Music Labels May Seek Higher Download Prices

punxking writes "Some of the big music labels are now clamoring to raise prices for digital music downloads. From the article: 'Music industry executives said introductory wholesale prices for digital tracks had been set low to stimulate demand for online music sales but the success of Apple's music store had prompted concern that they may now be too low.'" Relatedly, the BBC is reporting that iTunes is under investigation in Britain for charging disparities between the UK and the European continent.

Dupe much???

[Anonymous Coward]

See yesterday's news perhaps?

Pretty soon...

[l4m3z0r]

Pretty soon they will give us what we have all been waiting for... A /. article whose primary source is another /. article.

Re:Dupe City

[Anonymous Coward]

Man convicted for illicit fileswapping of Oscar films dies in jail [yahoo.com]

gentlemen, start your flamethrowers...

Re:Costs?

[SweetAndSourJesus]

"...would be interested in a feature that allows us to filter subscribers comments from non subscribers"

You mean like the one they already have [slashdot.org]?

Re:Costs?

[Joey7F]

Now explain to me why I have to pay $12.49 - $21.95 for a single CD that cost under a $1? I would not mind if the artists saw $5 of that cost. But usually they are lucky if they see .25 cents.

Because the MPAA believes that 12.50 to 22 dollars a CD is where the product of their volume and the price is a maximum.

Price is dictated partially by price but also by demand (I would argue PURELY demand because if it costs you 100 bucks to build a nail, no one will pay that).

That said, what CDs are you buying at 22 bucks? Best Buy and Circuit City routinely sell them at 12-16 bucks.

--Joey

Re:Dupe City

[Skye16]

Nope, it wasn't a joke, but I am glad my dismay brought "the giggles" to others.

Re:Costs?

[intradink]

Digital distribution actually yields a very small margin. You have huge infrastructure costs (disk, redundancy, DR etc), bandwidth, DRM overheads. Then against every .99 cent track sold, you have to pay the majority to the labels, and most of the rest to several royalty organisations. Once you've gone through the pain of DRM'ing and built up a reasonable track catalogue, you risk having to do it all over again once bandwidth and consumer demands say that 128kbs isn't good enough and they want it at 192kbs, 256kbs, 320 kbs.... A time consuming, disk munching and budget sapping task. The initial investment is huge, with a payback in (at best 3-5) years, assuming that you've achieved a critical mass of content and managed to get enough people to buy it. Certainly not for the faint hearted or financially challenged. Also the Labels don't typically do deals with digital distributers in the same way as they do with physical stock (ie. buy 100k units and get a per unit discount). This is probably more down to the lack of maturity in the digital model - they are still working out how to do it, with little consensus or standards between the labels. As you said, Apple were clear from the start that iTMS would probably operate at a loss, and in effect be subsidised by selling iPods by the truckload. I suspect that the suggested increase in the cost of wholesale tracks is probably an effort to boost the current market (buy them while they are still cheap), rather than any real move to increase the cost.

Re:Costs?

[shark72]

"Remember when CDs first came out? Remember the cost of a vinyl album at the time ($7)? Remember the cost of a CD at the time($12-15)? Remember the music industries promise that CD costs would drop when they became popular?"

I remember CD prices being closer to $18 at launch in the early 80s, but we'll use your numbers. That $15 you remember paying in 1984 is $26 in today's dollars. The average price of a new CD is now south of $13 [bandradio.com], so that's a 50% price drop in the past 20 years. I only wish that all industries followed a similar trend -- that would mean that the average price of a new car would be less than $10,000 today!

The rest of your post was spot on, though.

Re:Costs?

[shark72]

"We don't need them and there business model anymore, and they know it, but they don't want you to know it."

Slashdotters have been claiming that the Internet will destroy the record industry since the days of the original Napster. I typically see "the record industry is already dead" or "it will happen real soon now" but that's just not happening. Do you have an estimate of when it will happen? Next year, five years from now, ten years from now?

Unfortunately I don't think it's this simple, and Slashdotters who make this proclamation often forget a few things:

• Apple has sold millions of songs via the iTMS. The vast majority of them are from signed labels, and Apple's top tracks and top albums tend to mimic retail sales of physical CDs. In the meantime, companies like Magnatune [magnatune.com], which fit many Slashdotters' idea of the future of music, are flailing.
• The Internet is not the exclusive domain of Slashdotters and unsigned acts. To wit, notice the record companies' jumping all over iTMS like it was the last chopper out of Saigon, and Universal's recent move to launch an online-only label. They can use the Internet, too, and they can hire smart people, too.

But perhaps most importantly, I think the "The Internet will kill the record industry" crowd tend to see the Internet as a bit of a universal panacea. Make no mistake: many acts, both signed and unsigned, have done a great job of leveraging online distribution to build a fan base or to reach out to their fans when their label dropped them -- They Might Be Giants comes to mind. But the fact remains that:

• The Internet will not front you the money to rent a recording studio, or build your own.
• The Internet will not pay for your backup singers or session musicians.
• The Internet will not pay for a talented engineer to make your music sound good. Music recorded by amateurs in a garage with a PC-based recording system generally tends to sound like... well, it was recorded in a garage.
• The Internet will not give you the money to press thousands of copies of your CD and send them to radio stations. The Internet will not call those radio stations and get them to play your song.
• The Internet will not arrange and promote your tour.
• The Internet will not give you the money for co-op ads on the iTMS and other legimate download sites. While viral marketing can be useful, it is often no match for a record label that has actual cash to spend on online advertising.
• In short, the Internet is a network. It transmits bits. It is not a substitute for talented producers, engineers, and marketers.

Now, before you say "but I don't need any of that," keep in mind that if you choose the route of avoiding the record label and taking on all the responsibilities I've covered above (and God bless you if you do), you're essentially in competition with the record labels who will be taking those steps.

As you can guess, my opinion differs from yours on the motives behind the record companies' talks of raising wholesale prices. Online distribution is a format change, nothing more. The record industry has survived a dozen format changes over the past century. Part of a format change is experimenting with the pricing model. Now, frankly, I think that their attempts to go north of $0.99 are completely fucking stupid, but they are doing what many businesses do in developing a pricing strategy: experiment.