Apple iTunes to End Flat Fee Pricing? 556
MdntToker writes "According the Forbes, EMI has an understanding with Apple that flat fee pricing will end within the next 12 months, and more popular songs will be priced higher than 99c, while lesser known acts will be priced lower than 99c." From the article: "Label executives have made multiple arguments for flexible pricing. They argue, for instance, that almost all retail businesses have different price points for different products. But they are particularly interested in boosting their revenue from digital music sales, which aided by the sale of mobile phone ringtones, are increasing but not quickly enough to replace the continuing drops in compact disc sales. EMI said today that digital sales, made up 4.9% of the company's sales in the last six months, up from 2.1% a year ago." We've previously reported on this story.
Re:The "Flexible" Elevator - Going Up? (Score:2, Informative)
Got a nano as a gift. It's full of my own MP3's. iTunes doesn't even have my Ornette Coleman or Rasahn Roland Kirk stuff. There's a bunch of old releases by the Move and Traffic I can't get here either.
Guess I'm just not a sizeable market. Cry me a river!
Somebody CAN'T read!!! (Score:5, Informative)
"Today EMI Group boss Alain Levy said at press conference today that he believed Jobs would introduce multiple price points for iTunes music within the next year."
This does not say that "...EMI has an understanding with Apple that flat fee pricing will end within the next 12 months..." as the story claims.
Why was this story allowed to be posted this way?
The actual Forbes story is talking about how the labels want to take advantage of the consumers while Steve Jobs does not want to change the pricing structure. He's fought against it from the beginning and there has been nothing reported to support that the labels have won the fight yet.
Never Mind (Score:5, Informative)
"Today EMI Group boss Alain Levy said at press conference today that he believed Jobs would introduce multiple price points for iTunes music within the next year."
So one guy says with no control over the situation tells Forbes magazine that he thinks Jobs will make this happen, and it gets reported on Slashdot as fact.
For fuck's sake, not even the various Mac rumor sites have run with this one yet. When did MacSlash become MacWildGossip?
They don't understand the effect of convenience. (Score:2, Informative)
Point 1: Steve Jobs has publicly stated on several occasions that he opposes tiered pricing. Why? Because it's inconvenient and there's no legitimate reason other to line Record Labels pockets.
Point 2: It's been established that Record Labels are greedy, litigious and extremely unethical in their negotiations with their business partners (artists, brick-and-mortar retail stores)
Now, I have to rant on this because, as an independent musician, I've done more than my fair share of research. Right now, digital downloads are almost pure profit. There's no manufacturing and distribution costs and the price of a full album through a digital download is very close to what retail cost is for a physical product. What Apple has done is provide all the record labels a solution they could not come up with themselves to the problem of making money off of digital versions of their product using the internet. And what made it such a hit was the convenience involved, convenience designed by Apple to legitimately purchase music.
And what thanks and gratitude does Apple get from the labels? None. The only reason the labels think they can get more money is because cell phone providers have established that people are willing to pay $2.50 for a ringtone, which isn't even a full version of a song. What they fail to assess is that average cell phone users have no convenient method otherwise of obtaining those ringtones whereas typical computer users have several different methods of obtaining desired music other than legitimate or even Label endorsed channels.
Now, I'm a techie so when I upgraded my cell phone to one that could play audio ringtones, I got the software that interfaces with my phone so that I can create my own ringtones on my computer and upload them to my phone. That way, my phone can ring with my favorite Bon Jovi or System of a Down song that I own without me getting ripped off at $2.50 a pop. Even as an astute technical person, I found installing the software and getting it to interface with my phone was kind of a pain. But once a convenient alternative method of getting ringtones becomes available that the average cell phone user can figure out and follow, the ringtone market will bottom out. The only reason it hasn't done so yet is because cell phones are not computers and therefore their software interface is designed to be feature limited, providing only the options the user purchases. Computers don't have this limitation.
Re:Too bad the music companies don't think so (Score:3, Informative)
This is price fixing. (Score:2, Informative)
Re:The "Flexible" Elevator - Going Up? (Score:3, Informative)
Re:The "Flexible" Elevator - Going Up? (Score:2, Informative)
You must not have studied Economics. The entire basis is greed and selfishness (both on the part of the firms providing the supply[1] and the consumers providing demand). Consumers want as much as they can get for as little as possible, while firms want to sell as much as they can at as high of a price as they can. If demand doesn't decrease when price is raised from $1.50 to $2, then $1.50 was not an optimal price in the first place.
While I will agree that CDs are overpriced in terms of the cost of goods, you can't go only by the cost to press the CDs. Creating the medium is inexpensive, even at large volumes. Recording studio time, post processing, contracts, art, advertising, etc are all much more expensive, and contribute to the cost of the CD. However, this once again goes back to economic theory -- price does not really have any relationship to cost, beyond that the price should be greater than the cost if you want to survive. If the market will bear $20 CDs without a drop in demand, then firms will charge $20 for CDs and people will buy them[2].
[1] I mentioned supply, but in terms of digital music sales supply is essentially infinite. A traditional economic curve sets the price at the intersection of supply and demand, that being the optimal price for a product (set the price higher and you end up with unsold product; set it lower and you can't provide enough product to meet the demand). In a digital market, supply can effectively drop out of the equation and price would be set at the peak of demand. If the slope of demand is still increasing at price X, that price is too low. If the slope of demand is decreasing at price X, that price is too high.
[2] I'm ignoring monopolies, where price is set artificially high because there's no competition to undercut and drive the price down to the optimum. I'm also ignoring pricing cartels, and basically assuming a "perfect" market. Obviously no market is ever perfect, and the music market is likely worse than most, but for the sake of argument it's easiest to assume a perfect market at least initially.
Re:Never Mind (Score:5, Informative)
The labels can pretty much dictate WHATEVER pricing they want, and Apple will not have any say over it (unless they want to lose revenue). It would be one thing if they had a marketshare of say, Walmart. But digital sale is still pretty small percentage of the overall revenue for the labels.
The labels have been offering their goods at "introductory" pricing to see how quickly they can get legit digital distribution to grow.
Well, thanks to iTunes, they are growing fine, and now the labels want to make (more) money off of it. Which is a lot easier if they can apply flexible pricing model.
When the exec says he believe iTunes will offer multiple price points is because the labels have already announced to the digital music wholesalers that in 2006, they will be introducing mulitple wholesale price points.
Unless Jobs wants to lose even more money than he is losing now on iTunes (yes, they make money on iPod but iTunes is still not operating even yet), he WILL offer multiple pricing points on retail as well.
Re:So the model becomes ever more like... (Score:1, Informative)
Re:The "Flexible" Elevator - Going Up? (Score:1, Informative)
Re:The "Flexible" Elevator - Going Up? (Score:1, Informative)
False! Supply did not change at all, only the unit cost. It was already trivial to mass produce millions of a CD very cheaply, so not much has changed on that front, either. Most of the costs in recorded music are marketing related. You can write a great song, but you need to get it in front of consumers and convince them to buy it. It still takes a wad of cash to "convince" radio stations that they want to play your song and promote your concert. And no one really wants to waste their time dealing with one little independant act. So the real unit cost is still ($promotion expenses)/(number of units sold). If you spend $100k to sell 300k songs, your unit cost is about 33 cents.
Now, it is easier to get your product into a digital store that has to stock no inventory and carry no overhead. But unless you've got a truly great song, word of mouth from you playing at the neighborhood bar isn't going to move a lot of product.
Re:Never Mind (Score:3, Informative)
Re:Never Mind (Score:1, Informative)
Uh, dude? The iTMS has sold over 600 million songs.