's not popular music. I frankly don't give a fuck what other people think of my music. Be it when I'm listening to Floyd or Sibelius.
Bottom-line, a buck is too much for intangible music. I want something that persists longer than my flakey hardware.
The author of this article must have slept in during econ class. To be clear, this is not a market. It's a program that runs on a server charging $x * (number of downloads in the last y days). Are x and y arbitrary? The author never mentions where they would come from. Then he makes the absurd statement that the price should go up as demand does. This is counterintuitive, as people traditionally pay more for "less popular", "exclusive", or "niche" products, including media. The whole thing makes no sense.
A market for music would at least let producers set (and change) the price per song. Over time they would figure out what level would be profit-maximizing. For instance, a foolish record exec. could charge $10 for a popular song and get 100 downloads, but then lower the price to 10 cents and sell one million. In the end the market will decide. And I can guarantee that less popular bands will cost more, probably to their own chagrin.
If you scroll to the bottom of the article you'll see the author concede that his idea makes no sense. First he talks about a price floor, to compensate for overhead. That's just bunk. Then he breaks his own price floor by suggesting record companies offer free downloads of top-100 songs. With ads embedded inside, of course -- wtf?
Well whaddayaknow, there is a sentence at the end about "charging whatever the market will bear". I guess he came up with that right before the deadline and didn't have time to change the article.
Btw, don't assume that I like the market-based idea I mentioned. If record companies get away from 99 cent downloads they most likely will kill their golden-egg-laying goose.
Legally 100 years IS pretty much the same thing as forever, see the laws about 'perpetuity'. That is only nine renewals under your scheme, so even if that initial renewal was a thousand dollars, Disney would have no problem paying 1023 thousand dollars to keep any of their feature films for a century and neither would any of the major studios.
Democrat delenda est
Actually, the problem of devising this sort of a market (buyers appear at various times and don't want to wait, supply is unlimited) is pretty interesting and not impossible. The field of online mechanism design (where online means participants show up at various times) is quite popular these days, although I can't say I know too much about it...
However, it took about twenty seconds to see that there's already a paper that discusses a market virtually identical to this one (in theoretical terms). See: Incentive-Compatible Online Auctions for Digital Goods (2002), Ziv Bar-Yossef, Kirsten Hildrum, Felix Wu .
Their analysis: We first show that no deterministic online auction is competitive relative to the optimal fixed price revenue.
Hmm... doesn't sound like Apple needs to run out and implement an online auction market for itunes quite yet...
Shouldn't it be exactly the other way around? More popular songs are cheaper, less popular are more expensive? This evens out profit.
The flaw in the 'stock market' model is that the songs are not limited in capacity -- my download does not prevent others from downloading as well.
Eventually access to all music will be via monthly subscription (a service). Purchasing a song (a product) makes no long term sense especially when you factor in the cost the DRM involved. It's much easier and less intrusive to just keep track of, in aggregate, how many times a song is plaid and split up the monthly pot rights holders that way.
The two thigns that baffled me when reading this: the quote "What we need is a system that will continue to pack the corporate coffers yet be fair to music lovers" for starters. Why do we need to fill company coffers again? anyone?
2nd: the whole stock supply-demand pricing strategy only applies when you're talking about a limited resource, like stocks or goods. How in the world would this apply to downloaded music?? why up the price when something sells better? (I mean beyond the reason of "quick, consumers want it, drain 'em dry!" coming from the music company...)
AB HOC POSSUM VIDERE DOMUM TUUM
MST3K is constantly blaring in my head ...
Bit: Tom Says No to Yes
Episode: 1008- Final Justice
Transcribed by Mark Worhatch
[SOL]
Mike: Hi everyone, Mike Nelson here on the Satellite of Love. This is Tom Servo, and Tom's got something to say.
Tom: Thank you, Mike. Mike, folks, in 1984 the techno-megagiant band named Yes released a song in which they assured us that the (singing in high-pitched voice) "Owner of a lonely heart is much better than the owner of a broken heart."
Mike: Yeah, great song! I remember that one.
Tom: As do we all, Mike. As do we all. But my point is simply this: They introduced a profound topic and then barely scratched the surface. They told me nothing! How does the (singing) "Owner of a lonely heart" (normal voice) compare to, say, the (singing) "Owner of a broken gas fireplace?" (Normal voice) Or for that matter, to the (singing) "Owner of a perfectly functional cheese slicer?" (Normal voice) As the (singing) "Owner of a lonely heart" (normal voice) how do I stack up against the (singing) "Owner of a pencil?" I mean, come on, Yes!
Mike: I don't think it's up to Yes to come up with every possible permutation of--
Tom: Well they brought it up, Mike, and there's so much more to consider. What about the (singing) "Owner of a parcel of land in Montana" (normal voice) versus the (singing) "Owner of a pie?"
Mike: (to Cambot) We'll be right back.
Tom: I mean, how does the (singing) "Owner of a jar" (normal voice) stack up against the (singing) "Owner of a split level?"
[commercial sign]
http://www.mst3kinfo.com//ward_e/bit1008a.html
Atlas Shrugged : Thematic Story
What happened to economy of scale? The cost of the popular music should be less, not more. The "e-bay auction" reasoning doesn't work for an item which is virtually inexhaustible in supply. Demand may go up, but supply is unlimited, especially when piracy enters the equation. :)
Thank God for pirates!
Be heard || Be herd
Wow, this is almost as stupid and flawed as that proposed terrorism futures market.m arket/
http://www.cnn.com/2003/ALLPOLITICS/07/29/terror.
No.
:)
;) ). A digitally downloadable piece of music has no scarcity. There are exactly the same number of copies available as are required. There can never be a price fluctuation based on a market model.
Music is not an economic commodity. It's an emotional commodity that we've monetised. It's value to the listener has absolutely nothing to with it's popularity, but is instead related to the emotional impact. The only people who value it's popularity are the copyright holders. Though you'll find the musician likely values "the song" over and above the song's "value", his desire to eat not withstanding.
The ONLY model that can work in that siuation is a flat price, it's the only way to guarantee a reasonable income overall and to provide a reasonable cost on average to the consumer.
Trying to apply the laws of supply and demand to a commondity that has zero scarcity is also intellectually absurd. The reason prices increase with popularity in the market place is due to the scarcity of the goods. The more people that want a scarce resource the higher the price goes to compensate for the extra demand (simplistic description
"In essence, this is a pure free-market solution--the market alone would determine price"
Yeah but in a free market you have demand and supply. Supply in this case is infinite, so is he suggesting the price should be free? Prices set by companies selling digital content fit into the "How much money can we make from our consumers" category - i.e. they set a price that will give them the biggest return. If they raise the price too much, people won't buy. So it's a balancing act.
Seems to me that lesser known songs should cost more because they aren't being sold in volume. Whereas, more popular songs that get a lot more downloads should cost less because they're sold in more quantity. Seems to me everything balances out that way, and everyone gets an equal amount of money. Call me Robin Hood.
This is not free market, no, free market is where the customers determine the price. EBay is free market. Things there sell for what people will actually pay for them, not what the seller demands.
Recorded audio products should sell in the same manner, except for one problem. They are easily and infinitely reproducable with common household machinery (the PC). And they can be transfered by wire as digital data.
Therefore recorded audio products are simply not a product that fits into the market economy model. The only way to make it appear to do so is by applying absurd pseudo-market abstractions like 'intellectual property' that give the illusion that there is a restriction on the ability to freely and easily make a copy of this product.
But you can't treat audio recordings like a physical product anymore. They lost their physicality in the past 5-8 years. Not many products can ever do this, therefore it is really hard to come to understand the reality of the new situation, especially if you used to make money from selling audio recordings in physical disk format.
Well, you're just going to have to get used to it. Next time put your money into something that isn't going to lose its physicality. Something like oil or drugs.
If it is really supposed to be a free market, then why the lower limit ($0.25) on price? Shouldn't the market determine the lower limit?
Jim
It's amazing how you can spin the same article two different ways, and get a response from one portion of the /. audience, or another.
"Is it right to have to pay $0.99 for a song that's not very interesting?" >> Spins this article so that 99 cents seems high
"The RIAA is doing what ever it takes to ensure that the '99 cent' model goes away, and you could be paying even more for a popular song" >> Makes $0.99 seem like the optimal cost for a track.
These quotes are made up, but inspired by this, and a series of other articles on this topic. Take a look at how these Slashdot postings are perceived in the comments of each, depending on the editors comments!
-Patrick
"They never stop thinking about new ways to harm our country and our people, and neither do we."
Patent it
you could potentially make even more money by lowering the price, because the drop in price could attract more than enough customers to make up for the loss in revenue.
That statement is true for all songs -- the wildly popular ones as well as the real dogs. For every song, there is an optimum price that will maximize profits. The fact that supply is infinite when information is distributed digitally is irrelevant to this truth.
But when you say that the optimum price is higher for songs with low demand than it is for songs with red-hot demand, you're just wrong. The average consumer is willing to pay a premium for the latest huge hits. In a brick-and-mortar music store, most of the CDs in the bargain bin are crap. There's a reason for that.
That that is is that that that that is not is not.
The way it's written up in the Slate article, I would never want to participate in this scheme. Who would decide when the price would go up or down and by how much? the Record companies? Apple? The reason stock exchanges work is peopel get ownership of a real product (ie. a company) when they purchase stock. As written in slate, this Sounds more like a plan to get the most profit out of a song, squeezing as many consumers as possible. You want the new 50Cent? that'll be 4.99 oops 5.50. This would never work, unless...
The Record company actually floated parts of the song rights on the market. They might float 30-40% of Jay-lo's new album. J-Lo herself would own 10-20%, and the record company would still own 40-50% of the track, so they'd get about half of the profits from the track. Their could be an IPO and it would otherwise work as a normal stock with a certain percentage going towards dividends for stock holders and the rest being reinvested to sign new talent and groom new artists. As tracks get older the record company could float more of the track to raise profits, or make strategic buybacks, etc...
This would be a real market. Consumers would have a real product, actual ownership of the songs they adore.
No, You're on to something important. Ebay auctions is the best way to sell entertainment products. However it is impossible to get the market controllers to think in that way (possibly because people who make their living in the entertainment industry rarely have to actually buy entertainment products, they always get comp'ed).
Consider movies. Theaters are full on Friday and Saturday nights and empty every other night. But the admission price is exactly the same. Suppose a theater owner decides to auction tickets to Kong or Munich. They could get $30+ for tickets for 8pm on opening Friday and still get $3 for tickets to the 9:30pm show on Tuesday night. Instead the price is $8.50 for every evening show. Weeknight shows after 9pm are empty while opening night has people waiting in the rain that can't get in regardless of what they are willing to pay.
But theater owners and managers have absolutely no control of ticket pricing. So nothing can change.
I used to go to movies at least once a week. But for the past two years I haven't gone to a single one in a theater. I get DVDs from the public library for free or rent them from the supermarket for $1 12-hour weeknight rentals.
Hollywood doesn't have a clue that their former audience is gone. And they're too inflexible to do anything if they did realize it.
And, no, I don't go to Dunkin Donuts or Starbucks anymore. There was a trip point price and when they went over it, I just seemed to stop buying coffee there. It wasn't a gradual dropoff of visits.
So, no, you're not trolling.
If the RIAA members think they have a monopoly on creativity, they're the ones who are dreaming. Go ahead, charge $5 per track for the latest bubble gum pop. I won't even notice.
The RIAA is toast.
"Isn't 99 cents too much to pay for music that appeals to just a few people?"
Why should I care how few or many people the music I pay for appeals to? It either has 99 cents of appeal for me or it does not. I am sure a lot of people like whatever the Currently Over-Hyped Boy Band is, but I wouldn't pay 99 cents for one of their songs and I don't.
But I'd pay 99 cents to have some songs of which I'm sure fans of the C.O.H.B.B. have never heard.
Tiered pricing makes sense when there is scarcity--it is a kind of rationing. If more people want houses in Boston than there are houses, then the prices of houses in Boston rises until enough people decide to live in Natick and take the train. (Or someone builds new houses.) Perfect for a limited resource.
But with something like ITMS, there is no scarcity. Every purchase results in a download, every download produces a new copy of the work in question.
IMHO, The is not Greed but Vanity--I think Mr. Jobs is being too kind. Look at the quote--99 cents isn't the problem, it is that the record companies want smaller name artists to get less. This stresses the importance of having a record company promoting you. What frightens these people most is for someone to write, record and sell music without their "help."
"A Digital Music Exchange may not be a perfect solution, but who would you prefer to set the price of music: consumers or record executives?" is the line that the author uses to close his column, but what he doesn't realize is that we're not setting the price in his scheme, we're determining it. The executives control everything but one variable - how many times the song is downloaded, at least by his plan. Basically the difference between us controlling the price and us determining it is huge. If we set the price, we'd set it at something low. Determining it would set it at something high, like his scheme. I don't think he proofread his article very well. Usually the last line of an editorial is a zinger, and this one is - but instead of making a point, he kills his own. Why did this guy get the ok on this article? Is there no quality control?
The novel idea of a formal Music Market is not terribly inventive and solves nothing. Digital music ala iTunes-sytle breaks down at the point that Fair-Use meets Fair-Price. When that fixed price $0.99 song won't transfer to your desktop, copy to disk or reformat the iTune scheme falls apart.
Add a button in iTunes for pay-to-play songs in other formats, computers, etc... and Fair-Price is at the service of Fair-Use.
The problem that this sets is the fact that the stock market and all markets for that matter are driven by scarcity. That is there is a limited amount of a certain product and that people must offer to buy it at different prices to obtain it. In the digital forum - scarcity is not an issue. The copyright holders can offer an unlimited amount of songs at their acceptable price, the supply is perfectly elastic. The problem here is that someone else buying the song online doesnt stop me or anyone else from buying the exact same song - the supply is unlimited. The answer is that I have no incentive to offer a higher price for the song because scarcity is not an issue and the music companies would be smart to limit the amount of download of particular songs in order to drive up prices of particular songs in a market setting. For instance if I am a big fan of the Killers and I know that world wide the killers are only going to sell 100,000 songs I would pay a higher price for the songs that if they were unlimited. I just dont see how this market system for music would work. The most inreagueing part of this whole thing is that if licenses for songs wre tradable, it would be interesting to see how that would play out. I think it would leave the music industry with a huge problem, say for instance the price of each song incresed when its popularity increased, if I baught the song early on at a low(er) price than what it is currently at, I could sell my license at a lower price than the record companies but higher than what I paid, thus profiting. This would lead to secondary music dealers cornering the market - buying up large amounts of music when it first comes out and reselling it later at a higher price, cutting the music industry out of the sales. Just my thoughts.
Sellers typically try to set their sale price so they make the maximum total profits. The total profit determines whether or not they produce the product in the first place, and that is where the production cost enters the equation. The reason niche software titles cost more is because there are a few people who really need the software, and they need to be willing to pay enough to cover the cost of developing the software before the software will be written.
The truth is that the music sellers should be allowed to set the price, and they'll set it so they make as much money as possible.
WTF " Isn't 99 cents too much to pay for music that appeals to just a few people?"
This makes little sense -- it is the HUGE music which is worth nothing, and the little music which is worth much. Hey if I like britney's new song so much, I can record to a tape deck from my radio...
Whereas a masterpiece like Iced Earth's The Glorious Burden, -- hell the $18 or so I paid for it was a joke. For a masterpiece that will provide countless hours of pure enjoyment through the REST OF MY LIFETIME, it is worth at least $80-100 at a minimum.
This is just the same with fancy brands -- duh, look if you want Walmart Levi styles you can pay $20. If you want something NO ONE else has or just fancy pants rich folk have, pay $200-300 even
One thing I worry about, I think really small artist get ripped off completely along the way. An artist I've shot photos for is on iTunes. Tabitha Lebec http://www.tabithalebec.com/ with her amazing album Back to Innocence. If you like Sarah Mclachlan you will love Tabitha. Anyway I have personally bought songs from her on iTunes, and she hasn't seen a penny. Where is the $$$ going? If she hasn't seen her share at .99 a song, how is she supposed to see anything of .25 a song? Hell, at this rate it could be $99.99 a song, she is getting ripped off. Any class action lawyers out there? She tells me that other small artists she knows experience the same thing.
San Francisco Photographers
While pricing something with an infinite supply curve doesn't make sense, bundling would make a lot of sense. Buy 1, pay for 1. Buy 3, pay for 2. Etc.
by having to listen to classic Yes.
and it seems to work really nicely for them.
I've always wondered why people pay as much as $50+ dollars for games, just because they're shiny and new and everyone's anticipating it-- when in a year it'll be half that price at most.
Why? Demand and supply! Gamers don't want to play games when they're old but they're willing to pay through the nose to be the first to get their hands on the shiniest box in the store.
I don't think online music is any different. Software is just as cheap to produce as music, software gets pirated just as much as music, and software can be as infinitely reproducible as music.
Try it. Let the market decide prices. If prices go up, it will only be because music lovers are willing to pay that price. Like they found out when they jacked the price of games to $50.
People who don't want to pay that much will just have to wait... and wait they do, that's why bargain bins exist, and why the game industry is thriving despite having prices vary from ridiculously expensive to ridiculously cheap.
You're thinking, but that only works for brick-and-mortar sales. So? Not like it hasn't been done before: see eBay. That's what TFA is basically proposing: an eBay-like marketplace where buyers(you and everyone else who's trying to get a song from the store) and sellers(the music industry) can negotiate prices--- instantly and maybe unconsciously.
And when buyers and sellers can meet and negotiate prices easily, everyone profits. =)
Seeing as I feel that digital music is a luxury item, it is perfectly ok to use the market system. When i comes to commodities that I feel are essential commodities for life, the market system will just not do. Markets leave people out and when it comes to essential commodites this will just not do. For digital music, sure.
Don't forget that Slate was created as a voice of propoganda for Microsoft. Even though the Washington Post recently bought Slate, the ties are still there.
The great moral question of the twenty-first century is this: if all knowing, all culture, all art, all useful information can be costlessly given to everyone at the same price that it is given to anyone; if everyone can have everything, anywhere, all the time, why is it ever moral to exclude anyone? -- Eben Moglen Let people pay what they can afford. If you get the sharks out of the pool, it will work out.
100 years is much less that what we're looking at now and there is no cost for it now. Oh well, at least you read the comment this time.
Lasers Controlled Games!
True. So how exactly do you want to get the "sharks" out of the "pool." This is the same idea that Mr. Bush has: rid the world of terrorists and the world will be safe, his means is military violence. what is yours?
this is quite perverse logic, where something cost more because it is popular.
So mcdonalds hamburgers should cost more than a fine small french restaurant.
So some lame rap tune should cost more than a rare 60's miles davis recording.
twisted.
What sort of idiot came up with this line? Think about it. The only people payinng the 99 cents are those that are interested in having the particular tune. If i want some obscure tune for 99 cents, do I give a fuck what somebody else wants, or thinks the tune is worth? Fuck no. What a stupid queswtion.
Why should the cost go UP when there are more copies downloaded? That's incorrect. Price should go down, when there's more product dispersed(in people's grubby little hands). There has to be more product, more copies have been downloaded(therefore, there should be lower demand, making the price go down so people will buy it). Oops, forgot: We're being brainwashed into thinking that buying music electronically isn't the same thing as buying a single or a CD. bastards.
Look behind you...
Just for your information: where I live, a CD easily costs 20 euro, which is about $23.50...
One either likes a piece of music or does not. Someone doesn't buy music they don't like just because it's cheap. Whether it's 99 cents or 25 cents people who like a piece of music will buy it. More people buying it means more money for the record company and artists. That's how the system's supposed to work. The marginal cost of an additional copy of music on itunes is a negligible bandwidth cost. The cost for selling 100 copies and 100000 copies are essentially the same. The profits on the latter is of course 99900 more. And that should be incentive enough to put out good music.
i swear to god, if this wasn't the absolutely most baseless, useless, illogical piece of shit article i have ever seen on slash, i can only say, please god, i pray, never let that darkness, that despair enter into my consciousness. slashdot, you have fucking loop-de-loo'd the goddamned shark with this one. folks, get while the gettin's good.
The article is advocating more popular tunes being more expensive, but surely that's the wrong way?
The more popular the tune, the more money is being made, so the price can fall. The less popular the music, the lower the demand but with fixed overheads, so the price should rise.
The fixed costs are very similar between selling 1 copy and selling 1 million (the difference being the billing and bandwidth). With the bulk of the costs being fixed, the more you sell, the cheaper it should get, not the other way around!
This post will enter the public domain 70 years after my death, unless Disney buys another extension.
The troll you're arguing with will keep misrepresenting what you've said in a vain attempt to make it look like he's right.
Stop wasting your time.
Let's see: I buy some obscure jazz-novelty tracks from the '40s, and I get them for a quarter, because, well, who buys it? The next sale, it would be 26 cents to the heirs of the estate, most likely some conglomerate that bought up the tiny label that first brought out "Flat-Foot Floogie with the Floy-Floy"? Would people be more liable to find my gem? No. They'd be less likely to buy it, though not much. Now, I think it might be a good idea for some bands to cost $2.50 a track, so that fewer people could buy that pop crap. Would people be more likely to buy Beethoven if the price was based on Ludwig's sales? Gee, I don't think so. "Hey, Brenda, this Britney track is selling for $2.95, but if we bought Thelonius Monk, it would be 33 cents. What's bop?" Once again, the phony reliance on a "market" where one isn't appropriate. Market fluctuation is a terrible substitute for music education. I personally would like to see Apple put its price down to a nickel a track and watch the sales explode. Remove the copy protection, too. But that's not gonna happen, and this sure shouldn't.
It's hard to have "auction" pricing for an unlimited resource, unless you create an artificial scarcity (for example, virtual currencies like the Linden dollar). Now, calling it an artificial scarcity shouldn't be taken to mean that it's a bad thing... the artificial scarcity in printed banknotes is normally considered a GOOD thing.
The question is, how would you create an artificial scarcity of copies of a song?
If you think you'll get music for less than $0.99 per song, you're dreaming.
I get music for less than 99c a song every week through 3hive, and some of it is stuff like Mr. Moran from the Bosstones that I'd never in a million years have found any other way.
I can't cost-effectively get cable from three different cable companies, except through reseller pseudo-competition like all the "Fred's DSL" services.
If I could pay $2 for a song, then, because of the demand for the song the market price of that song increases to, say, $2.35, then I ought to be able to sell the song I just bought and make me a profit. But of course, that's just silly. It works the other way. The more demand, the less cost.
The Admin and the Engineer
Erm? Last I heard, typically, things that are mass-produced in enormous quantity tend to be less expensive than 'boutique' items, not more. If you have a half-assed boy band that you have to pay a million dollars to, and recording and PR fees are another couple million, and thirty million people want to buy a copy of their smash hit album, 'We're Boys And We Are A Band So Pay Us Money', you only have to charge ten cents per person to break even. If you have to pay the Cambridge Singers plus the Berlin Philharmonic $3 million to make an album, and only 300,000 copies are sold, then you have to charge $10 per album to break even.
I like folk music. I typically pay much more per album than someone who can buy their CDs at WalMart (oops, I mean CostCo) because I have to buy them at full SRP at specialty stores.
And now suddenly the popular stuff should be more expensive?
Weird.
-fred
Sign #11 of Slashdot overdose: You see the phrase 'moderate Republican' and you wonder if that would be a +1 or a -1.
What we need is a system that will continue to pack the corporate coffers yet be fair to music lovers.
Who besides corporations wants to fill corporate coffers? It's self-evident in the decline of corporate music profits and the rise of iTMS sales that people actually want the opposite: they wish to make music buying decisions that put their own interests (i.e., low pricing, convenience, immediacy) ahead of those of the pigopolists.
Slate's author isn't concerned about "fairness to music lovers," anyway:
If a single climbed to $5, consumers couldn't complain that it costs too much, since they would be the ones driving up the price.
Really? But isn't it in fact all those who bought the song in advance of oneself who are driving up the price? Why consent to a system that has a random probability of increasing our per-song music costs? Because music that I don't want might be cheaper for someone who does want it? And I couldn't complain about such a fair arrangement?
We can test Slate's reasoning in a fairly recent example of group behavior and commodity pricing: the Iraq war. Architects of the misadventure anticipated paying for it by appropriating Iraq's oil (sometimes described as allowing Iraq to "repay" us for "liberating" them). However, not only has nothing of the sort come to pass. But oil prices have spiked instead. By Slate's logic, nobody can complain about prices at the pump because an overwhelming number of Americans supported the war--they bought that song and dance.
Oddly enough, most people are complaining.