Apple Sets Tune for Pricing of Song Downloads 396
PygmySurfer writes "Apple Computer on Monday revealed it had renewed contracts with the four largest record companies to sell songs through its iTunes digital store at 99 cents each. The agreements came after months of bargaining, and were a defeat for music companies that had been pushing for a variable pricing model."
It's all about simplicity (Score:5, Insightful)
(note: I am not an iTMS customer. I don't even own an iPod)
Everything I have seen/heard/etc about the iTunes store is that it is simple.
People like simple. That's it. Why do companies not get this? How many people's VCR clocks blink 12:00 becuase (to them) it is too hard to actually set it?
Now, Apple is on to something with their pricing model. It is simple. Sure, some older songs are probably not worth as much and some newer songs might be worth more, but overall it is a good balance. It's simple. They would likely lose more revenue by going a variable (and more complex) pricing model than they do by not squeezing those last few cents out of the most popular songs.
Re:Good to see leverage moving from the labels, (Score:5, Insightful)
What it will do, though, is lower the incentive for newer bands to sign with the big labels, and go with more indie labels, because the distribution will be the same (assuming Apple doesn't start doing dirty things like making labels pay a $1M fee to include their songs on iTunes or something like that).
Huzzah (Score:5, Insightful)
Say what you will about Apple DRM, but at least it's honest - and doesn't attempt to sabotage my CPUs. Good to know my pricing hasn't gone haywire in the near-term. For those who think that variable pricing is the way to go (except for whole albums) check out the raging success story that is google video. They're pay model is so - easy to understand - and easy to work with - no one I know is using it.
I'd say that's a ringing endorsement for keeping it simple.
Re:Good to see leverage moving from the labels, (Score:5, Insightful)
So maybe they need to stop being big label artists. Easer said than done I realize, but if they can maintain and even use their fanbase to move to a more progressive indie label they will pave the way for artists who currently need the clout of a big label to get noticed. Once listening to bands on a Internet only indie label becomes trendy, then digital music will be all that we want it to be, right now there is still too much $$$ in the old corperate giants, because people still go for the big corperate product.
Re:Too expensive (Score:5, Insightful)
I don't think so. See, you represent one end of the bell curve we'll call 'cheapskate' and the fact is, no matter what the price were set to, someone will fall further along that curve than you and claim that everyone is missing out on huge profits by not dropping the price in half.
The reality is that given the enormous success of the iTMS, it seems that Jobs et all were spot on with their pricing model (which one would assume was arrived at after much research). Reality check - nobody sells a BILLION of anything that's outrageously overpriced...
relative pricing (Score:5, Insightful)
We hear so often that variable pricing is good. I think it's interesting that newly released music is commonly considered more valuable just by virtue of being new. This particularly applies to covers, rehashes, etc.
The problem... (Score:0, Insightful)
I'm sorry, but $.99 is still way too much for a compressed, restricted pop single from an artist I don't even want to listen to.
Stop complaining (Score:3, Insightful)
No big surprise here... (Score:3, Insightful)
However, you can bet your ass that the labels are colluding to cut Apple out of the pie after getting a very public caning.
Cheers,
Re:Variably priced songs would be a good idea (Score:2, Insightful)
I see this sentiment all the time here... Why doesn't it occur to anyone that this never would have happened? The labels were never fighting for the right to discount older songs, they wanted the ability to jack up the price of top 40 singles.
I don't know if this has anything to do with the reasoning or not, but you have to remember the only reason we see older CDs discounted or in remainder bins is because they are physical objects that take up shelf space. It's not because the music itself is dated, it's because it's not cost effective to store it if it's not going to sell. That's not the case for a music file, which of course can sit on the iTunes server indefinitely until someone gets a hankerin' to hear it.
Re:Server-side storage (Score:2, Insightful)
Napster already does what you request. Any tracks you purchase can be redownloaded simply by pressing a button for free. Any tracks you rent can be redownloaded as long as that subscription is current.
Of course, if Napster no longer has a license (contract) for that song, you are out of luck.
--Sam
Re:It makes me feel all good inside... (Score:2, Insightful)
Apple isn't looking out for you; Apple is looking out for Apple.
In fact, if it wasn't for the RIAA, Apple probably *would* be implementing a variable pricing scheme all on their own. Each song has its own unique demand curve and variable pricing would certainly allow Apple to optimize it's profit. (note that isn't necessarily bad for the consumer... many songs would be optimally priced at less than $0.99)
The only reason you see Apple on the other side of this issue is because RIAA is taking a peace of the pie. Apple also controls the ipod market which is complementary to the itunes market. But Apple gets 100% of the profit from the ipod market, and only part of the profit from itunes market (since they have to share with the RIAA). So they would naturally like to shift as much profit as possible to the ipod market, which means keeping lower prices in the itunes market.
In the end, if you're saving any money at all, it's only because Apple is every bit as cutthroat as anyone else. It's not because Steve Jobs is welling up tears because he thinks you might be overcharged for music from his company.
Good. (Score:3, Insightful)
Serves right - Profit Maximization does not always (Score:5, Insightful)
Profit Maximization and its importance is taught in econ classes, and the sales crowd give it a rather exagerrated importance, but the fact that the 'market' is in fact people which have a tendency to behave according to their own choosing and not as mindless drones of the 'invisible hand' is not.
They always go for getting the maximum profit achievable with a given or minimum quantity of sales. The very thought at the end does not deliver what they want to get indeed :
If you make an easily obtainable/copyable product overpriced, you pump up piracy, or at the least unwillingness to buy your products in the target crowd.
How many of us would think 'well, its just nothing, let me get 5-10 songs tonight' if the price per song was $5 or $10 ? or would any of us get a 'cheaper' song because the song we wanted was priced much higher ? is it that simple that we are going to get the 'best obtainable' from the songs provided ? a sheer stupidity scratch for the marketing crowd ? yes .
Not only the 'profit maximizing' concept actually hampers the profits, but it also shatters market reach and market control - which is something priceless in most respects. Sell a song for just $0.10, and youll get hordes of people buying songs because 'its just nothing' in price - youll become a net standard.
Sell them for $5, and youll get piracy.
Re:It makes me feel all good inside... (Score:2, Insightful)
Re:It makes me feel all good inside... (Score:5, Insightful)
If the 4 RIAA companies were willing to offer Non-DRM music, they could ditch Apple in a heartbeat.
They're stuck because the most popular music player has a DRM format controlled by Apple.
I bet the RIAA would love to see the iPod 'opened up' to support other DRM schemes. Then they could use a different distribution method... one that has variable pricing.
The Emperor & Darth Vader would destroy Apple & their music empire. Not because they're rebels, but because they didn't go along.
The RIAA doesn't mind iTunes (Score:5, Insightful)
To make it simple, Apple and RIAA are in bed with each other. They just can't decide who's to be on top.
Re:Still sucks for artists. (Score:4, Insightful)
Apple - $.35
Label - $.53
Artist - $.11"
I have never been paid 11.1% of 'market value' for any work I've done, and I can see why many people cringe over this figure. However, there is another side to the story. If an artist didn't sign with the label, their chance at large-scale success diminishes greatly. So, why not sign the deal, make 11.1% for each song sold on iTunes, and then build a following so you can pack the arenas and make the big bucks?
Re:It makes me feel all good inside... (Score:4, Insightful)
I'm so tired of seeing these kinds of tired, emotive phrases uttered. There's nothing greedy about being a corporation or American, or wanting to have variable pricing.
I'm opposing to variable pricing for downloads, but I'm not going to fly the standard anti-capitalist flag over it.
Re:The problem... (Score:5, Insightful)
And $15 was too much for a full CD of uncompressed, DRM free pop 'album' from an artist you didn't even want to listen to. So what. You weren't buying it anyway.
How much WOULD you pay for music you don't want?
How much would you pay for music you DO want? $0.05/track? $0.10? $0.50?
How much is music worth to you? Where is your personal dividing line?
Re:where is the loss-less files? (Score:1, Insightful)
At $0.99 per track, for a crappy quality download? You are better off buying the CD. All these places can go stuff it, until they're offering a lossless copy of the CD at less than the price of a CD... otherwise, I'll just keep getting the CDs I like and ripping as FLAC... wait does ipod even support flac? Bah... what a bunch of crap. all of it. bah humbug. I like my iaudio, usb hd flac (and ogg) supporting media player...
Re:Too expensive (Score:3, Insightful)
When prerecorded movies (on tape) first came out they were roughly $90 each. They make a lot more money selling them now at $20 apiece than they did at $90 each because they sell a LOT more of them.
According to TFA on this story [slashdot.org], bands typically get 4 1/2 cents per song on iTunes (out of the 70 cents the label gets.) That leaves lots of room left to slice -- if the volume goes up in a similar manner that video sales went up as the price lowered, the bands' total take will go up enough that there will be no reason for the bands to sue their labels. Of course that would mean that a 70 cents per song cut for the labels would be ridiculous. As it is anyway.
Your (their) numbers are wrong and misleading (Score:5, Insightful)
For a 99 cent sale, Apple pays the copyright owner 70 cents.
What the copyright owner chooses to do with that 70 cents is up to them.
If the artist sold their life, soul, and music over to a huge label in return for a massive advance, then the label is now the copyright owner (NOT the artist), and the label might pay the artist a pittance of that 70 cents. (Every contract between label and artist is different, and Apple has nothing to do with that.)
If the artist did not sell their soul to a label, then they are still the copyright owner, and the artist gets to keep the entire 70 cents.
I admire the Downward Battle guys in some ways, but their protest is misguided when they try to make Apple look like the bad guy because an artist chose to sell the rights to their music over to a big label.
It was the artist's choice give up ownership of their music. They could have remained independent but they chose the big up-front advance in return for no longer owning their own music.
Re:good job! (Score:3, Insightful)
If you want something that someone else produces, it is not unreasonable to pay for it. A buck for a song? If I like the song, I am likely to listen to it hundreds of times. After taxes, a dollar is like four minutes of work for me. I don't find it an unreasonable price to pay. If you do, don't buy. Simple as that.
And if you end up soending a lot more money than you planned, then I suggest a remedial budgeting course. Life in western civilization demands a rudimentary knowledge of managing money. iTunes is hardly the biggest corporate baddy out there looking to steal your money (that would be Congress).
You misunderstand definition of "vary" (Score:3, Insightful)
You totallly misunderstand what the labels vant in the way of "variety". They mean to have the old songs stay at 0.99, while new songs are $2-$5 each. Seriously, check older news articles for the labels demands.
Comment removed (Score:5, Insightful)
Re:Variably priced songs would be a good idea (Score:2, Insightful)
What did you pay for your last physical CD you bought NEW (not used) and how many tracks did it have on it?
I'll give an answer and you can do the math. I live in a small university town in rural southwest Virginia. There are about a dozen or so places that sell CDs within a 15 minute walk or drive, this includes Wal-mart, if you can stomach shopping there.
The last CD I bought was a John Butler Trio album. It was $12.99 and had 14 tracks on it. At the time I bought it, gas was still $1.59 (glorious by today's standard!) a gallon and I probably burned a gallon going to and from where I bought it, so that CD cost me $14.58 for 14 tracks. This is NOT a Billboard Top 40 artist. Those CDs go for anything between the $12.99 to $17.99! and often have only 10 to 12 tracks on them. And, it's those Top 40 tracks the labels are bitching the most about!
Now tell me $0.99 a track is expensive. Also tell me how many albums you own where you like all the tracks on the album? Also, please define what you mean by older? Older, as in the artist is dead. Older, as in the album is greater than or less than "X" number of years old. Where do you draw the line for what is considered old? How would you propose the labels draw the lines?
I just ask these things because I don't think most people have thought this through as thoroughly as the folks at Apple have HAD to to come up with that $0.99 a track number. Sure, Apple wants to make a profit, obvious. But, they also want to help. Let's not forget, Stevie-poo and a lot of his employees and stock holders are BIG music fans as well. They certainly don't want to get ripped off KNOWING a lot more about what's behind the curtain than a lot of people on the street! A buck a song, just ain't that bad for whatever it is you might want.
Stop fooling yourself. (Score:5, Insightful)
C'mon. One scan of a royalty check. That's all it'd take.
Re:It makes me feel all good inside... (Score:5, Insightful)
Exactly, and I think that's what the parent was getting at. The DRM mandated by the RIAA ended up giving Apple leverage. The industry had a choice - they could either agree to Apple's terms, or drop DRM so that the iPod could play the music from a competitor. The third possible option - dumping Apple and going with a more cooperative company - wasn't available because the DRM wouldn't work with the iPod.
In other words, the RIAA's stubbornness in 2000 came back to haunt them five years later.
Re:It makes me feel all good inside... (Score:5, Insightful)
"Tell me again why a DVD is less than a CD?"
Okay, once again: supply and demand.
I think that many Slashdotters are of the perception that businesses are obligated to set their pricing based on material cost (which, believe it or not, is typically a small portion of the cost of sale). Or, perhaps to be more accurate, they know why a Ferarri costs more than a Honda, and a Honda costs more than an Kia, even though the cost of the components (the metal and plastic that makes up the car) is about the same for all three. They probably also understand why a shirt from Hugo Boss costs more than a shirt from Kenneth Cole, which costs more than a shirt from Sears, even though the material and manufacturing costs are the same for all three. But when Slashdotters observe that the material costs for CDs and DVDs are approximately the same, they hit a mental block and don't quite get the principle of supply and demand that drives pricing in other industries.
If you're not sure how supply and demand affects pricing of DVDs vs. CDs, think for a few moments about how you use a DVD, and how you use a CD. Few DVDs are worth buying for me, because realistically, I'd only watch it once or twice. A DVD has to be pretty cheap in order for me to watch it. On the other hand, I'll listen to a good CD hundreds of times or more. It's all about the enjoyment you get out of the product. You might enjoy wearing that Kenneth Cole shirt rather than the Sears shirt. It fits better, and it's more flattering, or maybe it just makes you feel better. You enjoy driving that Ferarri more than the Kia. So, if the difference is worth it, you'll pay more. Get it?
If I'm not connecting with you, maybe somebody else can explain it better.
"A mass production model that wants $20 for a CD instead of selling a couple million copies at $5 a pop doesn't make sense."
Agreed. CDs haven't been $20 in the US for ages. The average price for a new release is down to $13 or $14. This is supply and demand at work again. Selling a CD for $5 doesn't make much sense, either, as it would likely be negative margin (a retail price of $5 would likely mean that it was sold into disti for about $3, which is likely below the cost of sale).
I think you may also be making the assumption that the CD market has what's called perfect elasticity, in which a $5 CD will sell 3x as many copies as a $15 CD.
"The result is I simply quit buying CD's. How is this profitable?"
One thing that the pros understand, that lay people often haven't learned, is that it's not necessary to get every potential customer to be a success. This is why that Kenneth Cole shirt costs $150, when they could probably sell it for $20 and make a profit. The secret is to find the optimum price point on the supply/demand curve (if a market has perfect elasticity, that curve would be a straight line at a 45 degree angle... but almost no industry is like that). So BMG doesn't sell you many CDs, and Kenneth Cole probably doesn't sell you many shirts, either. My guess is that both of them are fine with this.
Re:Inside truth behind variable prices (Score:3, Insightful)
...much weakened by recommendation engines. With a recommendation engine in place, pricing really only fits a supply-demand curve, not some false psychology. If the record labels really wanted to promote something, iTunes could charge the labels big money for engine distortions, per title, per user, per week. Apple could raise the cost of advertizing enormously and earn a huge profit from it by using a recommendation engine as leverage against it.
"The entertainment industry has to maintain a straight face and tell you that Gigli or Battlefield Earth are every bit as valuable as Wedding Crashers or Star Wars or nobody will go see them."
Neither studios nor theaters actually like this situation; they simply can't do anything else. Theaters have no way to enforce variable pricing. Patrons can buy a ticket to one show then walk to another. It's too expensive to hire a guard for each room. But in retail, even bricks and mortar, it's easy to charge a different price for each item. This is part of why movie studios are putting more emphasis on DVDs and less on theatrical runs. They can charge whatever the market will bear.
It's possible there's a lot more music that might get made and sold online if it could be priced how the publisher wants. I personally don't have an iPod or buy from iTunes because they don't have nearly enough anime or video game music. Despite this, I respect Apple for being able to pressure the record labels this much. If Apple is smart and powerful enough to bend the entire RIAA cartel to its will, then the record labels doesn't deserve the benefits of variable pricing. It hurts consumers in the short run, but Apple deserves its lunch for as long as they can get it.
Re:It makes me feel all good inside... (Score:5, Insightful)
"OK, let's try one more time. How about price fixing? Now, that's better."
I guess it's time again to explain how the labels were price fixing, and why they got nailed, and why it wasn't such a good thing for lots of people. I take it that you're of the understanding that it relates to the fact that CDs all tend to cost about the same, but that's not correct. Sorry.
Here's what happened:
The net result is that Tower Records went into bankrupcty and has been sold several times. Wal-Mart and Best Buy continue to sell CDs as loss leaders, and are contributing to the extinction of the independent record store. Music has become more homogenized, and CD prices didn't go down as a result of the settlement.
This is good news for you if you happen to like the music that Wal-Mart and Best Buy sell, or if you subscribe to the "what's good for Wal-Mart is good for America" philosophy. It's not so good for you if the local Wal-Mart or Best Buy have helped your local indie record shop close its doors.
And, of course, MAP programs continue to this day in lots and lots of industries. The moral here is not to try doing MAPs if there's the chance that this will piss off Wal-Mart or Best Buy.
I prefer variable. . . (Score:2, Insightful)
Re:It makes me feel all good inside... (Score:3, Insightful)
This is simply not true, quality products cost more to make.
I don't know about those specific brands, but having been around enough good clothing in my life, material is very important - using the best cotton for instance, Egyptian cotton, costs significantly more than the run of the mill stuff especially if you are using better grades. Also, better dyes are used in the better clothing, some of that never/hardly fades even with many washings (cheap rugs have this problem, the red often runs).
All of this costs money to make a better product. Some expensive brands actually have quality behind them that equals more than hype. This would also extend into the car analogy as well: Ferrari engines obviously output much more horsepower than a Kia engine, the materials/manufacturing costs behind them do differ. Otherwise there be a lot of cheap cars on the road that would be just/almost as good as a Ferarri but cheaper.
Re:I prefer variable. . . (Score:4, Insightful)
Re:Perfect elasticity (Score:2, Insightful)
The problem with this line of thinking (in regards to the music industry) is that they are quickly isolating their entire target market.
They are producing a lot of music and shifting the trends artificially in a direction that is shaking loose anyone who was once keen on purchasing their products.
The end result is music shops that are shrinking in size (in terms of both space and staff) and more and more customers are going to purchasing individual songs from iTunes (or pirating).
While the music industry might consider digital sales a partial win, they certainly consider pirating a sign of failure, and rather than blame themselves they would rather just place the blame on their "target market".
"You are not a part of our target market."
That line of reasoning makes sense in regards to many goods and services, but when it comes to the intangible world of music and movies it can only serve to hurt them in the end.