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Apple Sets Tune for Pricing of Song Downloads
PygmySurfer writes "Apple Computer on Monday revealed it had renewed contracts with the four largest record companies to sell songs through its iTunes digital store at 99 cents each. The agreements came after months of bargaining, and were a defeat for music companies that had been pushing for a variable pricing model."
(note: I am not an iTMS customer. I don't even own an iPod)
Everything I have seen/heard/etc about the iTunes store is that it is simple.
People like simple. That's it. Why do companies not get this? How many people's VCR clocks blink 12:00 becuase (to them) it is too hard to actually set it?
Now, Apple is on to something with their pricing model. It is simple. Sure, some older songs are probably not worth as much and some newer songs might be worth more, but overall it is a good balance. It's simple. They would likely lose more revenue by going a variable (and more complex) pricing model than they do by not squeezing those last few cents out of the most popular songs.
What it will do, though, is lower the incentive for newer bands to sign with the big labels, and go with more indie labels, because the distribution will be the same (assuming Apple doesn't start doing dirty things like making labels pay a $1M fee to include their songs on iTunes or something like that).
After the Sony DRM debacle, I've ruled out CD-based media altogether.
Say what you will about Apple DRM, but at least it's honest - and doesn't attempt to sabotage my CPUs. Good to know my pricing hasn't gone haywire in the near-term. For those who think that variable pricing is the way to go (except for whole albums) check out the raging success story that is google video. They're pay model is so - easy to understand - and easy to work with - no one I know is using it.
I'd say that's a ringing endorsement for keeping it simple.
big label artists are still being boned
So maybe they need to stop being big label artists. Easer said than done I realize, but if they can maintain and even use their fanbase to move to a more progressive indie label they will pave the way for artists who currently need the clout of a big label to get noticed. Once listening to bands on a Internet only indie label becomes trendy, then digital music will be all that we want it to be, right now there is still too much $$$ in the old corperate giants, because people still go for the big corperate product.
We are all just people.
I don't think so. See, you represent one end of the bell curve we'll call 'cheapskate' and the fact is, no matter what the price were set to, someone will fall further along that curve than you and claim that everyone is missing out on huge profits by not dropping the price in half.
The reality is that given the enormous success of the iTMS, it seems that Jobs et all were spot on with their pricing model (which one would assume was arrived at after much research). Reality check - nobody sells a BILLION of anything that's outrageously overpriced...
Think outside the... Hey, where'd the friggin' box go?
We hear so often that variable pricing is good. I think it's interesting that newly released music is commonly considered more valuable just by virtue of being new. This particularly applies to covers, rehashes, etc.
You guys can stop complaining about .99 being too much. It's obviously far out of Apple's hands. I think we should put our hands together than thank Steve for fighting The Man. (And don't stay Steve is The Man... because he is, but he damn well isn't, too)
... maximize profits.
Profit Maximization and its importance is taught in econ classes, and the sales crowd give it a rather exagerrated importance, but the fact that the 'market' is in fact people which have a tendency to behave according to their own choosing and not as mindless drones of the 'invisible hand' is not.
They always go for getting the maximum profit achievable with a given or minimum quantity of sales. The very thought at the end does not deliver what they want to get indeed :
If you make an easily obtainable/copyable product overpriced, you pump up piracy, or at the least unwillingness to buy your products in the target crowd.
How many of us would think 'well, its just nothing, let me get 5-10 songs tonight' if the price per song was $5 or $10 ? or would any of us get a 'cheaper' song because the song we wanted was priced much higher ? is it that simple that we are going to get the 'best obtainable' from the songs provided ? a sheer stupidity scratch for the marketing crowd ? yes .
Not only the 'profit maximizing' concept actually hampers the profits, but it also shatters market reach and market control - which is something priceless in most respects. Sell a song for just $0.10, and youll get hordes of people buying songs because 'its just nothing' in price - youll become a net standard.
Sell them for $5, and youll get piracy.
Read radical news here
They have leverage, they just aren't willing to use it.
If the 4 RIAA companies were willing to offer Non-DRM music, they could ditch Apple in a heartbeat.
They're stuck because the most popular music player has a DRM format controlled by Apple.
I bet the RIAA would love to see the iPod 'opened up' to support other DRM schemes. Then they could use a different distribution method... one that has variable pricing.
The Emperor & Darth Vader would destroy Apple & their music empire. Not because they're rebels, but because they didn't go along.
[Fuck Beta]
o0t!
People make it seem like iTunes is on our side against the big record companies or something. It's not. If the RIAA companies really disliked iTunes, they could stop iTunes from selling their songs any time. The RIAA likes iTunes. Sure, they would like to make even more money from it, but they make plenty now as well. All this "fighting" between Jobs and RIAA is just a show.
To make it simple, Apple and RIAA are in bed with each other. They just can't decide who's to be on top.
"At last count, the breakdown of where that $.99 goes is (on average):
Apple - $.35
Label - $.53
Artist - $.11"
I have never been paid 11.1% of 'market value' for any work I've done, and I can see why many people cringe over this figure. However, there is another side to the story. If an artist didn't sign with the label, their chance at large-scale success diminishes greatly. So, why not sign the deal, make 11.1% for each song sold on iTunes, and then build a following so you can pack the arenas and make the big bucks?
greedy corporate america
I'm so tired of seeing these kinds of tired, emotive phrases uttered. There's nothing greedy about being a corporation or American, or wanting to have variable pricing.
I'm opposing to variable pricing for downloads, but I'm not going to fly the standard anti-capitalist flag over it.
"Sufferin' succotash."
And $15 was too much for a full CD of uncompressed, DRM free pop 'album' from an artist you didn't even want to listen to. So what. You weren't buying it anyway.
How much WOULD you pay for music you don't want?
How much would you pay for music you DO want? $0.05/track? $0.10? $0.50?
How much is music worth to you? Where is your personal dividing line?
For a 99 cent sale, Apple pays the copyright owner 70 cents.
What the copyright owner chooses to do with that 70 cents is up to them.
If the artist sold their life, soul, and music over to a huge label in return for a massive advance, then the label is now the copyright owner (NOT the artist), and the label might pay the artist a pittance of that 70 cents. (Every contract between label and artist is different, and Apple has nothing to do with that.)
If the artist did not sell their soul to a label, then they are still the copyright owner, and the artist gets to keep the entire 70 cents.
I admire the Downward Battle guys in some ways, but their protest is misguided when they try to make Apple look like the bad guy because an artist chose to sell the rights to their music over to a big label.
It was the artist's choice give up ownership of their music. They could have remained independent but they chose the big up-front advance in return for no longer owning their own music.
If the music was available without the DRM, people would still play it on their iPods. It was already the market leader before the iTMS opened for business, just as it is in countries where the iTMS isn't yet available.
What the record companies don't understand is that they shouldn't fuck with something that works. Several of the also-rans offered all kinds of variability in the pricing, the number of times you could play a track, how many MP3 players you could copy it to, whether you could burn it to a CD, etc, etc. The iTMS beats them all, hands-down.
If Apple withdraws the iTMS from the French market, then people in France will just go back to ripping their own CDs, or getting them from P2P networks, and they'll still play them all on their iPods.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Not a single recording artist has been paid one cent by allofmp3.com, and I defy you to prove otherwise.
C'mon. One scan of a royalty check. That's all it'd take.
News for Nerds. Stuff that Matters? Like hell.
If the music was available without the DRM, people would still play it on their iPods. It was already the market leader before the iTMS opened for business, just as it is in countries where the iTMS isn't yet available.
Exactly, and I think that's what the parent was getting at. The DRM mandated by the RIAA ended up giving Apple leverage. The industry had a choice - they could either agree to Apple's terms, or drop DRM so that the iPod could play the music from a competitor. The third possible option - dumping Apple and going with a more cooperative company - wasn't available because the DRM wouldn't work with the iPod.
In other words, the RIAA's stubbornness in 2000 came back to haunt them five years later.
"Tell me again why a DVD is less than a CD?"
Okay, once again: supply and demand.
I think that many Slashdotters are of the perception that businesses are obligated to set their pricing based on material cost (which, believe it or not, is typically a small portion of the cost of sale). Or, perhaps to be more accurate, they know why a Ferarri costs more than a Honda, and a Honda costs more than an Kia, even though the cost of the components (the metal and plastic that makes up the car) is about the same for all three. They probably also understand why a shirt from Hugo Boss costs more than a shirt from Kenneth Cole, which costs more than a shirt from Sears, even though the material and manufacturing costs are the same for all three. But when Slashdotters observe that the material costs for CDs and DVDs are approximately the same, they hit a mental block and don't quite get the principle of supply and demand that drives pricing in other industries.
If you're not sure how supply and demand affects pricing of DVDs vs. CDs, think for a few moments about how you use a DVD, and how you use a CD. Few DVDs are worth buying for me, because realistically, I'd only watch it once or twice. A DVD has to be pretty cheap in order for me to watch it. On the other hand, I'll listen to a good CD hundreds of times or more. It's all about the enjoyment you get out of the product. You might enjoy wearing that Kenneth Cole shirt rather than the Sears shirt. It fits better, and it's more flattering, or maybe it just makes you feel better. You enjoy driving that Ferarri more than the Kia. So, if the difference is worth it, you'll pay more. Get it?
If I'm not connecting with you, maybe somebody else can explain it better.
"A mass production model that wants $20 for a CD instead of selling a couple million copies at $5 a pop doesn't make sense."
Agreed. CDs haven't been $20 in the US for ages. The average price for a new release is down to $13 or $14. This is supply and demand at work again. Selling a CD for $5 doesn't make much sense, either, as it would likely be negative margin (a retail price of $5 would likely mean that it was sold into disti for about $3, which is likely below the cost of sale).
I think you may also be making the assumption that the CD market has what's called perfect elasticity, in which a $5 CD will sell 3x as many copies as a $15 CD.
"The result is I simply quit buying CD's. How is this profitable?"
One thing that the pros understand, that lay people often haven't learned, is that it's not necessary to get every potential customer to be a success. This is why that Kenneth Cole shirt costs $150, when they could probably sell it for $20 and make a profit. The secret is to find the optimum price point on the supply/demand curve (if a market has perfect elasticity, that curve would be a straight line at a 45 degree angle... but almost no industry is like that). So BMG doesn't sell you many CDs, and Kenneth Cole probably doesn't sell you many shirts, either. My guess is that both of them are fine with this.
Sitting in my day care, the art is decopainted.
"OK, let's try one more time. How about price fixing? Now, that's better."
I guess it's time again to explain how the labels were price fixing, and why they got nailed, and why it wasn't such a good thing for lots of people. I take it that you're of the understanding that it relates to the fact that CDs all tend to cost about the same, but that's not correct. Sorry.
Here's what happened:
The net result is that Tower Records went into bankrupcty and has been sold several times. Wal-Mart and Best Buy continue to sell CDs as loss leaders, and are contributing to the extinction of the independent record store. Music has become more homogenized, and CD prices didn't go down as a result of the settlement.
This is good news for you if you happen to like the music that Wal-Mart and Best Buy sell, or if you subscribe to the "what's good for Wal-Mart is good for America" philosophy. It's not so good for you if the local Wal-Mart or Best Buy have helped your local indie record shop close its doors.
And, of course, MAP programs continue to this day in lots and lots of industries. The moral here is not to try doing MAPs if there's the chance that this will piss off Wal-Mart or Best Buy.
Sitting in my day care, the art is decopainted.
Mainly because you won't be the one deciding which ones are "better".