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Comments: 280 +-   Amazon Invests In Dynamic Pricing Model For MP3s on Wednesday August 08 2007, @03:16PM

Posted by ScuttleMonkey on Wednesday August 08 2007, @03:16PM
from the fun-models-to-play-with dept.
music
media
business
NittanyTuring writes "Amazon recently closed a Series A financing deal with Amiestreet.com, a startup selling DRM-free MP3s with a demand-based pricing model. All music starts out free, and prices increase for popular tracks. Jeff Blackburn, Senior Vice President for Business Development, Amazon.com: 'The idea of having customers directly influence the price of songs is an interesting and novel approach to selling digital music.' What does this mean for Amazon's own intentions to sell music?"
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  • Novel idea (Score:5, Funny)

    by rlp (11898) on Wednesday August 08 2007, @03:19PM (#20161797)
    A novel new business idea - the recording industry HATES that.
    • Re:Novel idea (Score:5, Interesting)

      by innerweb (721995) on Wednesday August 08 2007, @06:33PM (#20163859)

      I may be way off base on this, but if I remember correctly, this is starting to sound like free market economics (supply and demand). As demand increases, so does price. In this case, supply for each individual song for practical purposes is infinite, so they will have to use an *adjusting* system to manage price. It solves several problems if done correctly.

      • It allows new artists to be exposed without the risk to the consumer of buying music they hate. No risk means more consumers will try it.
      • No DRM means I use the music where and when I want.
      • The market will be used to determine the price of the music. That may be the sweetest part of this deal.

      At the risk of being redundant (on slashdot?), CDs are a dead medium. They are very expensive compared to digital downloads. They force bundling of musics that are not desired by the majority of people. They are fragile (heat, nicks, etc), though better than tape. They require an immense infrastructure (compared to digital files) to distribute. They make as much sense anymore as tape or vinyl did a few years into the age of CDs.

      Those in the industry that learn how to grapple with this will survive and thrive. Those who do not, like so many other players in other industries before them, will die.

      InnerWeb

      • Re:Novel idea (Score:5, Insightful)

        by jlarocco (851450) on Wednesday August 08 2007, @08:25PM (#20164741) Homepage

        I may be way off base on this, but if I remember correctly, this is starting to sound like free market economics (supply and demand). As demand increases, so does price. In this case, supply for each individual song for practical purposes is infinite, so they will have to use an *adjusting* system to manage price. It solves several problems if done correctly.

        Yeah. A bit off base. First of all, demand by itself does *NOT* determine price. There's a huge demand for water, and yet it's not very expensive. In an ideal free market price is determined by the equilibrium between supply and demand.

        Having said that, now I'm going to explain why normal supply and demand applies very, very poorly to the music industry:

        • The supply of any particular song is infinite once that song is created. The marginal cost of one more copy is $0. It's an economy of scale gone mad.
        • Personal preference plays a *huge* roll in people's decisions. Several orders of magnitude more than in other industries. To illustrate: I'd pay $5 a song for some genres long before I paid $0.01 for any "gangster" rap song. Contrast that to buying most other items, like toothpaste, or a bookshelf.
        • There's only one supplier for any particular song. If I really like the Eagles' "Hotel California", my choices are "buy it" or "don't buy it". In a "normal" industry, I'd also have the choice "Buy this other one that's practically the same thing but cheaper."
        • There's only one supplier for any particular song. If I really like the Eagles' "Hotel California", my choices are "buy it" or "don't buy it". In a "normal" industry, I'd also have the choice "Buy this other one that's practically the same thing but cheaper."
          that would be cool- if there were cheap Chinese imports of knockoff songs... hoter carifolnia and other great hits-
          seriously man- I would pay for that
      • Just thought I'd take a moment to supply this poor lonely soul with a brief, though apparently much needed, pre-school level human anatomy lesson, with a bit of English language thrown in for kicks.

        The words 'dick' and 'cock' in English are slang terms for the human 'penis', of which only males of our species have one. Further, except in the case of extreme and rare genetic defects, male humans have exactly one penis. Thus using the term 'suck my dick orcock' is illogical as both terms refer to the same mal
      • Re: (Score:3, Insightful)

        This seems like an incredibly bad idea to me, at least if it were to become the dominant pricing model - but I highly doubt it will.

        I mostly listen to artists that don't sell a ton of records, where a big success could be shipping 20,000 or 50,000 units compared to radio acts that can ship millions. I don't know how their model would work in reality, but let's assume these tracks might be 25% the cost of a big radio single. The process values popularity over all other factors, doubly reinforcing it. Not
          • Re:Novel idea (Score:4, Insightful)

            by Original Replica (908688) on Wednesday August 08 2007, @07:19PM (#20164257) Journal
            The more people who buy your song, the cheaper it should be.

            It's more or less supply and demand, but with MP3s the supply basically unlimited and almost free beyond the first copy, so cost can only fluctuate based on the demand. As demand rises so does the price. In durable goods you get a price reduction with a popular product because mass production will raise the supply and lower the manufacturing cost per unit. The amount and cost of supply and distribution can be a major factor in the consumer price of physical objects like furniture or automobiles. Supply is sort of a non-factor with digital media and so there are no production advantages to large number of units sold..
  • by fotbr (855184) on Wednesday August 08 2007, @03:19PM (#20161803) Journal
    You know there will be much whining about people that bought $Song for $PriceA only to find that it fell to $PriceB.

    And those that complain that $Friend bought $Song for $PriceA but now its up to $PriceC and its not fair that they have to pay more than $Friend for the exact same item
    • by Joe Snipe (224958) on Wednesday August 08 2007, @03:22PM (#20161837) Homepage Journal
      more to the point, what is to stop me from "selling" my free versions when the band gets popular? What if I give them away?
      • by Ohreally_factor (593551) on Wednesday August 08 2007, @03:27PM (#20161933) Journal

        more to the point, what is to stop me from "selling" my free versions when the band gets popular? What if I give them away?
        Er, maybe a sense of morals or ethics?

        Besides, instead of saying, "Yeah, I was into that band before the got uncool," you will be able to say, "Yeah, I was into that band before they got expensive." This is going to be a boon for frugal hipsters and poseurs.
        • by omeomi (675045) on Wednesday August 08 2007, @03:31PM (#20161993) Homepage
          Er, maybe a sense of morals or ethics?

          Not sure where morals or ethics are involved. If I buy something for one price (even if that price is $0), and the price rises, I don't see why I should be prevented from selling it at the higher price. Obviously, to be legal, I would have to delete any copies that I may have of the mp3 after I sell it.
                • Re: (Score:3, Interesting)

                  Umm... No. Not unless that is in your contract.

                  Maybe. This is a legal grey area.

                  Federal district courts in California and Texas have issued decisions applying the doctrine of first sale for bundled computer software in Softman v. Adobe (2001) and Novell, Inc. v. CPU Distrib., Inc. (2000) even if the software contains an EULA prohibiting resale. In the Softman case, after purchasing bundled software (A box containing many programs that are also available individually) from Adobe Systems, Softman unbundled it
          • Well, as long as he wasn't selling COPIES, it'd be perfectly legal, not to mention moral and ethical.
            Can someone explain why it isn't "ethical or moral" for me to give copies away for free?

            I'm not saying it is "moral and ethical", I just want someone to explain why they think it's not.
                    • Re: (Score:3, Insightful)

                      Sure you have the right to deprive others of the fruits of their labor. You are free to act in the market in ways that will devalue the labors of others. You're trying to flip the free market around into some sort of socialist command economy mechanism where the government is constantly meddling to enforce your notion of social justice.

                      Pirates "spoil the market". They don't deprive anyone of anything.

                      This is the distinction between real stealing and "IP stealing".

                      There are plenty of alternative methods to "
      • by omeomi (675045) on Wednesday August 08 2007, @03:29PM (#20161963) Homepage
        more to the point, what is to stop me from "selling" my free versions when the band gets popular?

        One could set up an entire MP3 futures trading market! You could invest in MP3's, hoping that their popularity will grow...
      • by yali (209015) on Wednesday August 08 2007, @03:31PM (#20161983)
        As demand drives prices up, the incentive to illegally copy MP3s will increase; but large-scale infringement would lower demand. So eventually (at least in theory) the prices will hit some sort of equilibrium point. This could be a pretty interesting natural experiment.
        • So eventually (at least in theory) the prices will hit some sort of equilibrium point.

          Or they might be so dynamically unstable that the system would thrash itself a couple of times and then end up jammed in the opposite state from that intended.

          The only control input is the price per copy, which as formulated has a destabilizing effect on market share. Charge more when there are more copies being purchased? That's not your usual supply and demand economics, certainly not with nonrival goods where ther

                • Re: (Score:3, Insightful)

                  So if you have a legal copy of a current song, you can sell it to someone else.

                  If you have a legal copy of a current song, you can sell that specific copy... you can't sell as many copies as you want. The supply of legal copies is controlled by the copyright holder, therefore the copyright holder has a monopoly.

                  As an analogy, Ford has a monopoly on the Ford Mustang. Sure, you can buy a Ford Mustang, and then resell it used, but Ford has absolute control of the supply of new Ford Mustangs manufactured. The used market doesn't count, because you can only resell the supply that Ford ori

    • Customers should know how the system works before they buy. And if they didn't bother to find out, and they waited too long to get it at the same price, then it's their own tough luck.

      I think this is a novel idea, and hopefully it will work well.

      My only question is, will they go strictly by number of sales for a song overall, or will they continuously monitor popularity of each MP3 and then reduce the price again once the popularity drops?
  • by Xtravar (725372) on Wednesday August 08 2007, @03:20PM (#20161815) Homepage Journal
    Won't higher prices mean more piracy? Or is that exactly what this system is avoiding?

    By nobody buying a track (which *could* mean piracy) the track's price would come down and then people would buy it?

    Wow, I think I answered my own question! This sounds pretty cool - less known music gets more exposure and more popular music gets set at a price people are willing to pay. Now, will they actually have a supply of music?
    • by EmbeddedJanitor (597831) on Wednesday August 08 2007, @03:33PM (#20162017)
      If the volumes stay low then the price stays low and the motivation for piracy should also stay low.

      As the volumes increase, the price increases and the piracy might increase.

      What is interesting is that this model possibly finds the "perfect price". So much for economic theory.

      In reality, a pirate will not buy some low-cost stuff and pirate high-cost stuff according to some built-in threshold. Once they have free piracy access to music they will use that for everything they can.

      • Re: (Score:3, Insightful)

        I was just about to write something similar before I read your comment and though I had basically the same idea I started to wonder: Can a perfect price be determined if the product is available for free? Right now it works the other way around than how you described it: People buy music if they are not able to download it for free (because it's too rare to be on a torrent site for example). Since there's a price cap in this case it gets even more complicated.

        On the other hand I quite like a pricing model
  • I for one plan on using my first post skill by downloading as many songs for free legaly as possible. But seriously after they reach over 0.99$ who is going to ever buy that song from them again?
  • by uncreativeslashnick (1130315) on Wednesday August 08 2007, @03:21PM (#20161835)
    Have you ever found yourself telling someone, "yeah, I liked that song before everyone else thought it was cool." I can see this model encouraging people to explore and download and try new stuff so that later on, when the price goes up, they can brag about how they downloaded it first, for free, before it was selling for $5 a pop.

    It also might open the door for more quality indies to actually make money. People might be turned off by high prices of what the RIAA cartel marketing is pushing, and go for the cheaper indie stuff. Then again, I am probably being too optimistic, as most teenagers will pay any price for "cool"
    • Re: (Score:3, Insightful)

      The only problem with it is: will the Music industry buy into it? I mean iTunes has a decent selection, but it's far from complete. How many major record labels are going to be investing in a market where they'll be giving stuff away?
  • SWEET! (Score:3, Interesting)

    by vigmeister (1112659) on Wednesday August 08 2007, @03:22PM (#20161839)
    T-Pain will sell for tens of dollars while I can get Manu Katche for cheap!

    Finally! All that non-conformance pays off!!

    Cheers!
    • Re:SWEET! (Score:5, Funny)

      by anaesthetica (596507) on Wednesday August 08 2007, @04:47PM (#20162863) Homepage Journal

      Finally! All that non-conformance pays off!!
      --
      Psychic spies from China cryin to pass deregulation
      Little girls from Sweden dream of free speech legislation

      Says the guy with a Red Hot Chili Peppers lyric as his sig...

  • by Duffy13 (1135411) on Wednesday August 08 2007, @03:22PM (#20161847)
    For those who didn't, prices start a $0.00 and cap out at $0.98.
  • Early adopters are usually the ones who subsidize the latecomers. This is entirely backwards, as the latecomers are subsidizing the early adopters.

    Will all the cool kids be saying, "I listened to , back when they were only 5cents a track"? It would be worse than people obsessed with their low Slashdot UID!

  • Love it (Score:3, Funny)

    by Quiet_Desperation (858215) on Wednesday August 08 2007, @03:24PM (#20161891)
    The stuff I like will cost 0.01 while the popular spooge hits the cap. I love you, free market. :)
  • by Optic7 (688717) on Wednesday August 08 2007, @03:26PM (#20161925)
    Those who prefer to listen to non-mainstream artists would get cheaper music, while those who prefer to listen to mainstream artists would pay more for it. It almost sounds like a tax on lack of musical taste to subsidize music geeks!
  • by Otis2222222 (581406) on Wednesday August 08 2007, @03:30PM (#20161977) Homepage
    I'd like to see a model like this. Ever since I installed a satellite radio receiver in my car, my musical horizons have broadened significantly. A lot of the artists I hear on some of the more obscure channels aren't indexed on iTunes or even available on illegal services like Limewire. This mostly applies to older music that is out of print, or never made it to CD.

    It would be nice if there was a service like this that had just about anything ever recorded digitized and made available for download. Let the market sort out what's popular and what isn't, but give us access to EVERYTHING.

    In this day and age, there is no reason why virtually every album ever recorded isn't available to buy a digital copy of.
  • Brilliant (Score:3, Funny)

    by harvey_peterson (658039) on Wednesday August 08 2007, @03:31PM (#20162001)
    The screw-you pricing of the airline industry and the crappy product of the corporate music industry.

    Can't fail.
  • by Bluesman (104513) on Wednesday August 08 2007, @03:32PM (#20162009) Homepage
    Who wants to start this? I'm selling options for indie band A at 35 cents a song.
  • There just isn't. Because this can't possibly mean more money for them, if prices cap at 0.98. And if they didn't cap there, no one would buy the more expensive tracks from them anyway. But unless these "trail-blazing" people either forfeit all profit for themselves in order to transfer it to the recording companies, or come up with some other, novel way of incentivizing this process (theoretically, at least using a simple model, averaging 50 cents a download) which will halve their profits compared to what they get from iTunes, there is NO WAY the Big Four will go for this.

    On the other hand, maybe the simple model isn't true, and maybe popular = most everything that the average buyer buys, in which case it won't look any different to the average buyer, so except for the DRM-free part (another deal-breaker for the Big Four), why should the average buyer care?
  • by Jason Levine (196982) on Wednesday August 08 2007, @03:45PM (#20162159) Homepage
    This is really good news. There are some good songs to be had on Amie Street for not much money. So far, I've bought 91 songs and have only spent $6.29. That's about 7 cents per song. With no DRM at all. Beat that, iTunes! ;-)

    Oh, and if you happen to be interested in what I'm listening to, here's my playlist: http://www.jasons-toolbox.com/what-im-listening-to .php [jasons-toolbox.com]
  • by bugnuts (94678) on Wednesday August 08 2007, @04:04PM (#20162377) Journal
    This has interesting economics, clearly designed to help Amazon, but might also help smaller artists. I think I like it, but not sure.

    There's no such thing as supply and demand in this model. There's only demand, and the supply is endless. So why does an infinite supply with a finite demand not equate to free? Bandwidth? They certainly can get some advertisement into the pages of popular sound downloads.

    This seems almost backwards ... you'd think it'd be cheaper to d/l a popular song and make up pagehits with ads, but perhaps this makes smaller artists get more exposure.
  • by jcr (53032) <jcr@@@mac...com> on Wednesday August 08 2007, @04:07PM (#20162399) Journal
    TFA doesn't say whether these are in fact MP3 files, and the critical question is: will these songs play on an iPod? If not, this business is doomed before it starts.

    -jcr

  • BRILLIANT! (Score:4, Insightful)

    by scribblej (195445) on Wednesday August 08 2007, @04:14PM (#20162499)
    I'm already working on my script to download all new music the minute it hits the service -- before it becomes popular.

    I can't wait for the madness that will hit once my script becomes popular in usage.

    (Note, I'm not actually writing such a script, but someone will.)

  • Expand the title (Score:3, Interesting)

    by Trogre (513942) on Wednesday August 08 2007, @06:40PM (#20163927) Homepage
    Let's expand that headline title a bit shall we?

    "Patent troll firm Invests in Dynamic Pricing Model for obsolete patent-encumbered audio format."

    • Fallacy-ridden arguments and ridiculous drawn out appeals to emotion is a more accurate representation. Remember: you should be able to do whatever you want with information, except if its the GPL! Then you have to follow the GPL!
    • Prices rise with demand because usually supply is limited. Last time I checked, we can create bits from thin air, so we have an infinite amount of copies we can sell. So there's really no reason for prices to rise with demand. If anything, they should drop because you need a price ten times lower for a song ten times as popular to earn what you used to.
      • by east coast (590680) on Wednesday August 08 2007, @03:48PM (#20162201)
        For the most part all of this bitching and moaning has nothing to do about a fair price. Lets face it, people want music, they want it for free and they want to do it legally. But like the old axiom of "fast, good, cheap. Choose 2", these three elements can never come together in a situation where it is win-win for both the listener and the musician.

        Most of the time when I see people on Slashdot talk about how things are "working out" with new music distribution models they normally forget to include the musician in the equation.

        I don't care what anyone thinks about this. An artist shouldn't be forced to tour to pay the rent. Is it hard to accept making a lifetime's wage for a few years of work? Sure. But on the other hand it shouldn't be asking too much for the artist to cover the cost of overhead for putting out music, keep food on his plate and make a bit extra without having to live in the back of an Econoline van.

        So most of the DRM/Copyright arguments has nothing to do with creativity or a society bolstered by its art. It mostly has to deal with people being greedy and not wanting to shell out for what they've taken.

        Blame the RIAA all you want, but people deserve to make a buck when they've produced something that you're willing to listen to more then once or twice.

        /rant
        • Re: (Score:3, Interesting)

          Why shouldn't an artist be forced to tour to pay the rent? I'm not saying that they should, but the RIAA model where artists drop their souls in a slot machine and hope to win the jackpot does not seem like an intrinsically good system.

          In most other careers, one expects to work most days of each week, most weeks of each year. I realize that touring is hard (I've done it), but why should musicians get off easy? It would be one thing if all of the successful recording artists were actually publishing gre

          • by Dhalka226 (559740) on Wednesday August 08 2007, @07:53PM (#20164523)

            But the Britneys and the Metallicas of the world have gotten rich off of simplistic musical drivel which caters to the lowest common denominator

            By which you mean that your musical tastes are superior to that of the vast majority of other people.

            I don't like any Brittney Spears music, I like a handful of Metallica tunes. Nonetheless I am willing to admit that if they have a million people who want to listen to their albums and Obscure Artist G has five--regardless of whether I like his music or I feel he is the modern equivalent of Mozart--they should be making more money for it. Demand isn't a perfect metric for everything, but it seems wholly appropriate here, particularly when it is each individual's decision whether or not to give a particular artist their money.

            If they're not going to write a new album or perform for me, why should I have to pay them

            Because they have produced a good that you want. While I'm not going to go so far as the RIAA does and call it stealing, I don't see how people justify taking something without compensating the creator with specious arguments like "somebody else already paid them 10 years ago."

            If it isn't worth the price according to whatever criteria you choose to apply, don't buy it. If it is, buy it. Not only does that compensate artists whose music you like, it will work to drive down music prices or eliminate poor artists if enough people agree with you.

                • Re: (Score:3, Interesting)

                  I'm glad you're so happy with the status quo.

                  For the record, as I stated before, I don't steal music. I do pay for what I listen to. However, as you may or may not know, most of that money does not go to the bands.

                  Many people do like what they buy. Others are being herded like sheep; those with the greatest resources for marketing can take the money that might go to better art. It may not be a zero sum game, but it is indeed a game.

                  I'm not telling anyone what to like or not like. I just think it'

marriage, n.: Convertible bonds.