Time To Drop Song Download Costs
from the doing-a-little-economic-analysis dept
We’ve been waiting patiently for the inevitable price war to break out in the online music download store world, but so far it’s (mostly) held up due to the high fees the recording industry continues to charge. Now, Newsweek’s tech columnist Steven Levy, is pointing out that if the recording industry dropped their fees, they’d sell a lot more music. He thinks that sooner or later, the industry has to realize that they’ll do even better if prices are cheaper. He points to Real Networks’ experience (which is a bit skewed since it was a promotional plan) in dropping the price by half — but which allowed them to sell six times as many songs. If this ratio were to hold (a big “if” obviously, since it assumes people will spend more overall) then the industry would end up making a lot more money by cutting their price — but, instead, of course, they’re all looking for ways to raise prices or force people to buy bad songs to get good songs.
Comments on “Time To Drop Song Download Costs”
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Can any price model really work at this point? Once people have the taste of “free” in their mouths what can be done to top that in a monetary way?
One idea would be to have a scaling price model that rewarded the “early birds” – basically let people download music very inexpensively during the initial release and then scale it up to a still cheap, but not as cheap price point. The idea would be to get as many people to be the “early adpoters” as possible, recognizing that once it’s publicly available it will become traded via P2P by some yet still purchased on music sites by others. /shrug
threshold of convenience
For content there is a threshold of convenience. Whether it is getting the 9/11 report printed instead of reading it online, renting or buying a DVD instead of downloading GBs of video data over broadband, or *easily* getting songs online. Buying music online can have benefits over free: No hunting through sloppily labeled files, poor quality RIPs, varied quality P2P peers, etc. When DRM significantly limits the use of downloads, or content selection is poor, or the search engine is rotten, free and pay still compete on convenience though.
Some will take free over pay even if costs per song were reduced from current rates and the pay services were awesome, mostly those who either have little $ to spend on music and those to whom time is a less valuable commodity than money. We had those people in the 70s/80s too — they taped music off the radio complete with the DJ chatter.
I too believe that song prices are still higher than than the threshold of convenience for most people. Halve the price and continue to improve the services, and far more people would be likely to take an easy means of getting the songs they want.
49 cents per track, and $4.99 per album is the right price. What they’ll lose in royalties per track, they will easily make up in volume. The Pizza industry has known this for decades.