40,000 Explanations For Why The Recording Industry Is Wrong About Business Models

from the start-counting dept

Among Apple's new iPod announcements was the inclusion of a 160Gb iPod Classic. As Steve Jobs noted, that means you could carry around 40,000 songs in your pocket. Forty thousand songs. Leave it to Bob Lefsetz to use this fact to point out how wrong the recording industry has been about music business models. He points out that this highlights how people want music -- in fact, they want lots of music -- and they want it conveniently and reasonably priced. That means at much cheaper prices (are you going to carry around $40,000 worth of music purchases in your pocket?) and without DRM.

He also highlights how the idiotic focus on getting more per song just as everything else about music and technology gets cheaper is hurting the record labels much more than it helps them. He compares the situation to how expensive it was to use mobile phones a dozen years ago. People were scared to use mobile phones because the charges were ridiculously high. You only used it in special circumstances. Today, however, the rates are much, much lower and that's massively grown the market for mobile services. Do you think the mobile operators would prefer to go back to $1/minute charges? Yet, why does the recording industry insist on $1/song charges when the infrastructure can support an entirely different model. Instead, make the music cheap and easily accessible. Take advantage of the infrastructure that allows people to carry around 40,000 songs in their pocket. Sell iPods that are pre-loaded with all kinds of music and watch them fly off the shelves. The record labels (and their supporters) will claim that it doesn't make sense to sell music for less when people are clearly willing to pay $1/song, but that's misunderstanding the market potential. People were willing to pay $1/minute for mobile phone calls too. And they were willing to pay $150/month for broadband access. But as all of those things got much, much cheaper it opened the markets up much wider, provided all sorts of new applications and services that made them more and more valuable -- and helped make the companies much richer by providing better services at cheaper prices. Why can't the recording industry understand that?

Filed Under: business models, ipods, lefsetz, riaa, storage, trends


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  1. identicon
    nipsey russell, 8 Sep 2007 @ 9:38am

    song cost

    CST: the 160g ipod classic is a video ipod (http://www.apple.com/ipodclassic/) "up to 200 hours of video" .

    however weighing in on the song pricing debate, $1 per song is ridiculous (any cost for a DRM song is more ridiculous). CNN once showed the cost per CD of all the components. I took a shot at breaking out costs per song and reducing the costs that felt could be reduced in an e-music environment (see snapshot here*)and using a conservative approach can get the cost per song below $0.50....i'm sure someone more knowledgeable can do a better job. Anyway, for me it needs to be well below 50 cents (i think i was getting 30 or 40 cents when using emusic) and there must be NO DRM, none, or i wouldnt pay a penny (Actually, i get "free" songs from my cafeteria occasionally and throw them in the trash)

    *costs: http://farm2.static.flickr.com/1368/1346569173_f33fb6125d_o.jpg

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