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Charles on… anything that comes along

Friday 18 November 2005

Filed under: — Charles @ 11:36 pm

Music biz seeks digital price rises - but why? To keep the artists in line

  • iTunes price rise a cert - EMI boss | The Register
    EMI Music’s chief executive Alain Levy has said that there’s now a consensus that the price of hit songs will rise on digital download sites. Apple charges 99 cents per song on its iTunes Music Store regardless of the song’s popularity - something that the industry is keen to change.

    “There is a common understanding that we will have to come to a variable pricing structure. The issue is when. There is a case for superstars to have a higher price,” Levy told the Wall Street Journal.
    Click Here

    .. and as Kate Bush is on EMI this may begin to go a little way to explaining why her new album Aerial is still not listed on iTunes.. it’s all going to get ugly, very ugly, I think. Where’s that P2P app?

  • Joel on Software on variable music and movie pricing
    this [varying the price between ‘old’ and ‘new’ songs and artists] is what the recording industry is telling you that they want to do on iTunes. But they don’t do it in movie theaters. Why not?

    The answer is that pricing sends a signal. People have come to believe that “you get what you pay for.” If you lowered the price of a movie, people would immediately infer from the low price that it’s a crappy movie and they wouldn’t go see it. If you had different prices for movies, the $4 movies would have a lot less customers than they get anyway. The entertainment industry has to maintain a straight face and tell you that Gigli or Battlefield Earth are every bit as valuable as Wedding Crashers or Star Wars or nobody will go see them.

    Now, the reason the music recording industry wants different prices has nothing to do with making a premium on the best songs. What they really want is a system they can manipulate to send signals about what songs are worth, and thus what songs you should buy. I assure you that when really bad songs come out, as long as they’re new and the recording industry wants to promote those songs, they’ll charge the full $2.49 or whatever it is to send a fake signal that the songs are better than they really are. It’s the same reason we’ve had to put up with crappy radio for the last few decades: the music industry promotes what they want to promote, whether it’s good or bad, and the main reason they want to promote something is because that’s a bargaining chip they can use in their negotiations with artists. [my emphasis]

    EasyCinema has I think tried variable pricing on films in the UK. However, it’s struggled to get first-run films, though that’s to do with distribution. Anyone been to one?
    But this is a killer argument from Joel Spolsky about what’s really behind the scheming by the record biz. Whereas Apple, he points out, wants to control the record companies by getting to choose who features on the front page of the iTunes “Music” Store.

7 Responses to “Music biz seeks digital price rises - but why? To keep the artists in line”

  1. L. Says:

    This all sort of makes sense until you realise that price of CDs often goes *up* after they stop being promoted so I’m not quite sure what to make of all this. Popular CDs are often available at reduced price when they come out so why have them cost more on iTunes or is it the shops that are taking the hit to sell more rather than the record companies (though I believe record companies do huge discount package deals on singles with shops to sell more)

    I have to say that I have never bought anything from iTunes because I think 99p is way too expensive for a single track. I like to buy complete albums and it is usually cheaper to buy the CD (and actually own it (excluding Sony of course…)) than it is to get it from iTunes. I also like to buy albums of stuff recorded in the 20s and 30s so it is utterly ridiculous to have to pay 99p for a track which is probably out of copyright and where the artists are long dead and certainly not getting any royalties. Even emusic (which is the best deal around) is still a ripoff when it comes to old stuff.

  2. Adam Says:

    That’s the first good explanation of the non-appearance of the new Kate Bush on iTunes, I’ve seen. If you’re right, their thinking annoys me no end.

  3. Charles Says:

    Alternative and simpler explanations exist: it could be that EMI has done an exclusive deal with Napster to have Aerial first.

  4. In Russet Shadows Says:

    The price fluctuates according to the where the product is in its life-cycle.

    If it’s new, then it’s at full price or at a slight discount. Bigger discounts at inception signal overstock on behalf of the store, or a desire to dump the album.

    As the product ages, its price may go up because of a decrease in availability. That coincides with the record company’s desire to make a profit on the artist that’s still in their stable (”classic”). For bands no longer on a label, the CDs go for a song as the label tries to move the “old and now uncool” merch.

    Pricing is a tool in the record company’s arsenal, because pricing at some level reflects perceived value. iTunes doesn’t buy into that view of perceived value, and the record companies want them to. iTunes is egalitarian and consumer-focused. The record companies are interested strictly in their bottom line and “moving units”. They care little for the artist or the public except as two ugly lonely people that they’d like to set up for a comfortable matchmaking fee.

  5. Adam Says:

    And indeed, Ariel is available on Napster. Interesting. What value is there to EMI in exclusive placement there? Different profile of buyers? Financial incentive from Napster? Annoying all those hippy-ish, Kate Bush-listening Mac users? :)

  6. Ian Hobson Says:

    To In Russet Shadows
    I’m not sure that it’s strictly true about price of a new release being at full price. My experience of many record shops, and the online retailers is that top 50/100 albums are frequently discounted a bit to get people buying them. For instance, CDWOW is doing the new top 75 at 7.99 I think. It’s when things are a few months old that they resort to a higher price. Then after a few years you might be able to get them for something much lower.
    Of course, you could put this down to economies of scale in the distribution system for physical sales. When you’re shipping thousands, it’s cheaper on inventory than when you’re messing around with 10’s of copies. Digital distribution doesn’t suffer this problem/benefit.
    But there’s also a reward aspect here. Loyal fans are often the first to buy. So, give them a discount, and penalise slightly those who buy based on a recommendation later. If you screw the loyal fan, not necessarily a good thing.
    Some other techniques would be to give the early buyer some unique material, special editions or even something completely different - concert ticket offers etc. In digital, these would be good techniques as well. Or you could also offer the first xthousand digital buyers a discounted price. This would be a good way to get people to buy quickly and (ideally) pass on the recommendation to friends.
    Really, there are SO many ways labels could use digital to change the way the WHOLE experience of an artist is delivered I’m really not sure why they don’t jump on it completely. I will only buy the odd single from online. Album sales are a waste of money. But if I had CD-quality, some extras too, fair DRM and a reasonable price, I’d go this route.
    I’d bet if a CD is sold for 10 at HMV high street, and 6 on iTunes, the label would make a greater profit from iTunes.
    Ian

  7. Leslie Bunder Says:

    Yep, I went to Easycinema once in Milton Keynes to see Shaun of the Dead.
    Paid I think 1 for the ticket. But, since then, prices have risen as the cinema is now showing first run films.

    i guess stelios couldn’t keep the 20p a ticket model going and also, they said they would have no food and drink and within a few months started selling it. 1 for popcorn which is good value, don’t know how much it is these days there.

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