The $.99 Download

Billboard analyzes the $.99 download and whimpers that “no one is getting rich.” Perhaps this is because the entire industry needs to be restructured to a model that emphasizes quantity at a reasonable price (MUCH lower than .$99 per song) rather than the all-or-nothing hit model that is failing so miserably today. Dumbshits – your very expectation of “getting rich” short term belies your mindset:

As the 99 cent digital singles model begins to take root across the industry through services like Apple Computer’s iTunes Music Store, Liquid Audio, Rhapsody and a host of others set to bow for the PC this fall, industry executives and artist representatives are questioning whether the pricing model makes sense financially.

With all parties involved angling for nickels and dimes in the average download sale, labels, artists and service providers all agree on at least one thing: No one is getting rich from singles sales at this point.

….Still, digital distribution advocates say the long-term potential is there.

If the industry can figure out how to sell downloads numbering in the tens of millions, labels can theoretically scale back their physical manufacturing costs and enjoy a healthy alternative revenue stream to the CD.

Despite being limited to the percentage of Mac users running OSX, the iTunes service has sold more than 5 million downloads since its April 28 bow. It has average sales of about 500,000 tracks per week, according to sources.

Artist representatives say overall digital download sales must surpass 20 times that 500,000 weekly volume for the pay-per-download business to become economically meaningful once larger PC services kick in.

Considering PC’s outnumber Mac’s 20-1, that number seems very reasonable – imagine what it would be if you lowered the price further. Remember – you’re competing with free.

In an effort to help drive volume, some services are trying lower prices. Listen.com, for instance, has dropped the price of its burnable tracks to 79 cents.

“We think on an ongoing basis the price point would be better off being somewhere between 50 cents and $1, not necessarily a dollar,” listen.com chief executive Sean Ryan says.

Lower, lower.

“It can be a very small amount of money,” Broussard says. “Even with respect to the artist getting the state-of-the-art, artist-friendly provisions, we’re still talking about a few pennies.”

To date, download economics have not been an area of much concern for artists and their handlers because of the limited revenue opportunity.

But artist representatives warn that the jury is still out on the economic model for downloads, as far as artists are concerned.

Veteran manager Irving Azoff points out that many digital distribution deals are short-term licenses and that “there are going to have to be renegotiations later.”

He adds, “If this thing really connects, they’re going to have to go back to artists and pay more of the 50/50 model than the 80/20 model they’re trying to do right now.”

That is starting to make more sense – eventually there will be much less need for the labels and their exorbitant take will be impossible to justify. Whimper and whine.