How Much Should Downloads Cost?

from the that's-the-big-question... dept

While everyone’s jumping into the music download store business, some are finally questioning whether or not the $1/song price is the right price. Many people say the price is way too high to get mass adoption on a large scale, but the record labels are complaining that they can barely make any money at that price already – since they need to sell so many songs at $0.99 per song to make up for the loss in album sales. Maybe it’s time they started offering things that were worthwhile on top of just the songs to get people to believe it’s worthwhile to pay up. If they believe they can’t make money selling music at a price people are willing to pay for it, then clearly they’re in the wrong business. I’d love to be able to “sell” each post of Techdirt for $10,000 per post, but I recognize not enough people are willing to pay that (in other words, no one is) for me to make a living that way. Thus, we had to come up with a different business model here. If the price you want to charge is above what the market is willing to pay, then you’re not going to last very long. Sure, some people are buying music at $1/song, but it’s still a small segment of the market.

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Comments on “How Much Should Downloads Cost?”

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wari (user link) says:

Emusic priced just right :)

USD$1 is really too much for audio entertainment that lasts for only 3-5 minutes and the fact that some form of DRM is included, you don’t really own the music at all, unless they say so.

There’s even no ‘physical’ thing included, like what the previous poster mentioned, cover art, lyrics booklet, etc. Looks like, I’d be paying for a lot more than a price of a CD, say, 15 songs, and there’s nothing for you ‘to hold’ in your posession.

A CD (that is not copy protected at least), gives you everything you need, I get them, rip them so that I get to listen to them on my iPod, and I also have an original that I can rip from in case I lose my files somehow.

I subscribed to E-music, at $14.99 for 65 songs per month (and they throw in 10 to 15 more of freely downloadable music per month) gives each song about $0.22, priced just right IMO. They are indeed high quality MP3s, meaning no DRM attached to them, you can do what you want with it except of course ‘share’ them. If you happen to lose your files from Emusic, they let you download them again at no charge.

That, is what I call service at a good price. No funny restrictions imposed on you, you get fair-use from Emusic, etc. I’m just a happy customer 🙂

Of course if you are looking for mainstream, popular music, I guess Emusic might not be your cup of tea. But really, mainstream and popular music are really a small part of the music world (not what RIAA wants you to believe).

Tony Lawrence (user link) says:

Why can't they make money at .99 per song?

I have no idea what the actual production costs for a song or album are, but I’m sure they aren’t tiny.

On the other hand, I’m equally sure that a lot of the cost is unnecessary. It may be impossible to cut the costs enough to meet that price point, but I bet there are less well known studios/artists that will find a way to do it. Quality may suffer, but probably not all that much. Technology makes it easier and cheaper every year. Garage bands can make very professional music now for amazingly small money. Their income might never reach Mick Jagger’s, but it wouldn’t take a great deal of popularity to make a living wage.

Fact is, if you can’t make money doing business the way you want to do it, you need to do something else. The world has changed, and the old money machine isn’t going to work. Tough luck, get over it, move on.

Dan Neuman says:

Re: Why can't they make money at .99 per song?

Apple has to give $.65 to the record label (or they at least kept it at that). They pay about 40% of the remainder (my analysis of 2.5% of transaction value and 30 cents/transaction on 5 songs per transaction) to credit card companies. The rest goes to staff, servers, communications fees, marketing and administration. I figure the lowest Apple could charge is $.84, but they would never cover their upfront charges (creating the store in the first place) at that rate.

The problem is the $.65 the label gets. Steve Jobs pointed out in Rolling Stones Magazine that the problem seems to be the advance payment the musician gets. Most don’t earn enough to pay it off, so the label eats that cost, making it up through earnings from hits. The solution seems to be to really reduce upfront costs to the label, but giving a bigger piece of earnings to the musician. This way the musician has bigger incentive to do well (the capitalist way). This works for independent musicians now, but they don’t get the exposure the labels can give them with radio play and music videos.

This may all change with time, but there’s a lot of inertia. Your best bet for change is in the marketplace: support the independents who make money off of earnings. This works just like buying organic food. Oh, wait…

Chris says:

No Subject Given

I don’t think Jobs really hit on the issue with advances. Very few musicians get significant advances. Most get development deals in which recording and production expenses are accrued against future earnings – but they have budgets too. Ever noticed how crappy the production quality, liner notes, cover art, etc are on an artists debut album? It’s a function of a limited budget. I think the costs are most likely in the distribution system. They can’t make money at a dollar a song becuase they are still funneling everything through the old distribution system.

As for price – the power of digital music is the ability to buy the one or two songs you want from an album for .99 each. $2 for the two songs I really like off an an album is a great deal compared to the alternative of buying the whole CD.

Crombie says:

$1 is TOO HIGH

$1 per song is how much it costs when you purchase a cd. That pays for the physical disc, the cover, the case the distribution….and if you purchase online it’s just a matter of putting a link to the file. The price for online music should be 25? per song. They will make money hand over fist with the amount of paying downloaders at that price. They just need to do it already!

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