iTunes: 99 cents across the board or mix it up? Matt 27 Sep 2005

122 comments Latest by Adam

Apple and the major record labels are headed for a showdown over pricing. Steve Jobs says the labels are getting greedy and that price increases will lead to more piracy. The labels argue that prices in non-digital musical formats vary (e.g. they charge more for the new Kanye CD, less for an old Simon and Garfunkel one) so iTunes prices should too.

“There’s no content in the world that has doesn’t have some price flexibility,” said Warner Music Group Corp. chief executive Edgar Bronfman at the Goldman Sachs Communacopia investor conference here. “Not all songs are created equal. Not all albums are created equal.

“That’s not to say we want to raise prices across the board or that we don’t believe in a 99-cent price point for most music,” he said. “But there are some songs for which consumers would be willing to pay more. And some we’d be willing to sell for less.”

What do you think?

122 comments so far (Jump to latest)

Fred 27 Sep 05

I’m guessing selling older music “for less” means $.89 and all the new stuff would be $1.99.

dale. 27 Sep 05

Who cares what I think, i’ll be getting screwed if they say so anyway.

Rahul 27 Sep 05

I say yes to reduced prices for older digital music, but still keep the maximum at the current $.99. That way you sell more of the oldies relatively when compared to today’s popular music, and possibly draw in a new audience who were previously unwilling to lay down the cash for their nostalgia. In the same way, you might get more people being curious about older music now that it’s cheaper and be able to market it to them as well. But raising the price in some crude commercial way to “balance things” seems like far too opaque a business move.

Benjy 27 Sep 05

I agree with Rahul that they should use the .99 as a cap and drop prices for older music.

With the SuperSaver pricing on many greatest hit albums, etc. the iTunes prices are higher than for a physical CD at Besy Buy. Since a greater portion of the cost goes to actually buringing, packaging, distributing and warehousing those CD’s the cost savings from an electronic download should be passed on to the consumer. Say $4.99 for those back catalog albums, .49 for songs.

Gopal Balaji 27 Sep 05

warner thinking of other way around and may spoil the net generation music selling and they lead people to go in piracy anything in this world are priceless to that point where their ultimatum is so warner think other way to jobs saying and they were going to lose the music business in the hands of pirates who are already giving songs with p2p for free.

lets think again and decide warner..

loss is not for us and for you only..

Dan Boland 27 Sep 05

One thing to remember is that Steve Jobs has said himself that the iTMS is just a means to sell more iPods, so I think his resistance to a price increase has more to do with the negative impact on Apple’s bottom line than any piracy concerns.

But I’ve had a question during this recent spat that no one I know has been able to answer: if the iTMS is grossly undercharging for current hits, then why are the major labels seemingly OK with subscription models such as Napster, where people can download all the current hits they want for a nominal fee? It is knowing that the draconian DRM will ultimately screw them out of what they paid for?

Polly Stark 27 Sep 05

The price of hard-copy music is generally a function of its popularity, rather than its age. So, HMV keep a few old Ani DiFranco albums knocking around, but you have to pay through the nose for them. In contrast, Simon and Garfunkel (ack) records are popular and so they can be knocked out for less.

Record stores justify this by saying that it costs them money to keep less popular music in stock, as the sell-rate is low. With a digital music store like iTunes, storage costs are very low, therefore customers should not be asked to pay more.

Now, it might make a sort of sense to charge more for albums that were more expensive to produce, or are longer, or get better reviews, but that is not the justification used by Warner.

Dan Boland 27 Sep 05

Rahul and Benjy: Ha! You both know that would never happen.

jules 27 Sep 05

I’m not an unequivocal “Adam-Smithian-Supply-and-Demand” proponent, but it does seem ridiculous to hold all music to the same fixed price.
Artists/entertainers who have earned their poplarity should be rewarded with a premium; new players should have the freedom to discount, encouraging consumers to take a risk on them.

Wesley Walser 27 Sep 05

The demand of a product has always influenced prices, but it sure is nice to be able to cound on one flat rate.

Although I would say that any argument that the labels are throwing out about the cost of full albums is completely void since I don’t think I have bought a $9.99 cd in several months because so many of them are at differant prices.

Brian Breslin 27 Sep 05

I think the big argument at the apple-riaa table is not that apple is charging too much, its charging too little. And if you think the labels have the foresight to think of the future you are sadly mistaken. they are all about the here and the now. they could care less if in 5 years sales of $1.99 downloads are zilch as long as today they are soaring and their stock is doing ok.
what the industry needs is some super-rich guy to come in and setup recording/production studios across the country. then he rents out the studios to the artists, they become their own producers so to speak. then give them contracts that they own 95% of their music licenses (or pay upfront for studio time - at a rate that is profitable to the studios).
this would give the artists the responsibilities and economic rewards and costs of being a musician.

Dave Lyon 27 Sep 05

I think a major factor for me is that I am willing to waste 99 cents. I may never have heard of song or maybe I’m not sure if this is the track I want. But I buy it anyway. If it’s the wrong one, oh well. If I don’t like it, oh well. But if it were any more, I honestly wouldn’t ever chance it. iTunes is the only way I buy music now. I’ve never been a big music buyer. I had a couple CDs that I really liked and that was it. Same with my wife. But for a year or more, we’ve been buying steadily from iTunes because the price is forgiving. Raise the prices and in many ways we will go back to being satisfied with what we’ve got rather than trying out something new.

Dan Boland 27 Sep 05

And if you think the labels have the foresight to think of the future you are sadly mistaken.

That’s exactly why the major labels find themselves at the mercy of Steve Jobs. How the leaders of such a lucrative industry as popular music could see the internet as a threat rather than an opportunity is beyond me. They’re reaping what they’ve sown.

Johan BergstrŲm 27 Sep 05

Creating a variable price-range will probably only cause higher prices in the end. Lowering prices on old stuff probably won’t make people buy it either. Music is not like clothes or electronics where you buy if the red sale signes are up. Great music will always sell; check Madonna or U2 sales?
What we’re going to see is $.79 for older stuff and newer at ~$1.59… Well, its impressive to see that Apple has such tremendous influence over the music business..

Benjy 27 Sep 05

While my hopes for iTunes pricing might be a bit optimistic, there isn’t that much upside movement in pricing for downloaded songs.

Wal-Mart, Target, Best Buy, Circuit City, etc. regularly sell physical CD’s for $9.99 - $12.99. Who’s going to pay as much or more for electronics files that can disappear if a hard drive crashes and have lower sound quality? I’d gladly pay an extra $2 to have the physical disc that I can rip to my computer at my desired compression, play in my car’s CD player, and re-rip if necessary.

Chris Harrison 27 Sep 05

The higher the price, the less likely I am to buy it. That’s why I stopped buying CDs - they aren’t worth the money. Most albums tend to have 2-3 decent/good songs and the rest are crap. Yet, the album companies expect us to drop $13.99 to buy the whole album. Screw that and screw them! If I’m going to spend my money on music, I want to buy a la carte if/when I feel like it, and get the songs I want.

I hope Apple wins this battle.

Chris S 27 Sep 05

What Benjy said.

When we purchase an electronic format, we are also purchasing restrictions inherent in the format. So if the pricing structure is going to be flexible, .99/song should be the high end.

Neil 27 Sep 05

I agree that they should hold the maximum pricing at 99 cents, but let’s face it: 99 cents is a different price depending on what country you’re buying from.

For example, here in Canada tracks are 99 cents Canadian, which at current exchange rates means each track is actually 85 cents US. In the UK each track is .79, which converts to $1.40 US.

Why the difference? I’m glad to pay 85 cents US for a track, but the discrepancy doesn’t make sense to me, either.

I agree with Polly, though - you can’t use the old music store justification for pricing as it’s basically moot with digital downloads. Server and bandwidth costs are part of the new overhead, but I would hazard a guess that this is much, much lower than stocking a physical CD in a store.

The idea that all tracks are priced (and valued) equally might seem strange, but this makes sense. Who’s decision is it that the latest Ashely Simpson track is more valuable on an artistic level than, say, a Mozart concerto? It should be the consumer that determines artistic and financial value (with their pocketbook) and not the record labels.

DaleV 27 Sep 05

The market will determine. I am not opposed to variable pricing, but I will be one of MANY who will not pay (much) more for anything … and I will resort to allofmp3.com or other in those cases without a hint of guilt.

The record companies are truly grasping at straws — with each passing day they lose more leverage. I hope they all crash and burn. I’d like to see artists or their management be able to upload new music to services and set their own pricing … Heck, I’d like to put my band’s music on iTunes and charge $.05.

Geir 27 Sep 05

What they should really do, if only because it would be an interesting experiment, is to price the songs dynamically.

So a song starts at say .69 when released. Its price then increases or decreases according to the speed at which it is selling at.

A huge hit will rake in the maximum amount people are willing to pay, and a disappointing performer will get a boost with a lower price which will increase when people start to catch on and discover the artist.

So the price “emerges” according to the wisdom of crowds if you know what I mean. Oh well, best get back to my crack pipe now.

Joshua Rudd 27 Sep 05

It’s greed. In-demand songs will sell thousands if not millions of times for 99 cents. Older and not-so-popular songs will sell a few hundred times (or thousands). They’ll make more money on the popular songs anyways — but if they start charging more, their total sales might go down.

i’m betting that some math guru will set the prices where they think they can maximize their profits.

That said, i think they should stick to the 99 cents.

JF 27 Sep 05

The “I’m not paying for more” line is the same type of “greed” the record labels are exercising when they saying “I’m not selling for less.” It’s the SAME THING.

You want to keep more of your money, they want more of your money. You’re both after the same thing — your money. You want more, they want more.

So, before you start throwing “greed” around, realize that you’re just as greedy as the labels. And, in fact, you’re worse than the labels if you resort to theft to keep more of your money.

Adam Thody 27 Sep 05

Don’t they realize this is the kind of thinking that got them into trouble in the first place? People stopped buying CDs because they were ridiculously priced, and we all know this is where they’re headed when they say “range”. Up.

iTunes is a model that clearly works, why mess with it?

JF 27 Sep 05

Donít they realize this is the kind of thinking that got them into trouble in the first place?

They didn’t get themselves into trouble, you got yourself into trouble when you stole their product. They aren’t breaking the law, you are. They’re selling their product just like every other business is selling their product. You are stealing their product just like every other criminal who takes without paying.

People stopped buying CDs because they were ridiculously priced

People stopped buying CDs because they could steal them for free online. That’s why. If CDs were $7.99 people would still be stealing them online. Music is stolen because it’s EASY and the chances of being caught are close to 0, not because it costs $9.99 or $11.99 or $14.99 or $17.99.

Tim Uruski 27 Sep 05

To say that “Not all songs are created equal” is ridiculous. Sounds like all that filler material is finally coming back to bite them. Maybe they should change their distribution model instead of trying to bend the old one into the new digital world.

Josh Williams 27 Sep 05

The problem is not with the pricing. $.99 a song across the board is fine. The problem is that the record companies are still in the old mindset of selling “albums” which typically contain a few hit songs, and a bunch of crappers.

The answer is not to raise the price of the hits to subsidize the crappers. The answer is to stop paying bands up front for the crappers they put on an album — which can simply be accomplished by paying less money up-front, and going to a full-on royalty get-up with less advances.

The result is albums that are stronger from track 1 to track 12 because each song can be decided upon and bought at an individual level if the purchaser chooses too. Green Day masterfully realized this with their latest album, and they have made it easy to consume the entire thing. Each song can stand on its own apart from the album, and I’m sure they’re doing just peachy.

However, if your band swings a one-hit-wonder, you’re going to have a tougher time selling an album this day in age, because people can just buy the one track — for $.99.

This is where its gets sticky. If that one song is killer, as a band, I might want more than $.99 for the song — but you’re going to have to determine what the market can bear. And as a single band, you’re not going to sway Apple to change their prices.

The price adjustment then benefits the labels far more than the bands involved (it’s totally a CYA deal). And some day soon, bands will begin to think like businesses, and realize that with today’s technology, they don’t need the label at all. This day is coming faster than the labels realize.

In fact, in 10 years, do you think iTunes and its competitors (as a form of distribution) might replace labels altogether?

Jordan T. Cox 27 Sep 05

Disclaimer; I’m not an iTunes user.

I think one of the cool things about iTunes is its pricing uniformity. Per Apple’s usual strategy, it’s simple. The user doesn’t have to think or weigh costs, which I think is pretty cool. If pricing variety is introduced, that simplicity will be lost.

As to Mr. Thody’s comment, that’s absolutely right. The RIAA is only thinking about going up. They’re a corporate body whose goal is to generate revenue, increasing revenue. They are not here to provide a service, or aid in our love of music - they’re here for profit.

JF 27 Sep 05

Sounds like all that filler material is finally coming back to bite them.

The labels don’t write the songs, the bands do. Blame the bands for crappy songs.

Jason Rothstein 27 Sep 05

People stopped buying CDs because they were ridiculously priced

People stopped buying CDs because they could steal them for free online. Thatís why. If CDs were $7.99 people would still be stealing them online. Music is stolen because itís EASY and the chances of being caught are close to 0, not because it costs $9.99 or $11.99 or $14.99 or $17.99.

Actually, people haven’t stopped buying CDs. CDs still account for 98% of music sales, and rose 2.3% in 2004 despite incredible gains in online music sales. So neither of these arguments hold much water.

Jason Rothstein 27 Sep 05

People stopped buying CDs because they were ridiculously priced

People stopped buying CDs because they could steal them for free online. Thatís why. If CDs were $7.99 people would still be stealing them online. Music is stolen because itís EASY and the chances of being caught are close to 0, not because it costs $9.99 or $11.99 or $14.99 or $17.99.

Actually, people haven’t stopped buying CDs. CDs still account for 98% of music sales, and rose 2.3% in 2004 despite incredible gains in online music sales. So neither of these arguments hold much water.

Doug 27 Sep 05

JF, the difference is that I want to keep more of MY money. It’s not greedy to want to keep the money I work for. No product has an intrinsic value. All products have a value assigned by the market and it fluctuates. As an active participant in that market it is my right to say that a product doesn’t have a value worthy of more of my money (i.e. my time i.e. my life). It’s not greed, it’s value assessment. And if I say that I won’t pay more than .99 for a song that is my prerogative. I opt not to buy. I opt to not have the product. If the record companies want to opt not to sell then fine that is their prerogative. But when they are consciously selling and refuse to heed market forces and demand on artificially inflating prices, that is greed.
I agree that raised prices at iTMS means increased sales at allofmp3.com and increased P2P traffic.

f5 27 Sep 05

The labels donít write the songs, the bands do. Blame the bands for crappy songs.

JF — Uh, yeah…the labels never force new artists to work with producers and label execs that ‘help’ the artists ‘find their commercial voice’ and severly water it down in the process…or anything like that. I just don’t think it’s that black and white.

JF 27 Sep 05

Actually, people havenít stopped buying CDs. CDs still account for 98% of music sales, and rose 2.3% in 2004 despite incredible gains in online music sales.

That’s true too.

Richard Spindler 27 Sep 05

I hate complicated solutions for simple problems. Keep it simple by selling each song for 99c, and that’s it.

This is what I like about Apple, their solutions are as simple as possible, but not any simpler. :)

-Richard

JF 27 Sep 05

JF, the difference is that I want to keep more of MY money. Itís not greedy to want to keep the money I work for.

And the labels want to keep their money for the work they do and the risks they take. It’s the same thing. Everyone wants more of everything. The problem is that people don’t want to pay for more — they want more but they want to pay less.

Look, if you don’t want to pay their prices, don’t buy their product. But don’t steal because you don’t want to pay — that’s criminal.

pwb 27 Sep 05

As long as iTunes remains in power, there will remain pressure between Jobs to keep pricing consumer friendly and low and the music creators to provide flexible pricing. Jobs will surely see that pricing *must* get more flexible in order for iTMS to remain competitive. There is not a single product in the worls where pricing is completely inflexible.

I foresee a gradual move to lower pricing for older titles ($0.79/7.99 for titles > 1 year) and higher pricing for new titles ($1.49/14.99 for new or pre-releases).

And it would seem that at some point iTMS would offer a subscription option due to its total superiority for music discovery.

Sam 27 Sep 05

“Criminal” is such a stupid and extreme label for someone who shares mp3s via p2p.

Ever edged over the speed limit or crossed the street without right of way? Ever made a mixed tape of music you liked for someone else? Why you must be a CRIMINAL!

Kyle 27 Sep 05

I could not care less if they introduced variable song prices into iTunes. I really don’t care to *own* mp3s, and am perfectly happy with the rental model offered by the likes of Real, Yahoo, and Napster, especially since all three recently offered DRM tools that allow you take you’re music on the go.

I just wish Apple would open their Ipod to allow compatibility with these services. It’s the only reason I haven’t bought an Ipod yet.

I don’t understand the fascination/popularity of iTunes, but I understand I’m in the minority.

Oh, and I also agree with your comments, Jason.

Peter 27 Sep 05

I agree with the music labels. I mean, control from the top has never worked out in the long wrong. I’d hate to see the music labels control pricing, but I’d love to see the market have a voice.

Steve Jobs 27 Sep 05

consumers want a fixed price

so give them a fixed price !!

JF 27 Sep 05

Ever edged over the speed limit or crossed the street without right of way? Ever made a mixed tape of music you liked for someone else?

Equating retail theft with edging over the speed limit neither helps or hurts your case — it’s irrelevant.

How about using something closer to the point. Have you ever wanted a shirt at a store but it was priced $0.20 (yes, 20 cents) too much so you walked out without paying? Have you ever been to Virgin records, thought the CD was a few bucks too much, and tossed it in your bag and snook out the front door?

That’s what we’re talking about. And that’s called shoplifting. And that’s theft. And it’s criminal. Yes it is.

Dan Hartung 27 Sep 05

Well, I say let the price float. I don’t expect all of anything else to cost the same.

But I also say this: RAISE THE PRICE

by

one

cent.

Thomas 27 Sep 05

About the T-shirt analogy. If I take a T-shirt from you, you won’t be able to wear it. If I download an mp3 from you, you will still be able to listen to it. With the T-shirt, you’ll have less and I’ll have more. With the mp3, we’ll both have more.

Darrel 27 Sep 05

So, the RIAA finally has a succesful model for online sales that has been embraced my consumers and now they want to screw even that up.

Brilliant business minds those RIAA folks.

I’m constantly perplexed by the fact that some of the very leaders in our country who claim that ‘unregulated capitalism’ is the answer to everything write laws specifically to favour poor business models like the RIAA who refuse to listen to the consumer and instead legislate their way to profit.

So, before you start throwing ďgreedĒ around, realize that youíre just as greedy as the labels. And, in fact, youíre worse than the labels if you resort to theft to keep more of your money.

Who’s talking about theft? This is a copyright infringment issue. And when their are alternatives in the market, consumers take them. Business either listens, or throws a tantrum. The RIAA is choosing the latter.

If CDs were $7.99 people would still be stealing them online.

You got some numbers for that, JF? Seems to me the iTunes pretty much disproves that. Good user experience + fair(ish) pricing + easier to use than the alternative (Kazaa, etc.) = more sales.

And the labels want to keep their money for the work they do and the risks they take. Itís the same thing.

No, the labels want to control a market. They don’t want any consumer-driven market swings. The labels, since mid-century, have gotten wealthy due to a very controlled market. They hand pick a few genres, market the shit out of a few select bands with a few hit singles, flush out the rest of the album with fluff, and then sell at a nice profit marketing to the masses.

The internet (+ sattelite radio, digital tv, etc.) completely breaks down their model. Nowthe RIAA has to actually figure out what people want…which is much less efficient. They now need to market 100 artists to 1000 people for the same amount of sales rather than 10 artists to the same crowd.

It’s a dying business model, pure and simple and instead of adopting, they are kicking and screaming their way into oblivioun. Artists are confused, and haven’t quite jumped ship yet, though hopefully that’s happening (even long-time RIAA business model stalwarts (sp?) like Madonna have finally realized iTunes is the business of the future…)

Look, if you donít want to pay their prices, donít buy their product. But donít steal because you donít want to pay ó thatís criminal.

Only because the RIAA has Orin Hatch and the like believing their fake tears.

Darrel 27 Sep 05

How about using something closer to the point.

Comparing digital media infringment to physical property theft is about as far away from similiar points as one can get.

Ironically, even the punishment is different. Steal a t-shirt? Pay a fine/spend the night in jail. Copy a shitty Brittney Spears single? Get sued for 6 figures. Seems fair.

George 27 Sep 05

Theft screws up the supply & demand model by not suppressing the garbage and encouraging the cream. If the pricing model is incompatible with what the market requires to encourage its discriminatory purchasing, then the data regarding what the market demands is worthless. If the market demands no-thought pricing (the 99Ę-for-any model) then those involved in the supply chain either need to adjust their businesses to accommodate the pricing, or they need to find a new pricing model that works, or they put out material that people love and will purchase with wild abandon with little regard to the price.

Whether music listeners are an elastic marketplace is not so much of a question… the late 90s show just how easy it was for people to justify theft versus paying what the labels and retailers demanded. The success of iTMS shows that people are willing to spend money on music even with DRM restrictions.

I’d like to see trend data on both CD sales, overall online delivery music sales, and broken down by the big 4 of the online music stores. I’m inclined to think that the online music stores have reclaimed portions of the lost CD sales and fostered new music buyers, and a lot of that has to do with simple pricing models.

The big labels have a history of screwing up anything they get their hands on. I hope Jobs keeps their nonsense away from the simplicity that Apple has a knack for mastering.

David Ely 27 Sep 05

Hell, why not make it really fun and have dynamic pricing? Have the price change itself based on popularity. Once sales drop off the price can decay until they pick back up.

David 27 Sep 05

How about using something closer to the point. Have you ever wanted a shirt at a store but it was priced $0.20 (yes, 20 cents) too much so you walked out without paying? Have you ever been to Virgin records, thought the CD was a few bucks too much, and tossed it in your bag and snook out the front door?

Thatís what weíre talking about. And thatís called shoplifting. And thatís theft. And itís criminal. Yes it is.

No, that’s not what we’re talking about. Stealing a CD from a store is shop-lifiting, downloading mp3s from p2p networks is copyright infringement. They live in two separate worlds. If you steal a CD, you have broken the law and are subject to the legal system. With copyright infringement, the copyright holder has the option to enforce their copyright. If you steal a CD, the record company doesn’t have it in for you - that’s the record store’s bag. It isn’t that you are stealing music, but the physical piece of media. That’s the issue and there is a significant difference between the two.

Copyright infringement can get you in trouble with the law, but calling that person a “thief” or “shop lifter” isn’t correct and is nothing more than a scare tactic to prevent would-be copyright infringers.

That said, I’m mostly one of the I-don’t-care-the-price-I-wouldn’t-buy-anyhow folks. Pay roughly the same amount for a castrated, limited version of an album I could otherwise get hassle-free? I’ve bought two records on impulse from iTMS and have been very disappointed (mostly with the second purchase).

But, as far as singles are concerned, if iTMS is the only place I can get them, the every-song-will-cost-me-a-buck model works amazingly well. It’s an easy amount of money to part with. I don’t think they are too interested in making older stuff significantly cheaper to move more inventory, rather they’re fairly certain they can milk singles for a bit more. I’m against killing simplicity, but as they always say, if the market supports it…

Tom R. 27 Sep 05

I’ve never understood why the filesharing issue brings up such heated emotions.

On one hand I really don’t get why some people are so angry at the record companies for doing what is essence every company in the world attempts to do: maximize their profits. I agree that they have consistantly chosen to do so in ways that are short-sighted and doomed to eventual failure, still I don’t see why people are so pissed at them as compared to any number of other companies, many of whom provide services much more critical than music, who do the same.

On the flip side I cannot understand why so many people get so angry at music downloaders. Of all the injustices in the world it seems like music downloadng incredibly trivial. We all (yes all) skirt some laws in our daily lives; why some people get all high and mighty about music downloaders is beyond me. And no, downloading a song is not the same as shoplifting a CD. I’m not saying downloading is OK, but it is just not the same as theft.

NathanB 27 Sep 05

Thomas is right. That’s why it’s called copyright infringement and not theft JF.

Oddly enough, if you’re caught shoplifting you’ll probably get a $300 dollar fine for your first offense, but if you infringe copyright you could face prison time and ruinous court fees.

Darrel 27 Sep 05

Nicely put, Ruminator.

Speaking of data we’d like to see, I’d love to see a survey as to why iTMS is the preferred online store. It could be because of iPods, but maybe it’s the easily breakable DRM? I personally prefer ITMS because I can buy a song, and then make it a ‘usable’ MP3 that I don’t have to worry about moving to a new machine in the future.

Hell, why not make it really fun and have dynamic pricing? Have the price change itself based on popularity.

That’s Magnatune’s model.

On one hand I really donít get why some people are so angry at the record companies for doing what is essence every company in the world attempts to do: maximize their profits.

Theres a variety of ways to maximize profits. Just two methods off the top of my head:

1) listen to customers. accomodate their needs and wants. Deliver product and service at a price point that leads to high volume sales and happy customers

2) sue the ass of your customers. bribe congress to pass laws in our favour. Beat them with a big stick until money falls out of their wallet.


many of whom provide services much more critical than music, who do the same.

Very true. I suppose the difference is that many of these other industries don’t have an easily accessible ‘arachists’ alternative that things like P2P offer.

Maybe some examples would be the Telcos, and the ability for us to now circumvent them with VOIP technlogies, or Television and TIVOs.

I don’t blame an industry for being scared of their own extinction. I do wish they’d innovate like Jobs rather than cry about it. They don’t win much sympathy from their customers when they do that, and you’d think they’d want their customers to be on their side.

Delfin 27 Sep 05

Crazy args. As Mr. David Bowie mentioned in an interview, music industry reaches a point of illness where they criminalize the users and consumers of their products. So they want them to pay more for the same.

I like Job’s idea - quite democratic - selling all music to the same prize. So benefits for musicians and companies are equal independently of their fame or chart position.

In fact, A top-chart music band probably would sell more songs, what will be good for them and their fans. In the other side, new folk band for example,will get the same percentage of royalties selling song through ITunes than famous worlwide bands . And this looks fair to me.

The rests are CEO’s excuses. Human nature resists to accept innovations, and music executives love more their PowerPoint analysis than their clients.

Or so it seems.

Darrel 27 Sep 05

Oops…here’s that Magnatune Link

Also, Josh, that guy certainly was a jerk, but really, how did that hurt your business? Do you think this guy would have purchased your icons himself had he had the money? I kind of doubt it.

The RIAA has been trying to use this ‘every downloaded song = 1000 lost sales’ equation when it simply isn’t so. Yea, some freely copied digital stuff is a lost sale, as someone copied it instead of buying just because it was easier to do. But much of digital copying…especially commercial pirating, is in a market that likely wouldn’t have paid for your stuff had the illegal market not existed.

I do some stuff for a software company and we know we have copied versions of our software out there. It bugs us, but, really, most that have copied it weren’t going to pay for it anyways, so we don’t loose sleep over it.

Eric 27 Sep 05

JF writes:

If CDs were $7.99 people would still be stealing them online.

Darrel responds:

You got some numbers for that, JF? Seems to me the iTunes pretty much disproves that. Good user experience + fair(ish) pricing + easier to use than the alternative (Kazaa, etc.) = more sales.

I say:

Yeah right, Darrel, as soon as the iTunes Music Store came online, all file sharing/stealing/copyright infringement [choose your term] came to an abrupt end. Look, all JF needs is the number 2. As long as 2 persons are still getting their music for free off the Internet, then JF is right, people continue to [insert term again here].

Darrel 27 Sep 05

And this looks fair to me.

Ha! I think that sums up things well. Industries like the RIAA cringe at ‘fair’ markets. They want the upper hand. Always. ;o)

Keith Free Ellis 27 Sep 05

To be blunt, I am more interested in having iTunes improve the quality of their paid downloads more so than the thought of paying a few pennies more pre song or album. But…even at 99 cents more or less, why would one buy from iTunes when the russian will sell you a better quality album for 2 bucks!??!

Eric 27 Sep 05

Now for my quibbles with Doug.

Doug writes:

Itís not greedy to want to keep the money I work for.

So then Ebenezer Scrooge, who just wanted to keep his own money, is the most misunderstood character in English literature.

Doug goes on:

If the record companies want to opt not to sell then fine that is their prerogative. But when they are consciously selling and refuse to heed market forces and demand on artificially inflating prices, that is greed.

It looks to me like the record companies are heeding market forces. They put product on the market for a price, and it sells. Doug, you think it’s too high, but others do not. You won’t pay the price, but others will. Doug, your personal preferences do not define “market forces” or what is “artificially inflating prices”, the market does.

And if they’re following the market, why then is it greed that they’re exhibiting?

Darrel 27 Sep 05

Yeah right, Darrel, as soon as the iTunes Music Store came online, all file sharing/stealing/copyright infringement [choose your term] came to an abrupt end.

Of course that didn’t happen. What DID happen? Well, iTMS became incredibly succeful selling a crapload of music.

There always has been, and always will be people copying music. The goal is to make it easy for people to buy music.

$18 CDs that you have to go to the store to get is a lot harder to buy than an instantly downloading a 99 cent single I just heard on the radio.

So, if CDs were prices at $7.99 would people still use P2P to grab music online? Probably. Would less people do it than if CDs stay at $18? Probably.

Josh Williams 27 Sep 05

Also, Josh, that guy certainly was a jerk, but really, how did that hurt your business? Do you think this guy would have purchased your icons himself had he had the money? I kind of doubt it.

Darrel, it hurts business in two very serious ways:

First, he will use these icons in his design work, on the web. This decreases the value of the work for those who have legally purchased the icons.

Second, the icons have already been made available for resale and redistributed through P2P channels. People are making money, and deriving benefit, off of our work with us receiving no compensation whatsoever. The value of our work is further compromised and diluted, while our good name is tarnished.

And yes, we will pursue and prosecute to the fullest extent of the law.

Don Wilson 27 Sep 05

It’s obviously successful. They’ve already screwed up one method of transporation for music, I suggest Apple not allow them to do the same with their baby.

Darrel 27 Sep 05

First, he will use these icons in his design work, on the web. This decreases the value of the work for those who have legally purchased the icons.

How so?

Second, the icons have already been made available for resale and redistributed through P2P channels. People are making money, and deriving benefit, off of our work with us receiving no compensation whatsoever.

That’s actual piracy, and that’s bad…mainly for those customers that don’t understanding they’re purchasing pirated software.

Vinny 27 Sep 05

I think for $7 bucks a month I can have just about all the music I want, on three seperate devices. It’s callled Yahoo! Unlimited or Rhapsody.

Tim Uruski 27 Sep 05

_The labels donít write the songs, the bands do. Blame the bands for crappy songs._

Don’t forget about Britney Spears.

And even if the labels don’t _write_ the filler, they definitely commission and peddle it. If I’m not mistaken, it’s the labels that choose which artists to sign, support and market. If an artist/band is only capable of producing a single hit song… maybe they shouldn’t be signing for a full-length album. With new distribution methods like the iTMS, the labels should be embracing this realization, not trying to force the old model of sales into it.

Peter 27 Sep 05

Using a P2P service to download music that you don’t own is a bit shady and definitely illegal, but what if a friend makes you a copy of a CD that they bought? Is this still theft?

Anonymous Coward 27 Sep 05

The labels donít write the songs, the bands do. Blame the bands for crappy songs.

However, the music labels did chose to move away from the single, forcing groups to come up with complete albums to release. Bands have to play the game of the industry and if that means using fillers to hit hit album deadlines set by labels, then they do.

Matt 27 Sep 05

Considering the cost of producing physical media albums, I am surprised at the parity between music on iTunes and music in a brick-and-mortar retailer. I’m curious what others think, but I don’t think the record labels are really making less on the content in the current model… it seems to me they would be making roughly the same amount on new content and much more on older content…

Anonymous Coward 27 Sep 05

OMG. Call it what you will “theft” or “copyright infringement,” but the bottom line is that many millions of people have songs now that they should have paid for but didn’t. You can couch this by saying there’s a “copyright infringement” problem going on, but there’s a THEFT problem going on. People have things for free they are supposed to pay for. This is beyond BUYING a book and photocopying a few pages. This is NEVER BUYING THE BOOK IN THE FIRST PLACE and giving copies to everyone you know and don’t know. Stealing and restealing.

kingbenny 27 Sep 05

Actually, the Magnatune model is not really dynamic based on popularity, but more per-user. IE. you pay what you think is fair for it, not what popular demand says you should pay for it.

Mark Sigal 27 Sep 05

Personally, it is completely within the right of the music industry to test pricing elasticity. The market has proven to love fixed rate pricing @ 99 cents a song. What if the same customer wouldn’t blink at $1.25, enabling the industry to make 25% more revenue? Are they stupid, greedy, amoral for wanting to:

A) get those extra dollars
B) find out if the market will bear that extra cost

People get so emotional about these things like it is a public trust, such as a park or a utility, when again, this is entertainment, it is a big business and businesses have a right to run their business as smart or as stupidly as they want to.

I am not defending the industry. As others have pointed out, the entertainment industry has fought every technological advance as if it was the plague coming into their midst, only to discover that WHOA! the upside surprise was a positive game changer for them.

And there is no question that the economic structure of the industry seems at odds with creating great product and cultivating great artists. Plus, the logic of suing your customers and being perceived as the black hat at a time of great disruption as we segue into an always on world is boffo (IMHO).

That said, let’s not pretend that it is our god given right to pay 99 cents a song or when we steal by downloading that it is somehow LESS of a crime than…

Take personal responsibility. Buy the stuff if the perceived value is there or don’t. Or disrupt the industry by meaningfully embracing artists that are outside of the system. This thread is very akin to the Mac vs. Windows posts where discussions quickly become religious.

Disclaimer: I love my iPod (thanks, Steve!), and the simplicity of the sofware, buying model and iTunes-iPod integration has translated into me becoming an annuity for the record industry versus an occasional transaction.

Josh Williams 27 Sep 05

Peter: Yes it is. Today is a good day to realize this truth.

Darrel: When someone pays $240 for a set of our icons, they do so with the understanding that everyone else is paying the same price. It’s a fair deal, and there’s value passed onto the customer. That same value is passed to every customer. When somebody steals the icons, those who have paid for the legal right to use the icons are now subsidizing the value of that theft.

For example, if 20 websites legally use our icons, and each website paid $100 for the icons, then the collective value derived from the work is $2,000. If 10 other websites then go and steal the icons and use them, there are now 30 icons using our icons, while the collective value is still $2,000 (or $66 per website). Value has been taken from those who paid for the legal right to use the icons.

When we sell icons for $100+ on our website, it is with the complete understanding that not everybody is able to afford this. It sets a value for the exclusivity of our work, and sets a standard for the pricing for our custom design services as well. The price ensures that our icons don’t pop up on every personal blog in the world, thus keeping the value high for those who want professional icons that you can’t get from a Google image search.

This is our business, and this is how I pay our designers their Christmas bonuses each year. Downloading icons, music, etc. without payment, is wrong. Period. Don’t give me crap that it doesn’t hurt the authors, musicians, and designers, cause those in the wrong wouldn’t have paid for it anyhow. That’s total BS.

I don’t have a lot of sympathy for the record labels, and their poor business judgment, but this does not mean that the artist, musician, or author is not entitled to benefit from every use of their work.

Dan Boland 27 Sep 05

Josh Williams: Not to sound like a dick, but do you really think putting three red lines across your icons will stop someone with Photoshop from doing the same thing?

Darrel: Sing it, brother. I’m with you 110%.

JF: See what you’ve started? ;D Seriously, the original question pertained to whether iTMS should stick to the 99 cent for all model or start introducing a flexible pay model. I think coming from a company that prides itself on user interface, I would think the answer from them would be in the “keep it simple, 99 cents” corner. It’s all important to note that this battle pertains to songs, because albums on iTMS are not all $9.99. (And a pet peeve of mine… can’t you just make it an even buck?)

David 27 Sep 05

Josh: while I’ll agree that acquiring music without paying for it is wrong, it still lives in the copyright infringement world. For the folks that paid with a fradulant credit card, I assume that they’d be liable for criminal charges for use of the CC while only civil charges for having the your icons. This differs from theft in the sense that if someone buys a shirt with a stolen CC, not only are they guilty of CC fraud, but also of stolen property, that is to say by them having the property others are denied the use of that property, which isn’t the case for digital media. Both are still clearly wrong, but are taken care of under different areas of the law.

Josh Williams 27 Sep 05

David: I totally agree. Whether you call it “theft” or “infringement” is totally nomenclature. The bottom line is that loss does occur to the original owners when digital media is acquired illegally. I don’t lose the shirt off my back, but I lose a butt load of time replying to email from those who had their Visa card stolen wondering why they have all these purchases from us on their statement. I lose time sorting it out with PayPal. I lose time (and money) working with our attorney to deal with the crap. The loss is very real.

Kesava Mallela 27 Sep 05

Keeping the price below 99c for the older ones only means that making long tail longer!

RT 27 Sep 05

With the advances in micro payment technology from PayPal and perhaps from Google Wallet, why not set up an iTunes music auction marketplace.

Then in the true spirit of supply and demand, the market could set the price of more in demand titles vs. less demand titles.

Apple and/or the labels could set a minimum floor price for each “category” of song which would be demand-based and they could also set a higher “buy it now” type price for consumers willing to pay a premium for instant gratification.

This model would also result in valuable data about consumer preference, price points, demand, etc.

Just my .02

-RT

Sam 27 Sep 05

Have you ever been to Virgin records, thought the CD was a few bucks too much, and tossed it in your bag and snook out the front door?

Thatís what weíre talking about. And thatís called shoplifting. And thatís theft. And itís criminal. Yes it is.

No, I haven’t done that, and, yes, that would be a crime. But thats not what we’re really talking about. Sharing of mp3s is not even in the same ballpark as shoplifting.

Perhaps I’m a bit older and more of a music buff but I spent a good part of my younger years making and sharing mixed tapes with friends. Did you? Does putting 90 mins of music that I like on a tape for others to explore make me a criminal? Perhaps in your mind, but I don’t feel like one!

Shane 27 Sep 05

Supply and demand works on shortages of either supply or demand. The only shortage in the supply of music from iTunes may be bandwidth. Perhaps if a particular song were in great demand, a higher price to offset the increased bandwidth demand would be justified. But that wouldn’t help the labels out, only the ITMS. The record labels need to understand that delivering content via the internet differs from selling it on a CD at WalMart.

Darrel 27 Sep 05

When somebody steals the icons, those who have paid for the legal right to use the icons are now subsidizing the value of that theft.

Again, I’m not seeing that connection. You’ve priced it at $240. Does that price change for the paying customer the more or less people make copies of your icons? Or is it just a price you’ve set and people either pay it or don’t?

When we sell icons for $100+ on our website, it is with the complete understanding that not everybody is able to afford this. It sets a value for the exclusivity of our work

That argument makes more sense. But it seems that it’d cost your paying customers more money to subsidize you chasing down all these other people rather than just let it be and cater to the paying customers.

Downloading icons, music, etc. without payment, is wrong.

It’s not wrong or right. It just is. Depending on a variety of things, it can be a bad thing for the creator, or a good thing, and everything in between. To blanketedly call it ‘wrong’ is as shortsighted as blanketedly saying ‘is completely fine’.

Now piracy, actually taking IP and reselling it at a profit illegally, that’s a whole other issue and is most definitely (usually) wrong.

I donít have a lot of sympathy for the record labels, and their poor business judgment, but this does not mean that the artist, musician, or author is not entitled to benefit from every use of their work.

I agree.

The labels are trying to make MORE money and dropping prices on older songs doesnít really achieve that goal.

It can. Volume.

What bothers the RIAA is that they lost the repackagability of music in the album format. They used to be able to take a big artist’s catalog and resell it a dozen times over the span of a year. The internet made that model obsolete.

sb 27 Sep 05

mike rundle: i have to disagree with you that dropping the price on older music doesn’t make good business sense. i’m a bargain bin shopper, always have been. i buy it for one reason: it’s cheap. and if i don’t like it, i’m out $3.99. no big deal. a model that increases volume at a reduced price makes great business sense. it’s tried and true.

i’d like to see a startup that sells nothing but bargain bin music. and bargainbinmusic.com is available, btw. get a relationship with a few labels and agree to sell off their bargain bin stuff at $.39 a download. what do they have to lose? if you fail, you fail. it doesn’t impact the record company. and it doesn’t mean that they couldn’t offer the exact same music on iTunes for a greater price. i’d go to bargainbinmusic.com and poke through what was available. i love old fats domino records, and they’re almost always in the bin.

Sam 27 Sep 05

And yes, we will pursue and prosecute to the fullest extent of the law.

Josh, it might feel good to say that you’ll pursue people to the ends of the earth if they rip off your icons, but is this really what you want to do? If you caught someone wouldn’t it be better to shame them into paying? If they don’t, is it worth the legal hassles and $$$?

Certain products that we’ve developed get ripped off, mostly by customers who bought and then burned to provide copies within an organization. Yes, its lost revenue but I would rather keep the relationship and potential for future revenue. Its not perhaps the most relevant analogy to your situation, but if we had to get lawyers involved there is no win situation for us.

Dan Boland 27 Sep 05

Josh Williams: If you feel comfortable with the red line technique, then I’m happy for you.

brad 27 Sep 05

With a digital download, there are no real manufacturing costs, no real distribution costs - make the the first good version of the product and then zing off a few million copies at very little cost.

But that’s always been the smallest expense for the music industry anyway, right? The big expenses happen elsewhere: studio equipment and space; fees for session musicians and engineers, recording, mixing, and production, mastering, promotion, lawyers, sales, etc.

Does anyone have statistics for how much money it costs a major label to put together a new album? I bet it’s not cheap.

Dean 27 Sep 05

Does anyone have statistics for how much money it costs a major label to put together a new album? I bet itís not cheap.

The costs are highly variable - depends on the artist. I think I saw in an article about the new Fiona Apple CD in the NYT the other day and it said that they spent $800k on the leaked P2P version that came out last year…

All those costs usually come out of the “advance” the band gets to make the record. The big labels throw a ton of money at some bands in hopes they score a huge hit record. Most of their efforts go un-rewarded. But that’s a whole other story. In my opinion it is the kiss of death to take a big advance. We never took “tour support”. As a result, we made more money touring than in record sales.

In the future, bands will be better off being DYI’ers (releasing their own CD’s), and touring their asses off.

Dean 27 Sep 05

uh…that’s “DIY’ers”….

Deirdre Saoirse Moen 27 Sep 05

I disagree with JF that people stopped buying albums because they could steal them. That was true for some people, granted.

However, there’s also the fact the RIAA seems to have overlooked that music is a luxury item and that, during economic downturns, people don’t spend money (or as much money) on luxury items. For example, the restaurant industry is extremely economy-sensitive.

During the time I’ve been shopping at the iTunes store (since Feb 2004), I have purchased three new physical albums and 170 iTunes songs, the vast majority of which were back catalog. In addition, I’ve bought five albums on iTunes, all but one of which was relatively current.

I’ve also bought 15 used albums out of the bargain bin at Rasputin’s (at $3.95 a pop, 5 for $15). Where’s the digital equivalent of that?

Had there not been an iTunes store, I probably would have bought two of those albums in a store, and none of the individual songs.

Also during that time, I’ve downloaded one MP3, simply because it was a song that was inobtanium in physical media. I’m still hunting for a copy of the (import) CD, long out of print, which I’d gladly pay for.

I’m a developer, so I recognize that people want to be paid for their creativity. However, I am also price-sensitive. If the prices of the average stuff I want to buy on iTunes went up, I probably would buy more back catalog and less new stuff. I don’t think that helps the artists who are touring now, y’know?

Note to Dean: I love the Dead Milkmen!

Josh Williams 27 Sep 05

Josh, it might feel good to say that youíll pursue people to the ends of the earth if they rip off your icons, but is this really what you want to do? If you caught someone wouldnít it be better to shame them into paying? If they donít, is it worth the legal hassles and $$$?

Sam: when somebody steals and resells our icons on their own website, do you think I’m really concerned about shaming them into paying for them rightfully? Sam, people steal our $5 icon collection. OUR FIVE FREAKING DOLLAR COLLECTION. I don’t give a rip that I missed a $5 sale.

I give a whole lot of rips that they are now reselling those icons on their website or redistributing them on P2P networks. Trust me, I get no delight chasing people around, and I’m going to go psycho like Adobe and their software registration/authorization schemes (that inconvenience rightful users of their software).

The fact remains that if I sit on my duff, and three months from now you can purchase our icons from someone else’s website for a cut rate, this causes consumer confusion, and undermines our sales.

[Downloading icons, music, etc. without payment] is not wrong or right. It just is. Depending on a variety of things, it can be a bad thing for the creator, or a good thing, and everything in between. To blanketedly call it Ďwrongí is as shortsighted as blanketedly saying Ďis completely fineí.

Darrel: I’m sorry. You are completely and totally delusional. Downloading something that you do not have rights to download is completely and totally wrong. I don’t give a damn whether there might be perceived benefit to me by “the spreading of the good news.” As I am the owner of the content, it is mine to decide what rights are and are not granted.

If I have a digital file on my computer (let’s say its an email), you have no right to that file unless I grant it to you. I did not create that file for the public good. If you hack into my computer and take that file, you are taking something that does not belong to you. I have not granted you rights. You are stealing.

It doesn’t matter whether this is my personal computer or some server sitting in Hong Kong. You are stealing my intellectual property.

We grant rights to those who have paid for our icons. If you have not paid for our icons and received a license, you have no rights to them. Your possession and use of them is therefore illegal, and *surprise!* — It is wrong.

Darrel 27 Sep 05

Downloading something that you do not have rights to download is completely and totally wrong.

You think that. Many don’t.

Either way, people will do it, so you can either cater to the paying customer and win more to that side, or dwell on the non-paying customer and maybe scare off a few (again, piracy is a different issue…)

Your possession and use of them is therefore illegal, and *surprise!* ó It is wrong.

Don’t confuse the terms legal/illegal with right/wrong. There isn’t always a direct correlation between the two.

Darrel 27 Sep 05

Also, Josh, selling stock art is a bit different than music. Stock Art is your primary product. With music, that’s just part of the product line that the artist can profit from.

Josh Williams 27 Sep 05

Darrel, please tell me how, in whatever way possible, taking unlicensed icons from our website is right? Where is this possibly right? I don’t care what you or I think. How is taking something that doesn’t belong to you right?

Donít confuse the terms legal/illegal with right/wrong. There isnít always a direct correlation between the two.

Don’t confuse situational ethics with an excuse to turn a blind eye when someone is taking something that they have no right to take.

brad 27 Sep 05

In the future, bands will be better off being DYIíers (releasing their own CDís), and touring their asses off.

I used to think that too, but I’m not sure the economics work out except for established bands. How do you get the tours if you don’t get exposure? How do you get exposure if you don’t have publicity and distribution? All that stuff costs money and professional services, and the band might not be willing to take that risk out of their own pockets.

Yes, you could release direct to iTunes or P2P and build support for yourselves there, but that’s a shot in the dark; it takes a lot of work to get yourself noticed among the hundreds of thousands of other artists there, unless you’re very talented and/or very lucky.

Darrel 27 Sep 05

How is taking something that doesnít belong to you right?

When Katrina came, and flooded NOLA, and left thousands homeless and on their own, a few of them took some food and water that didn’t belong to them. Was it right? Maybe not. Was it wrong? maybe not.

If someone takes an icon from your site and prints it out and puts it as a frame for her pet dog in her scrap book, is that wrong? Maybe. Is that hurting anyone? Not really. Has your business suffered? Not at all.

There’s a spectrum here. Certainly taking your icons without paying and then using them to build a site for profit is unethical and wrong.

To get back into music, is me finding a song I really like and emailing a copy to my friend to spread the word wrong? Some say yes, some say no. Would doing that benefit or hurt the artist? It can do both. Or neither.

Todd W 27 Sep 05

Making a flexible pricing model would be a step backwards.

Look at the airline industry - there are two models. There’s the JetBlue/Southwest model of simple pricing (fly anytime between these dates and here’s your price). It’s lower cost of ownership for the airlines, easier to build, easier to maintain, and causes lower customer frustration.

Then there’s everyone else (you know, they guys who aren’t makling money - overly complex. The price may change up to 1200x a day. So, we have higher cost of ownership, higher cost to implement, to support, to build, and increased customer frustration.

Keep the prices simple - .99. Having a scaled pricing structure will only complicate things, require a system that’s more expensive to build, more expensive to maintain, and increase customer frustration. It’s just not worth it.

When will the greedy people in the ivory towers learn?

Josh Williams 27 Sep 05

If someone takes an icon from your site and prints it out and puts it as a frame for her pet dog in her scrap book, is that wrong? Maybe. Is that hurting anyone? Not really. Has your business suffered? Not at all.

If a child innocently takes an action figure that he doesn’t have in his collection, massed produced by the thousands, and walks out of Walmart, does that noticeably eat into Walmart’s bottom line? No.

Does this noticeably hurt the toy company? No.

Does this make that child a “bad” child? No.

Do the circumstances make this theft right? Absolutely not.

One can innocently break the law or violate somebody’s rights. However, the answer is not to ignore the offense and pretend it doesn’t happen — saying, “Oh, they meant no harm.” The answer is to thoughtfully educate the child that there are better (and right) ways to obtain that action figure.

Even still, we’re not talking about innocent theft here… I highly doubt those taking icons from our website by using a stolen credit card are printing out the icons to use in a scrapbook highlighting their vacation to Eastern Europe.

Perhaps none of us should own anything. Maybe that would be best. Then, when I am hungry, I can simply walk into your house and raid your fridge. Or, because I don’t like the rain outside, I might just stay there for a for a few days until the weather clears up.

Technically, I’m not hurting you. Besides, no one was going to sleep in your dining room tonight anyhow. You’ll experience no loss whatsoever.

Deirdre Saoirse Moen 27 Sep 05

One of the reasons I like the iTunes store is quite simple: I get to actually hear what I’m buying, which is something I don’t get (as fully) in a record store. I get to see what tracks for that artist are popular with great specificity, so if I know the artist but not the song name, I can start there.

For airlines, I can speak to that (having worked in Product Development for a division of Expedia). Each flight has a revenue manager who reviews the pricing structure of specific flights. By and large, there’s really only a handful of fare classes for a given flight. The pricing on those fare classes varies by day, and subsets of those fare classes are only available, but what differs most is the number of seats allocated in each fare category.

So, for a given flight (let’s take United flight 47 from San Francisco to Maui), there’s seven basic fare codes, each with modifiers. Some codes (like T, their deepest discount, about $350-390 roundtrip) aren’t available at certain times of year (like Christmas). Sometimes, there may be a T fare, but only two seats per plane. Right now, I’m not seeing any T fares, only S (one fare level higher, about $480-$520 roundtrip). Next up is W.

If you look at a specific flight for a specific day on a specific day, fare pricing isn’t that complicated.

The main problem with airline pricing is the elasticity of demand and the ever-changing costs. The latter is one of the reasons why fares are re-priced during the day, however, my experience suggests that this happens much less frequently than is generally thought. When a price appears to jump suddenly, it’s typically not because the fares were re-priced, but rather because someone either bought the last seats in that fare code, or the seats allocated to that fare code were reduced because demand or cost predictions changed. In other words, if you’re looking at a flight and the price jumps suddenly, you’re probably looking at a different fare code.

Oh, and Southwest doesn’t have one “simple” price for each flight: they have six. They allow better combinations (e.g. you can combine fares on flight segments in different categories). For the San Jose - San Diego flight for RubyConf, there are therefore 36 different price possibilities from $98 round trip to $234 round trip. This is simpler how? It *appears* simpler, but it’s not, really — you just see the innards.

Let’s just say that I don’t want my iTunes songs priced that way, m’kay?

Darrel 27 Sep 05

Josh you’re now tossing baby-with-bathwater logic into the mix, so, I guess we’re done.

Anonymous Coward 27 Sep 05

Josh youíre now tossing baby-with-bathwater logic into the mix, so, I guess weíre done.

Hooray! Even though it kept going on and on, I thought it was over a long time ago (with Josh winning).

Don Schenck 27 Sep 05

Screw ‘em … spend the night out listening to live music.

Better, do what I do: play your guitar at home.

Clark 27 Sep 05

You are stealing their product just like every other criminal who takes without paying.

Thats narrow minded bs. The law is outmoded.

Don Wilson 27 Sep 05

Let’s do another “In 10 words or less” game

Copyright Infringement - Selling one’s object(s) for another’s profit
Theft - Stealing one’s music object(s)

Don Wilson 27 Sep 05

typo - remove the word ‘music’ from the second definition.

shawn 28 Sep 05

i wonder… if it were the artists asking for the price flexibility, as opposed to the record companies doing so, would that make a difference?

has anyone bought an album yet with only 4 or 5 long songs on it? are those songs .99 each?

Thomas 28 Sep 05

The thing with music is that there’s an abundance of it. I can’t make myself spend money on music when I can just listen to the radio (FM and Internet) and get the music I want. Especially not now when most of my day is spent at the university studying - I’d much rather spent music on something where I get more in return… And I don’t think I’m the only with this attitude. Am I?

james governor 28 Sep 05

i guess this guy never went to the movies. no variable pricing in that content market.

Don Schenck 28 Sep 05

Thomas —

I NEVER listen to commercial radio (well, that’s not true … I listen to ESPNRadio sometimes). Never for music. With all the commercial breaks and the “Clear Channel Controls The World” music lists, it sucks majorly.

I listen to WXPN from University of Pennsylvania, or WITF public radio out of Harrisburg.

God I HATE commercial radio. I’d rather listen to my wife’s Mariah Carey CD’s.

brad 28 Sep 05

guess this guy never went to the movies. no variable pricing in that content market.

Not sure if you’re saying that sarcastically, but if you really believe this what about second-run movie houses? I saw Titanic for $1.50 (about what it was worth, actually) by waiting a couple of months after the release and going to our local second-run cinema). And cinemas charge different prices depending on where you are. First-run movies are a lot more expensive in New York than they are in Vermont, for example.

Darrel 28 Sep 05

In terms of volume, second run movies seem to show that lower prices ultimately equate to larger sales.

The last first-run movie I saw was 4 brothers. $8 a ticket. There were 6 of us total in the theater.

The last second-run movie I saw was Sahara. $2 a ticket. Must have been 100+ in the theater.

So…hmm…$48 vs. $200…

8500 28 Sep 05

Wow in the slug fest between Josh and Darrel, I somehow missed Dean from the Dead Milkmen posting here. It’s good to hear directly from someone who’s music is listed on iTunes.

The Dead Milkmen were the sound-track of my youth. Thanks Dean!

Daniel Morrison 28 Sep 05

There are certainly songs that I think should be priced lower…old tunes that aren’t that popular. I would probably buy more of these at a lower price.

While the labels say they want to sell some at a lower price, they aren’t doing it. There is nothing stopping them currently, so we can figure out what they want: to make songs more expensive. They are using the “some higher, some lower” to balance the effect, but this is nothing more than a sneaky way to make it look less bad. More people will buy new songs, so they want to milk it for all it’s worth. That’s why they haven’t lowered prices on old ones - they know that it is good bargaining power. Stupid music companies.

Wayne 28 Sep 05

All movies are priced the same, Mr. Bronfman.

christy 29 Sep 05

Just to bring the conversation back around to iTunes and the prices of their songs for a minute… (if I may?)

As an Australian, I’m still waiting for iTunes to launch locally. Ho hum… it’s taking forever and I’ve heard that the local record companies are still bickering over royalty rates. In the meantime I peruse CD stores occaisionally, balk at the prices (usually between $19.99 if we’re lucky, but up to $29.99AUD - that’s $22.79USD) - and then walk out of the store. I only buy CD’s that I know I’m gonna love … and never take a chance.

I have been known to rip songs from friend’s collections… feel guilty and wonder when I too will be able to actually give those artists a royalty. If only I had the luxury of paying $0.99 via a legal option. I can’t wait till it launches here and only hope that they keep the pricing simple and recognise the price advantages of digital delivery.

Nick Hodges 29 Sep 05

I think that the record companies should do what all other companies do — set their prices to maximize their profits.

And I totally agree: some songs I’d pay more for, and some songs I’d pay less for.

Tom Coates 02 Oct 05

Surely quite a lot of this discussion is missing the point. Apple isn’t the only music retailer on the internet (although I will concede they have a fair amount of lock-in). If the market is going to operate effectively then another supplier that gives the record companies flexibility will come along, and if that supplier is a success, then Apple will have to follow suit. If the record companies in the meantime don’t want to use Apple, they don’t have to. I suspect that most of these models, which make the whole experience more confusing and complex to consumers, will fail - but that’s just my opinion. If the market is so good, then let the market fix the problem. It’s not Apple’s responsibility to change its business plan to meet the needs of the record company - it’s Apple’s responsibility to make money for their shareholders in the way they think is best. In this case they think a flat-rate works better, and as long as the record companies allow them to keep selling them, then they’re unlikely to change their minds.

Julian Bond 09 Oct 05

What I really want to see is an officially sanctioned version of AllOfMp3.com.
- Any encoding you want
- no DRM
- Pay by bandwidth
- For a typical 192b Lame -presetstandard MP3 track $0.99 for releases, dropping to $0.50 after 3 months and then $0.10 after 12 months and thereafter.
- Sell lossless FLAC at the same price (or just under) as CDs
- Digitise and offer every piece of recorded audio that’s still around on tape somewhere.

I’m convinced this would be enormous as the price reflects the lack of hassle of getting properly encoded, named and tagged and MP3s vs using the free P2P nets. Easy and cheap trumps hard and free.

But I don’t expect to see this any time soon. So in the mean time I’ll just use AllOfMp3 anyway.

Adam 12 Oct 05

amen, julian.

those russians have got it all figured out…all that’s missing is a bit of a price increase to give some money back to the artists. But I fully believe that pay per MB is the way to go.

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