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

Novel idea

[rlp]

A novel new business idea - the recording industry HATES that.

Re:Novel idea

[innerweb]

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.

• It allows new artists to be exposed without the risk to the consumer of buying music they hate. No risk means more consumers will try it.
• No DRM means I use the music where and when I want.
• The market will be used to determine the price of the music. That may be the sweetest part of this deal.

At the risk of being redundant (on slashdot?), CDs are a dead medium. They are very expensive compared to digital downloads. They force bundling of musics that are not desired by the majority of people. They are fragile (heat, nicks, etc), though better than tape. They require an immense infrastructure (compared to digital files) to distribute. They make as much sense anymore as tape or vinyl did a few years into the age of CDs.

Those in the industry that learn how to grapple with this will survive and thrive. Those who do not, like so many other players in other industries before them, will die.

InnerWeb

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."

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]

more to the point, what is to stop me from "selling" my free versions when the band gets popular?

One could set up an entire MP3 futures trading market! You could invest in MP3's, hoping that their popularity will grow...

Re:pissed off customers, thats what it means

[yali]

As demand drives prices up, the incentive to illegally copy MP3s will increase; but large-scale infringement would lower demand. So eventually (at least in theory) the prices will hit some sort of equilibrium point. This could be a pretty interesting natural experiment.

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.

Re:pissed off customers, thats what it means

[Lord Ender]

Wow. So you are telling me I could short Fergie? Quick! Buy 100 PUTs on "Big Girls Don't Cry!"

This could work really well

[uncreativeslashnick]

Have you ever found yourself telling someone, "yeah, I liked that song before everyone else thought it was cool." I can see this model encouraging people to explore and download and try new stuff so that later on, when the price goes up, they can brag about how they downloaded it first, for free, before it was selling for $5 a pop.

It also might open the door for more quality indies to actually make money. People might be turned off by high prices of what the RIAA cartel marketing is pushing, and go for the cheaper indie stuff. Then again, I am probably being too optimistic, as most teenagers will pay any price for "cool"

Umm read the article....

[Duffy13]

For those who didn't, prices start a $0.00 and cap out at $0.98.

This could actually be nice for some people

[Optic7]

Those who prefer to listen to non-mainstream artists would get cheaper music, while those who prefer to listen to mainstream artists would pay more for it. It almost sounds like a tax on lack of musical taste to subsidize music geeks!

Re:Love it

[kpainter]

I wonder if they will pay me to download Yoko Ono tracks?

Might this help the long tail?

[Otis2222222]

I'd like to see a model like this. Ever since I installed a satellite radio receiver in my car, my musical horizons have broadened significantly. A lot of the artists I hear on some of the more obscure channels aren't indexed on iTunes or even available on illegal services like Limewire. This mostly applies to older music that is out of print, or never made it to CD.

It would be nice if there was a service like this that had just about anything ever recorded digitized and made available for download. Let the market sort out what's popular and what isn't, but give us access to EVERYTHING.

In this day and age, there is no reason why virtually every album ever recorded isn't available to buy a digital copy of.

Amazon music stock market

[Bluesman]

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

Re:SWEET!

[anaesthetica]

Finally! All that non-conformance pays off!!
--
Psychic spies from China cryin to pass deregulation
Little girls from Sweden dream of free speech legislation

Says the guy with a Red Hot Chili Peppers lyric as his sig...