U.S. Investigating Online Music Pricing 213
An anonymous reader writes "Times Online has a story about the U.S. Federal Government investigating whether the music labels are fixing prices for online music sales. 'The antitrust division is looking at the possibility of anti-competitive practices in the music download industry ... Mr Jobs suggested such a move would drive owners of Apple's iPod, the hugely popular digital music player, to piracy, a problem that has cost the music industry billions in revenues in recent years.'"
Don't (Score:1, Insightful)
I Smell The RIAA... (Score:3, Insightful)
At what point does what the RIAA is doing constitute breaking some kind of law? Anti-trust maybe? Anyone have some insight into this?
The problem isn't pricing the problem is copyright (Score:3, Insightful)
It always amazes me to see all these people who are in-dignified about this when it's their own belief system in copyrights that pre-destined this to begin with.
Re:clarify this paragraph: (Score:2, Insightful)
That's alot of free downloads... (Score:3, Insightful)
Yeah, right... (Score:4, Insightful)
Personally I think this is just that, an investigation, with little backbone or political will to see it come to court. It would detract from their "war on terrorism" and listening in on all their warrentless wiretaps.
Oh please. (Score:5, Insightful)
"piracy, a problem that has cost the music industry billions in revenues in recent years"
Please, lets not jump to conclusions like this, ok?
Not fixed low (Score:3, Insightful)
new lower pricing model (Score:5, Insightful)
No, and here is my suggestion:
0.20 cents for each 128 kbps song
0.40 cents for each 256 kbps song
0.60 cents for each 320 kbps song
0.80 cents for each lossless song
The better the audio quality, the higher the price.
Re:Not fixed low (Score:3, Insightful)
Piracy isn't an option for me. It's illegal, and it keeps the major labels in power by keeping their music popular and gives them a leg to stand on in court.
variable pricing can be a good thing (Score:5, Insightful)
Could the labels actually be right?
Ipod_although it's tempting to assume that the evil record labels are once again trying to gouge us, there's some sense in their latest efforts to get Apple to abandon it's one-size-fits-all pricing model. A New York Times article over the weekend reported on the ongoing struggle between the labels and Apple over its fixed $0.99 price point. The labels would like to sell most new music for more--$1.49/track?-- while older or more obscure tracks could go for less.
There's plenty to like about variable pricing. For starters, it's almost always the most efficient way to maximize markets of disparate goods and customers. As Barry Ritholtz puts it:
It's a basic rule of economics: goods that have elastic demand (i..e, non essential) are highly price sensitive. Further, any item easily available for free (albeit illegally) will have an even bigger response to price increases.
Apple has argued that single-price simplicity was necessary in the early days of the service, when people were just getting used to paying to download music. But now, after 500m tracks have been sold, we're clearly past the early adopter phase. So what's the right pricing model going forward?
Most accounts of the dispute between Apple and the labels have focused on the industry's efforts to raise prices, which are undeniably a big part of their plan. No surprise there. The research we've been doing for the book shows that within the bulk of the online music business--the top 100,000 downloads--only 3.5 tracks on the average CD sell. So the record labels are getting less than $3 in revenue (wholesale) from albums when the music is sold by the track. That's less than half the wholesale price of a CD (although with none of the physical costs of making and distributing a CD). The shift from an album model to a track model is indeed an alarming thing for the labels, and it's easy to see why they'd want to raise retail prices online as a result.
But there's more to the story that that. The labels may be evil, but they're not (all) stupid. They--to say nothing of many of their artists--also see the virtues of dropping the price for lots of their music, too. For decades they've been playing with CD pricing models that range from cut-price classics to top-dollar boxed sets, and when freed of the overheads of traditional retail, they're likely to experiment more, not less. Although some of the more vocal commentators have encouraged Apple to hold the line at $0.99, there's a strong argument that introducing variable pricing might ultimately lead to a more consumer-friendly outcome.
The reason is simple Long Tail math: there's a lot more music in the Tail than there is in the Head, and labels are generally more willing to experiment with discount pricing outside of the top 1,000 than they are with their hits. Those niches represents most of the music available today, measured by number of titles, and because they're only modest sellers individually they're less likely to create channel conflict with CD retailers, who tend to only stock the hits.
Imagine, for starters, that Apple introduces a three-tiered band of pricing: $1.49, $.99 and $.79 (that would no doubt soon expand to include $.49, but below that the transaction costs of credit card processing and the like start to loom large). Tiered pricing--gold, silver, bronze--is still pretty simple for consumers to understand, yet it introduces a valuable new dimension of demand creation.
Rhapsody, for instance, saw demand triple last year when it cut prices in half, to $0.49. And the average usage per customer in the all-you-ca
Its called price fixing (Score:3, Insightful)
Imagine if Intel and AMD got together and agreed to not sell CPUs for less than $500. Suddenly you would have to pay much more for a computer, and Intel and AMD would get much higher profit margins. As long as they keep to this agreement, people who want to run an x86 computer, don't have a choice but pay the extra.
The reason the prices are so low for most CPUs at the moment is because of the competition between those two manufacturers.
The suggestion is that the large music companies, rather than trying to compete against eachother on price, have an (informal?) agreement on what they will sell their music at, somewhat above their actual cost.
One important difference is that music companies don't compete on price as much as they compete with their "artists". No matter how low a britany spears album is priced, I won't buy it.
The prices must be fixed! (Score:2, Insightful)
No more cd container costs.
No more printed liner costs.
No shipping costs.
Drastically reduced distribution costs.
And it ends up costing me more than ever to download a wrapped physical CD worth of music that has been shipped to a retail location.
Something is not right here.
Because Jobs has such pull with the Federal gov't? (Score:3, Insightful)
Coincidence? I think not.
Given the fact that Apple lost its lawsuit against MS, the DoJ abruptly dropped its case against MS when Bush came in on his first term, and Al Gore is on Apple's board [apple.com], I find it unlikely that Jobs has much pull with the federal government. That said, Apple is a major force in the tech economy right now, so the feds might be willing to give Jobs more of an ear than usual simply because he runs a high-impact, successful company.
Re:I Smell The RIAA... (Score:4, Insightful)
What on Earth are you talking about? iTunes is one company with a set price - they set the price there because it's affordable for consumers. Price fixing usually happens at level outside of the common view. In this case: Sony, Virgin, Arista (whatever other shitty labels) are being investigated because there is speculation they are meeting to set the base price of their product in order to make more money.
iTunes might have an agreement with Sony for $0.25 per song, while Virgin iTunes has to pay $0.28 per song (Yes, numbers I'm pulling out of my ass). iTunes still sells each for $0.99 . The idea here is that the labels are potentially meeting to rise the price up to an agreed upon price (say $0.60 per song - another number straight from my ass) to increase their bottom-line and force iTunes to raise their end-user price as well. This would give more viability for consumers to go back to buying CDs at the artificially high prices and not be able to save money when buying online.
Re:variable pricing can be a good thing (Score:5, Insightful)
The article was about a government investigation into possible monopolistic price-fixing in the online music industry. Your point seems to be that variable prices are a good thing assuming market forces are at work and there is no monopolistic price-fixing.
The music industry in America is controlled by a monopoly called the RIAA (Recording Industry Association of America). Their monopolistic power has been increased by obscenely repeated extensions to the duration of copyright protection handed down by our corporate owned Congress.
Are you claiming that despite this obvious monopoly and despite all of their monopolistic practices in the past, there has been some magic wand passed over the Internet so their monopolistic power won't be used there? Or are you claiming that since market forces are magically at work on the Internet, there is no need for this government investigation? Or are you making the circular argument that market forces are working because you've assumed that market forces are working?
Even if we ignore assumptions about market forces, some of the particulars of your argument are not well thought out. Here is an example: you say:
If someone were to offer to sell me legal, good quality music at say $.10/per track, I'd be willing to give them a small deposit (say $5 or $10) so that they only have to charge my credit card after every 50 or 100 downloads. This solutions actually cuts down the credit card overhead by a factor of 5 or 10. I find it hard to accept you as a credible proponent of "long tail math" when your recommended price points ignore such obvious and simple solutions.I agree in theory that variable prices in a free market could be a good thing. But I strongly disagree with your (perhaps unstated) assumption that our current system is a free market. The obscene copyright laws and the RIAA's iron-fisted monopolistic control make it anything but.
copyrights and economics (Score:3, Insightful)
What are you talking about. Just because people can use substitute goods and can't get any price they want, doesn't mean that there isn't price fixing and anti-trust behavior.
If the RIAA manage to extract $20 for a CD or $.99 a song from your neighbor despite the fact that you can put your own music for free or for $.10c on the net then MORE POWER TO THE RIAA. It's called MARKET POWER. It means that they have invested the time and effort to make their product worth what the market is willing to pay. You and I may not like sylvia browne's shite books or britney's shite music, but they have managed to convince the market that they are worth paying over the odds for them.
Well the problem is that the RIAA can't extract that much, so instead they try to kill alternate distribution chanels while screaming bloody murder about incentives and property rights. Well bullshit. Alot of people make it investing their time and effort without a little personalized government monopoly, in fact most artists do, because only 1% of 1% benefit from the way the copyright system is set up now.
The basic economic phenomenon here has NOTHING to do with copyrights ....
If I artifically restricted the natural supply of food to people arround the world because "I had no incentive", most people would see that as the pure economic evil that it is. But when they restrict the natural flow of information, then oh my God "It's a RIGHT !!! " ... Well bullshit, it's not a right and has everything to do with economics.
To really play hardball ... (Score:3, Insightful)
That would get the message across really fast.