Bizarre Economics: Price Goes Down, Sales Go Up
Published July 02, 2003
I have said all along that online music sales has to be a low-price, high-volume operation in order to cut into free P2P, which clearly has disadvantages of spyware, ads, unreliable files and labeling, and less than 100% good karma. I think the price range for unrestricted MP3s should be somewhere between $.10 and $.25., which will almost FEEL like free, but will most certainly not be. Get it right or pay the price - here is some evidence:
- Listen.com on Tuesday said it has seen a nearly 100 percent increase in CD burning among subscribers to its Rhapsody online music service since cutting its fee to 79 cents from 99 cents per track.
Rhapsody would not disclose how many tracks were actually burned in June, but said that on-demand streaming has increased 45 percent to more than 11 million songs, or more than 350,000 songs per day, in June.
Listen.com said the brisk activity for its service as well as Apple Computer Inc.'s (AAPL) new music service, which has sold more than 5 million songs, show that consumers are willing to pay for music online if services are compelling.
....Rhapsody is considered by critics to be among the easiest-to-use subscription services, but has never released subscriber numbers. Analysts have estimated its subscribers total less than 100,000. [Reuters]
- Bizarre Economics: Price Goes Down, Sales Go Up
- Published: July 02, 2003
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- Section: Sci/Tech
- Filed Under: Sci/Tech: Internet, Music: News
- Writer: Eric Olsen
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Comments
Right on B, glad you agree, you are much more involved on a practical level than I am.
If B would buy four songs but still spend only the same amount, what's the incentive for lowering the price?
Ouch! Hal, you've got it exactly right. That's how the RIAA looks at it - how little work can we do, or how little product can we give away, for the same amount of money.
Of course, for every Brian, there is also an Eric, who spends nothing online now, but would if it were cheaper. At least he says so, but I'm still convinced that those calling for a quarter now will want a dime, and then a nickel and so on.
Anyway, the RIAA share of an iTunes download is apparently 65 cents. One presume the Rhapsody arrangement is similar. If Rhapsody can accept 14 cents a track instead of 34, maybe Apple can do the same. The problem is, it isn't up to Apple or Listen.com, really. When you've only got a third of the ticket price under your control, the math doesn't work out so simply.
If the RIAA would accept less, life would get interesting...
Hal,
The difference is, the value would be so much greater that I'd actually BUY. (I mean, I do now, but I'd make it a habit were it cheaper.)
25 cents competes with free much better than 99 cents. Once the price goes low enough, people might actually use the services the way they use P2P. And people download a LOT through P2P--far more than the same people used to buy in CD form.
So, they are in that habit. Price music to compete with that--i.e., basically a "convenience fee"--and they'll fire up iTMS instead of LimeWire. And they'll use it the same way, downloading gigabytes of songs.
Obviously this is not a price issue, it's morals.
I agree that if you (the collective 'you') got the two-bits you'd whinge for the dime.
Yes, Hal, it's obvious that anyone who doesn't buy something because they don't think it's good value is immoral. It's similarly obvious that anyone who refuses to pretend that technology has not advanced beyond the LP and the cassette deck is immoral. You are a light unto nations. Keep it up.
Here is my thinking: I have about 20,000 records and CDs. I have purchased more than half of them. I have also sold records for those pricks for 25 years through radio, TV, writing, here, DJing live, etc. I deserve free records, I get a lot but always want ones I don't get free. I have used Kazaa a couple of times now when I needed specific songs quickly for weddings and didn't want to spend the $100 to get the CDs when I only wanted one song I was gong to play exactly once.
I still didn't feel exactly right about it, I didn't really like the experience, I despise the spyware, and a lot of the songs are mislabeled.
Therefore, I would be happy to buy music in a convenient, unencumbered format, with no hassles or DRM if it felt reasonable to me: $1 a song isn't reasonable, .$50 doesn't seem reasonable, $.25 is starting to feel better, $.10 feels just right - an album for between $1 and $2 and I will spend a shitload of money I don't have because it's a good deal, I always want more, and that price "feels" like free but adds up plenty quick if you like everything like I do.
One of the important things isn't price, it's convenience.
If I want a song for a particular moment, I want it now.
Not after going to the mall to the crappy record store with their ignorant staff, who if they can be bothered, can't tell me that not only don't they know if they have Thin Lizzy CDs in stock, don't know who Thin Lizzy is.
If you read "Boom Bust and Echo", the majority of the USAian and Canadian population want things which manage their time effectively.
P2P networks are timesucks. If you don't have a lot of time to waste, they are horrible. There is a huge market of people who don't want to go to horrid record stores, don't want to deal with P2P, they just want the music they want -- NOW.
Sadly the RIAA members are too stupid and greedy to meet this market.





I wonder when the record companies will realize that if songs are 25 cents, I'll buy four times as many. If P2P shows anything, it's that the appetite for music is insatiable. I have 8,000 songs in iTunes. But if Apple thinks people will pay $7500 to fill their 7500-song-capacity iPods, they're crazy.
If every song downloaded on P2P were instead sold for 10 cents or 25 cents...
And I'd definitely consider 10 cents a small price to pay to avoid the hassles and poor quality of P2P.