See, The Palm Pre Can Be Offered For Free

from the was-it-such-a-ridiculous-suggestion? dept

A little over a month ago, I suggested that Sprint and Palm were making a big mistake in not offering the Palm Pre for free (more specifically, saying that Sprint should subsidize the full price). I don't think I can recall a post where more people told me I was so totally wrong. People insisted it was the dumbest idea ever, and that it would harm the brand value of the Pre, while costing Sprint way too much money. Yet, I still stand by that claim. Sprint doesn't make money selling the phone, it makes it by getting people to sign up for at least two years of Palm Pre service -- which is on the higher end of the service scale. The Pre is not as good as the iPhone, and did very little to really stand out from the competition. So the way to get around that is to offer the device for free.

At least some people seem to agree.

The device is now being offered in the UK... exactly as I suggested: free with a two year contract. At the same time, through some tricky step following, you can actually get the device for free in the US as well. I don't see how that takes away from the prestige of the device at all. If anything, it's only going to help make it easier for some people to at least try it out as a phone.

Of course, my other big complaint with the Palm Pre -- its weak developer support still stands. Famed developer Jamie Zawinski just wrote about his absolutely ridiculous experience trying to get two simple apps available on Palm Pre phones. It's taken months, and they're still not available, even though he wants to make them available for free. Instead, as with the iPhone, the "approval" process of getting apps into the app store are positively ridiculous. I had been seriously considering getting a Palm Pre (in fact, a few months ago, I was positive I was going to get one), but without real developer support, it's just not worth it. I'll wait until a decent Android phone is available instead.

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Sony Music Does Deal With Amie Street... But Using iTunes Pricing?

from the how-does-that-make-sense? dept

Well, this is odd. Amie Street is the well known indie music site that lets people purchase music with a dynamic pricing system -- the music is cheap at first, but as more people buy, the price goes up. It has some neat features to it. So it seemed like a big deal to hear that Sony Music had done a deal with the company to offer its music on the site... except that it's not using the dynamic pricing. Instead, it's pricing the music at $0.69, $0.99 or $1.29, based on popularity. In other words: the exact same pricing as iTunes. So what, exactly, is the benefit of offering the exact same pricing on Amie Street? About the only good thing you can say for this deal is at least it didn't muck up the pricing of everything else, like what happened when Sony Music did its deal with eMusic. Though... it is worth noting that Amie Street did recently put some additional restrictions on redownloading songs. Perhaps the company tried to separate out the announcements so that no one connected the two things...? If that's the case, why bother signing with Sony Music in the first place. Amie Street offers no benefit to people who want Sony Music. All it seems to do is go against the very point of Amie Street.

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Sprint Offers Palm Pre For $100 For A Month, Maybe Two... Then, Oops, Not At All

from the great-moments-in-marketing dept

I recently explained why I thought Sprint made a rather large strategic marketing error in pricing the Palm Pre at the equivalent price of an iPhone: $199 (after annoying mail-in rebate that turns many buyers off). In fact, I argued why it would make a lot more sense to further subsidize the phone all the way to free, and make up the money on the backend with more subscriptions. Given how heavily invested Sprint was in the Pre, and how pathetic the sales have been to date, it really makes very little sense to keep the price so high. So, at the very least, I thought it was a good first step this morning when it was "announced" that Sprint was offering the Pre at $99. Of course, there were some silly things about this promotion as well. First, it only applied to new customers, transferring numbers over from other carriers. What better way to mock your loyal customers than to offer others a better deal? Second, they didn't just discount the phone, but gave you a "credit" that was split over the first three bills (better than a mail-in rebate, but still annoying). However, what was even stranger was that Sprint didn't even seem to understand the promotion itself. John Paczkowski noted that in some places on Sprint's website it said the promotion ran until October 10th. In others it said October 31st.

Apparently, the confusion at Sprint headquarters went well beyond that, because as the company attempted to sort out the confusion, it announced that it was doing away with the special promotion entirely. And yet, even after announcing it, the offer page remained on Sprint's site. It's not at all clear what happened here, other than Sprint seems somewhat clueless in how to do basic promotions, pricing and marketing. Obviously, the company intended to offer the phone for $99 -- it's on the company's own site. And yet, now it's suddenly claiming that it was a mistake? I can already see the business school case study on how not to launch an innovative smart phone.

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Why Sprint Should Be Giving Away The Palm Pre For Free

from the just-get-that-sucker-out-there dept

There was plenty of hype around the launch of the Palm Pre, which by all accounts is a pretty damn good phone (I've played around with it, and like it). However, Palm and Sprint made two huge mistakes in marketing it. First, they didn't have a really well-developed developer community building apps for it, so the app store is pretty weak. Apple did this with the iPhone when it launched (and we dinged them at the time as well), but Apple got away with it for two reasons: Apple is leading the field in such smartphones, and it's Apple, who seems able to bring developers to the table with cultish enthusiasm and loyalty.

Palm doesn't quite have that.

If the problem was that the SDK wasn't ready, Sprint and Palm should have waited. Launching before the phone was really ready was a mistake, and the company may be paying for it with rather weak sales after an initial burst. However, one analyst has a suggestion that I think makes a lot of sense, saying that Sprint should drop the price of the Palm Pre to $0.99. Basically, let Sprint subsidize more of the phone -- which it would easily make back in service fees (since the phone requires a two year contract with its most expensive data plan). Pricing the phone at $199 makes it a direct comparison to the iPhone, and that's the last thing that Palm or Sprint should want. But dropping the price to $1 (or, hell, give the damn phone away for free with a two year plan), would get it a lot of attention, and give people a real reason to switch away from other carriers or other phones, and give the Pre a shot. Trying to compete with the iPhone by just saying "but we're better" doesn't work. Rather than spending tons of money on creepy TV commercials that make no sense, why not use that ad budget to subsidize the phone in a way that really builds up a lot of attention and serious buyers? If Sprint did that, I'd go sign up for a Palm Pre that very day.

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The Death Of The Album Has Been Exaggerated

from the if-you-market-properly dept

The common wisdom you hear these days is that the concept of the "album" is dying thanks mainly to the ability to obtain single songs (whether through legal means or not). However, some are beginning to challenge that thinking. Bandcamp, a fantastic service for musicians we've discussed before notes that their sales data bucks the trend: full albums outsell single song downloads on the site. There are a few reasons why:

• Most Bandcamp artists are indie and attract fans more interested in complete works than the average Hannah Montana/Lady Gaga flavor of the moment consumer
• You can listen before you buy via Bandcamp. Not just 30 second samples, but rather the whole album.
• iTunes and others price most CD's at $10. Bandcamp artists have found that name your own price with a $5 minimum is a real sweet spot.
• iTunes and others encourage single track purchases with page layouts, buy buttons and featured tracks

This is definitely interesting. I know that I'm in the camp of folks who never buy single tracks, but always look to buy the full albums of bands I like, so that makes sense. But the really interesting point is the third bullet: if albums were priced closer to $5, people would likely be a lot more interested in buying. Again, this shouldn't be a surprise. When the old Allofmp3.com let people buy albums for sums between $2 and $5, it seemed to be quite popular -- even compared to the ability to just download albums. It certainly adds a lot of credence to the idea that one of the big problems the recording industry faced was really the super high prices of CDs.

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Looking For The $0.69 Songs On iTunes

from the gotta-dig dept

Last month, we pointed out that some of the music industry folks who actually "get it" were getting worried that when iTunes launched its variable pricing offering, labels would focus much more on jacking up prices to $1.29, rather than finding songs to offer at $0.69. Aaron Martin-Colby points out that this appears to have been quite an accurate fear. Gizmodo went looking for $0.69 songs and had a lot of trouble finding any. $1.29 songs, however, were quite easy to find. Once again, looks like the record labels are more focused on squeezing fans rather than giving them a real reason to buy.

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Has The Recording Industry Finally Realized That Selling 1,000 Songs In One Package Makes Sense?

from the could-it-be?!? dept

While we still think SanDisk's new music format is unlikely to get much traction, there was one bit of interesting news in a report on the new slotRadio device designed to play its music-on-microSD: you'll be able to buy slotRadio cards with 1,000 songs on them for $40. We've been wondering for years why the industry is so focused on the $1/song price, when new technology allows for tens of thousands of songs to fit in your pocket. In fact, if you get past the whole price-per-song thing, you start to wonder why you can't buy an iPod stuffed with thousands of songs based on exactly what you like. To date, it's always been a price issue -- with the industry requiring its huge fee per song.

But apparently that's changing. slotRadio has almost no chance (DRM included!), but the very fact that it got the industry to agree to a package that involves 1,000 songs for $40 shows that, somewhere, somehow, people in the industry are realizing that, when you can carry 40,000 songs in your pocket, the $1/song pricing model just doesn't make sense.

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Office Depot Employees Blowing The Whistle On Outright Scams

from the reputation-is-a-scarce-good dept

For many years, there have been stories of various shady online electronics (especially camera) retailers (many of whom are based in the same neighborhood in Brooklyn). The main scam is to offer super cheap prices on cameras to get you "in the door" (either online or in person), and then focus on trying to sell you all sorts of massively over-priced add-ons and warranties. If you turn them down, they suddenly "discover" that the original product you ordered is out-of-stock. At times, over the years, various authorities have cracked down on such resellers, though they often pop right back up under a different name.

Still, folks who know the business were well aware of such shady companies and often knew to avoid them... but it's a bit different to find out that some large brand name retailers appear to be doing the same. Laptop Magazine is reporting on a series of whistle-blowing employees at Office Depot, detailing how they pulled off similar scams. The typical "oh, that's out of stock" trick is apparently quite common, but it even gets more advanced, with some employees creating photoshopped price signs, in order to "hide" the price of an expensive warranty add-on in the "list price" for a computer. These practices are quite illegal, and it looks like the report might trigger some FTC interest, especially given the multiple reports, suggesting that this isn't just a few rogue employees.

It does make you wonder what Office Depot was thinking. The obvious answer is: "anything for a sale," but that doesn't tell the whole story. Sooner or later, companies that do this sort of thing are going to get caught -- and when that happens (beyond the fines), the damage to a company's reputation can be massive and debilitating. It just seems like the cost of being outed is so high, it's ridiculous that any company would encourage such behavior.

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Price Ceiling For Mobile Voice Service Continues To Fall

from the a-good-kind-of-deflation dept

T-Mobile has announced that it's expanding its offer of a $50 per month unlimited voice service plan across the US, becoming the first of the country's four biggest operators to start to fall into line with the $50 voice ceiling. Given the constant price battles in the mobile industry, you'd expect the other major operators to follow T-Mobile, or lower the prices of their current unlimited offerings that also include text messages and data. But one interesting aspect of the T-Mobile plan is that it's only available to customers that have had T-Mobile accounts in good standing for at least 22 months, making it more of an effort to retain existing customers than attract new ones. This reflects the rapidly changing focus of the business from attracting new customers to also retaining current ones. One of the quandaries posed by US mobile operators was that, historically, they gave better deals and prices (especially on new handsets) to new customers than current ones, giving good customers an incentive to churn to a rival so they could get a free new device. This stance has changed over the last couple of years, as the industry standard contract length has grown from one to two years. Second, the T-Mobile offer reflects the company's standing in the market. Its quarterly net subscriber additions are falling, while the company's seeing a lot of competition at the low end of the market. This new plan is aimed at helping on both fronts.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Valve Exec Explains How To Compete With Piracy

from the service,-value,-pricing dept

Last month, an exec at Valve Software noted that "Pirates are underserved customers" and said when someone realizes that, they also discover: "I can do some interesting things and make some interesting money off of it." It looks like the company is sharing some data to back that up now as well. A whole bunch of you have been sending in reports from Gabe Newell's keynote speech at DICE. Newell is the founder and managing director of Valve, and he provided plenty of reasons that show that "piracy" is not the issue at all: service, value and pricing can easily trump piracy.

He started out by pointing out something that we've discussed in the past: digital content is best viewed as a service, not a product. As a service, you focus on providing continual value -- and people are paying for that future value (which is a scarce good prior to delivery), rather than an infinite good already created. There's value in paying for that future (scarce) service, and it trumps paying for an abundantly available good.

From there, he noted that the reason "piracy" is doing so well is that the "pirates are ahead not just on price, but on service." In fact, he noted that since DRM decreases the service value for customers, it also tends to increase piracy, rather than decrease it.

Then, he showed how that combination of service and smarter pricing allowed the company to run experiments and make a lot more money -- competing quite successfully against piracy. The most stunning example: last weekend, the company ran an experiment with the game Left 4 Dead. It heavily discounted the price, and sales shot up 3,000%. And this wasn't just a case of building off a small base. The sales over the weekend were more than when the game launched.

In fact, it looks like a big part of the problem facing the industry is that they charge way too much for their products. Here are the numbers Newell shared from Valve's experiments with "sale" pricing:

• 10% off = 35% increase in sales (real dollars, not units shipped)
• 25% off = 245% increase in sales
• 50% off = 320% increase in sales
• 75% off = 1470% increase in sales

Newell then says when they decrease the price by 75%, they are making 15% more than when they were charging at full price -- though, I'm not sure how that math works out from what's stated above (I've been playing around with the numbers, and something is missing...).

Between all of this, it's pretty clear, yet again, that "piracy" is hardly the issue. If you provide a valuable ongoing service at a much more reasonable price, there's no problem at all. Once again proving that the issue is a business model issue, rather than a legal issue. It's too bad so few old school content providers are willing to recognize this, and quite troubling that some folks in our government are still missing this as well. It's going to lead to bad laws and even worse enforcement of the law.

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Comparing The Telecom Industry To OPEC Isn't So Crazy

from the too-much-regulation dept

Tim Wu has an op-ed in the New York Times comparing the American telecommunications market to the OPEC oil cartel. My esteemed co-blogger Adam Thierer calls the comparison -- and Wu's piece -- "absurd." I'm going to have to respectfully disagree with Adam on this one. Wu's basic point is the same one that Techdirt has been making for years: there's not enough competition in the broadband marketplace. Adam suggests that OPEC is nothing like the telecommunications industry because "OPEC is a GOVERNMENT-RUN cartel," implying, I guess, that the telecommunications industry is not a government-run cartel. That's strange because Adam loves to talk about how excessive FCC regulation is holding back the telecommunications sector. Likewise, Adam has written eloquently about the harms of the FCC's over-regulation of the spectrum. Government regulations still impose significant barriers to entry in the telecommunications market. That sounds like a "government-run cartel" to me.

It's true, of course, that the American telecom market is less constrained than the telecom markets in some other countries. And it's certainly less constrained than it was 30 years ago. But it's also far from being a free market. Potential entrants to the wired broadband market face hostile local governments who often enjoy cozy relationships with the incumbents and a variety of taxes and regulatory mandates. As for wireless, Wu puts it as well as I could: "The federal government dictates exactly what licensees of the airwaves may do with their part of the spectrum. These Soviet-style rules create waste that is worthy of Brezhnev." I read Wu as making a point that couldn't be more libertarian: that bad regulatory decisions have limited competition in the telecom marketplace. He explicitly calls for "relaxing the overregulation of the airwaves and allow use of the wasted spaces." Amen to that.

Now, Adam and Wu aren't going to agree on what should be done about these problems. Wu is a fan of municipal broadband, while Adam is not. Wu supports network neutrality regulations that Adam opposes. And Wu wants more spectrum to be made available for use as a commons, while Adam would prefer to see the creation of robust property rights in spectrum. My sympathies are with Adam on all three issues. But in criticizing those specific proposals, I think it's important not to lose sight of the big picture. The big ideological debate of 20th century telecom policy was over whether market competition or government planning is a better way to promote progress. I think it's a sign of how completely the pro-market side has won that argument that Wu explicitly clothes his modest regulatory proposals in pro-competitive, deregulatory language. Wu explicitly acknowledges the potential for unintended consequences and the importance of robust market competition. Wu is no libertarian, but it's silly to paint him as some kind of throwback from the 1930s.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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The Real Price Of The iPhone: $599

from the hey,-that-sounds-familiar dept

As was widely expected, it turns out that all the hype and fuss about the iPhone costing $199 was really hiding the key facts: it's only that price if you're buying it in the US, along with a long term contract with high service fees. At first it actually appeared as though the only possible way you could buy the phone was with one of those contracts. However, AT&T has now admitted that it will indeed sell the phone without a contract, but the price will be $599. While some unlockers may find that worthwhile, it's probably a bit much for most. Still, this once again highlights how Apple's predictions that it was going to change the economics of the mobile phone industry haven't actually been true. There are plenty of mobile phones out there that you can buy subsidized under a contract, which cost 3x as much without a contract. So, rather than changing the economics of mobile phones, Apple has now completely bought into them. Update: Of course, as some are realizing it's actually cheaper to buy the subsidized version and break the contract. The early termination fee is less than the difference here, so you end up doing better that way.

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iPhone Pricing Details: Getting iPhones To Unlock Just Got A Whole Lot Trickier

from the can't-play-that-game-any-more dept

When we wrote about the iPhone pricing immediately after the Steve Jobs keynote, it wasn't entirely clear what the details were, and if AT&T/Apple had shifted to a typical carrier-subsidized model. However, the details quickly became clear. Indeed, Apple and AT&T ditched the deal they had last year, whereby Apple actually received a cut of AT&T's service fees. Instead, AT&T is buying the devices directly from Apple and then selling them (at a loss) to customers who will need to sign up for a more expensive service and a two-year contract (rather than the old one-year contract). Basically, this is back to the traditional model of mobile phone sales -- which Apple had suggested was a thing of a past just a year ago.

Either way, though, the deal works out fine for Apple. It still gets the full price it needs to get on the iPhones and doesn't have to worry about recouping service fees from folks who unlock iPhones. AT&T, on the other hand, now becomes a lot more reliant on service fees, first to make up for the loss on the device sale, and then to show growth in its 3G network usage. To that end, it appears that AT&T has totally ditched the old model where you could buy an iPhone and "activate" it on your own. No more. Now you have to both buy and activate the phone in stores. You can't order the phones online and have them delivered to be self-activated. In Engadget's post, the writer seems confused by this, and quotes AT&T's bogus claim that it did away with self-activation because the company "found that many others wanted to complete purchase and activation in one step so they could walk out of the AT&T store with their iPhone up and running." If that were the case, they could have just added in-store activation, without removing the option for self-activation.

The real reason seems pretty obvious: if you have to both buy and activate the phones at the same time and they require a two year contract, it's a lot trickier to get your hands on an iPhone for unlocking purposes. Since the full process is supposed to happen at once, it seems unlikely that stores will be letting people walk out the door with an iPhone that doesn't also have a contract. Those hundreds of thousands of unactivated iPhones that disappeared into China? Not so easy this time around (of course, you'll also note that the new iPhone will be available in 70 countries, so they're trying to stamp out the issue from the supply side too). Yes, there will still be 3G iPhones out there that can be unlocked, but that market is going to dry up significantly and cost a lot more.

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iPhone Shows That Cheaper Phones Are Still Important

from the price-is-important dept

The iPhone has received plenty of well-deserved (and plenty of not-so-well-deserved) hype and press over the past year or so, but one of the key points that Apple tried to make when it launched was that a premium phone deserved a premium price -- and people would pay for it, even without a massive subsidy from a mobile operator, as is typical of other phones. And, while there definitely was a huge crush of Apple fans who had to buy the iPhone early, the fact that Steve Jobs quickly lopped $200 off the price, just months after it was introduced, suggested that the number of people willing to pay that kind of premium wasn't as much as expected. In today's keynote, as was widely predicted, Jobs launched the new 3G iPhones with another $200 cut off the price, so the base model with 8gigs is now $199 -- down into the range of your typical subsidized smartphone.

While the iPhone has done plenty to get people to rethink mobile interfaces, it seems clear that Apple may have initially misjudged how people would respond to premium-priced phones. Jobs had promised 10 million iPhones sold in the first 18 months, and has reached about 5 million in the first 12 months (nothing to sneeze at, obviously). However, to get up to that 10 million number, he had to drop the price to be competitive with other phones. It's a smart move (though, it's not clear if the $199 is subsidized or not), given the market conditions, but beyond the lessons that everyone will talk about concerning Steve Jobs' strategy in launching the iPhone, the most interesting of all may be how the initial pricing structure backfired -- but was changed so quickly.

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Google AppEngine Pricing: Get In For Free; Only Pay If You Drive Serious Traffic

from the watch-out-amazon dept

I've already explained why I believe Google's AppEngine could be a big deal if implemented well (still an open question). One of the open questions was price, though you could (and we did!) take a guess based on the original announcement. Well, now Google has released the pricing and it's pretty much what we expected: the platform is totally free for anyone who isn't driving that much usage, but as you ramp beyond a certain level, fees kick in. Those fees seem pretty similar to Amazon's fees (some minor differences, but not that many will notice). Assuming that the rest of the system works well, the free bottom end will hopefully lead to some interesting innovations. For developers, the only cost of building and testing a web app is their time. This effectively lowers the barrier for developing new web apps even further. For years there was talk about how cheap it was to develop web apps these days compared to a decade ago. With Google's offering, it's even cheaper.

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Looking For A Travel Deal? Have Your Browser Do The Walking... Out Of The Country

from the go-local dept

With the Internet, we now have a whole range of options when we need to book travel, ranging from online travel services to "name your own price" services. Whether or not we are better off still is up for debate, but now a new angle has emerged in the quest for lower prices. Booking travel through non-US websites may yield travelers a better deal -- even for the same exact offering. In one example, the rental car price quoted was 58 percent lower when booked through the foreign site. Travel companies defend this practice, claiming that they need to be able to set different prices in different markets in order to compete. But, this is merely the economic principle of price discrimination at work -- if you're able to get a higher price for any reason, then it technically is exactly what the market will bear. The mere fact that American customers visit different websites than Spanish customers naturally segments the market. So, by being able to increase their utilization by lowering prices in the appropriate markets, the price of the goods is driven down in the long run by this practice. That said, people will still be pissed off by this practice because buying from a different website does not seem like a "reasonable" explanation for that price difference. At least companies have not implemented higher prices for the wealthy -- that would definitely raise some eyebrows.

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