Amazon Invests In Dynamic Pricing Model For MP3s

NittanyTuring writes "Amazon recently closed a Series A financing deal with Amiestreet.com, a startup selling DRM-free MP3s with a demand-based pricing model. All music starts out free, and prices increase for popular tracks. Jeff Blackburn, Senior Vice President for Business Development, Amazon.com: 'The idea of having customers directly influence the price of songs is an interesting and novel approach to selling digital music.' What does this mean for Amazon's own intentions to sell music?"

Comments

pissed off customers, thats what it means

[fotbr]

You know there will be much whining about people that bought $Song for $PriceA only to find that it fell to $PriceB.

And those that complain that $Friend bought $Song for $PriceA but now its up to $PriceC and its not fair that they have to pay more than $Friend for the exact same item

Re:pissed off customers, thats what it means

[omeomi]

Er, maybe a sense of morals or ethics?

Not sure where morals or ethics are involved. If I buy something for one price (even if that price is $0), and the price rises, I don't see why I should be prevented from selling it at the higher price. Obviously, to be legal, I would have to delete any copies that I may have of the mp3 after I sell it.

Amazon music stock market

[Bluesman]

Who wants to start this? I'm selling options for indie band A at 35 cents a song.

Re:Novel idea

[jlarocco]

I may be way off base on this, but if I remember correctly, this is starting to sound like free market economics (supply and demand). As demand increases, so does price. In this case, supply for each individual song for practical purposes is infinite, so they will have to use an *adjusting* system to manage price. It solves several problems if done correctly.

Yeah. A bit off base. First of all, demand by itself does *NOT* determine price. There's a huge demand for water, and yet it's not very expensive. In an ideal free market price is determined by the equilibrium between supply and demand.

Having said that, now I'm going to explain why normal supply and demand applies very, very poorly to the music industry:

• The supply of any particular song is infinite once that song is created. The marginal cost of one more copy is $0. It's an economy of scale gone mad.
• Personal preference plays a *huge* roll in people's decisions. Several orders of magnitude more than in other industries. To illustrate: I'd pay $5 a song for some genres long before I paid $0.01 for any "gangster" rap song. Contrast that to buying most other items, like toothpaste, or a bookshelf.
• There's only one supplier for any particular song. If I really like the Eagles' "Hotel California", my choices are "buy it" or "don't buy it". In a "normal" industry, I'd also have the choice "Buy this other one that's practically the same thing but cheaper."