Without absolute proof of collusion, it is very unlikely that the Surpreme Court will rule in favor of the plaintiffs. This same sort of thing has been tried in other industries, and almost always fails because there is no smoking gun. No meetings, no discussion, no memos, etc.

Much of the pricing of digital music has been as a result of Apple’s choices on how to market things. They set the original 99 cent price, and everyone who wanted to play had to join them. That sort of price pretty much establishes the market.

Over time, the labels pushed for higher prices, and Apple allowed there to be multiple price points. The higher price points also make Apple more income.

I think this lawsuit is without merit, and the original court got it right. With a very conservative / pro buisness supreme court, it is very unlikely it will get past them.

Nope. The surpreme court will not hear a case until it has reached it’s conclusions on other levels, and until there is enough out there for them to work with. The Supreme Court isn’t about discovery and trial, they are about settling issues on which the courts are often split.

The Supreme Court isn’t likely to take the case until there is enough out there to work from, and the question is narrowed to something that can be argued in the short time permitted to each side.

surely the prices Apple charge are what the labels said they were allowed to charge? same goes to shops as well. charge less, sell more, make more money, reduce file sharing. simple!

I do have to say as well that the title of the post is somewhat misleading. “Supreme Court Lets Price Fixing Claims Against Major Labels Over Digital Music Move Forward” isn’t really accurate, the Surpreme Court declined to hear the appeal for now. They didn’t grant any permission or allow a case to move forward, they just declined to rule at this point.

The Court didn’t do anything to encourage or allow things to move forward, they just declined to get involved at this point. it isn’t like both sides presented their case before the court and they ruled on anything.

I see the RIAAs defense…

Well if you don’t let the labels fix prices, then they would “gasp!” have to compete with each other. If you make us compete with each other then prices will go down. If prices go down then we are going to have to squeeze artists or our execs and lawyers would have to make less money.

So really you are just hurting the artists.

Its quite similar to their anti file sharing defense.

Well if you let people share the things that they “buy” (scratch that) “rent” then we will lose money. If we lose money then our execs and lawyers will make less money so we will have to raise prices. If prices go up then we will be squeezing the consumer.

So really you are just hurting the consumer.

The only ones immune to the hurt is the entertainment bureaucracy, and any attack on it is redirected right back to the artists and consumers. This is why I wouldn’t mind seeing all the big labels go bankrupt. Would artists get paid less? Probably. Would consumers have to pay more? Also likely. Would buying media finally be about supporting the artists who make it instead of the middlemen? Absolutely.

“However…labels are necessary as an alternative to self-promotion. There is still a place for [labels]…”

There, I fixed that for you. It doesn’t have to be the Big Three. Just because six year olds think dinosaurs are cool, it doesn’t mean we need them to still be walking around.

You might want to throw Bose and anyone else who locks their retail prices on that list as well.

You confuse market pricing with price fixing.

Price fixing requires agreement amongst all the parties, usually a meeting, a document, or an agreement made. There is no such thing. Rather, one set a price, and the others choose to either meet that price or go lower. Over time, the market settles in at a price where all parties are happy with what they are making.

Remember, much of this stuff is “non competing” goods. They compete mostly on their merits to the potential buyers. They are not all the same, they are in fact all different.

Airlines are a great example. All planes can get you from A to B, the prices vary depending on service, availability, etc. Quite often, one company will be a market price leader, and others will follow on those prices. On one side, they don’t want to have empty seats, and on the other side, they don’t want to leave money on the table.

Public pricing is very simple to work out, considering all the prices are out there.

The only thing that is “ridiculously apparent” is that all the players are watching each other very closely. Why do you think there was so much concern in the book selling market when certain places suddenly marked things way down? It is because each company as a result has to respond, like it or not. They are all watching.

Actually, in a competitive market, price should be equal to marginal cost. If the volume is high enough, I would expect the marginal cost of a CD to be well under $1. If there is no physical product to exchange, like an electronic download, I’d expect it to be even less.

To paraphrase Mal Reynolds from the show Firefly, as he prepped his crew on what could become a dangerous mission:

“The world is fifty percent middlemen, and they don’t take kindly to anyone interfering with their middlin’…”

Two problems here: While the marginal cost of a CD is fairly low (production wise), that is often not the big end of the expenses. To look only at the marginal production costs without any of the other cost structures to make the product is wildly misleading.

Band has 4 members. They work for months writing songs, come together in a rehearsal space and work on the songs, perhaps with a producer on hand to help them out to smooth things out. They perhaps hire external song writers to help out, maybe a really good programmer for some sequncing stuff, whatever. Finally they go on and record it in a studio, with an engineer, a producer, and a few other staff members (like equipment roadies, whatever). At the end of that, the final product is mastered, artwork designed, final pre-production test copies made and checked, etc.

It’s now a year since they started writing to get to the finish product. There are countless man hours put into the product, the studio time, the hired on people, etc. let’s say they went through $250,000 to do it.

Then they produce 500,000 CD copies for sale, each with a marginal production cost (your number) of $1. The problem? The fixed up front costs have to get covered somewhere. So now, your $1 is already $1.50, and we still haven’t covered any of the costs of getting the product to the retailers, stocking, maintaining, and finally selling the product, the distribution, their credit card discounts, they invoicing and collection from the record label to the distributor and all on down the line.

See? Your $1 “marginal cost” is just part of what it costs. When you stop thinking about marginal costs as the only costs, things make way more sense.

If airlines ignored the cost of buying the aircraft, of the gate fees, the ground staff, the maintenance people, and all those other things, they could fly for a whole lot less. But reality has marginal and non-marginal costs coming together to define what the true break even point is.

The only difference is that airlines have a fixed limit on the number of seats on a given plane, which means they use rate management / yield management to maximize revenue per seat, where as the band can produce the 500,001st copy for only the marginal and distribution costs, and perhaps finally start making some money.