[Rumori] Digital music services jack up prices

Sat Apr 10 23:47:44 PDT 2004

I'm not quite sure how to express my thoughts on that. It seems the music 
industry has been struggling to legitimicize the idea of paying to download 
music, only to suddenly turn it into a really stupid idea. There's no real 
excuse either. $ spent on bandwidth is nowhere near the money being spent on 
manufacture & distribution.

Psychologically, this could be a somewhat thought-out attempt to get people 
to stop downloading music entirely, paid or not. If so, this stage was 
launched much too early.

In other news, I went out and bought Jay Z's "The Black Album" today, 
figuring I liked "The Grey Album" so much that I'd enjoy hearing the songs 
in their original musical context. Comparatively, the production's a lot 
more boring. Shucks...

>From: Carrie McLaren <carrie at stayfreemagazine.org>
>Reply-To: "Detritus discussion list." <rumori at detritus.net>
>To: rumori at detritus.net
>Subject: [Rumori] Digital music services jack up prices
>Date: Fri, 9 Apr 2004 01:12:23 -0400
>
>Downloading music gets more expensive
>
>http://www.azcentral.com/business/articles/0407downloading07-ON.html
>
>Ethan Smith
>Wall Street Journal
>Apr. 7, 2004 11:00 AM
>
>To see the future of online music prices, look no further than "Fly or 
>Die," the new album by rock-meets-hip-hop trio N.E.R.D.
>For months, digital-music services have been touting albums for $9.99 to 
>entice more people to buy online. But Apple Computer Inc.'s iTunes Music 
>Store has been charging $16.99 for "Fly or Die," while Roxio Inc.'s Napster 
>service sells the 12-song collection for $13.99. Both prices are higher 
>than the $13.49 that Amazon.com charges for the CD itself. The same pricing 
>shifts are showing up on albums by a growing slate of artists, from Shakira 
>to Bob Dylan.
>
>Unburdened by manufacturing and distribution costs, online music was 
>supposed to usher in a new era of inexpensive, easy-to-access music for 
>consumers. In many cases, buying music online is still cheaper than 
>shopping for CDs at retail outlets. But just a year after iTunes debuted 
>with its 99-cent songs and mostly $9.99 albums, that affordable and 
>straightforward pricing structure is already under pressure.
>
>All five of the major music companies are discussing ways to boost the 
>price of single-song downloads on hot releases - to anywhere from $1.25 to 
>as much as $2.49. It isn't clear how or when such a price hike would take 
>place, and it could still be months away. Sales of such singles - prices 
>have remained at 99 cents - still account for the majority of online music 
>sales.
>The industry is also mulling other ways to charge more for online singles. 
>One option under consideration is bundling hit songs with less-desirable 
>tracks. Another possibility is charging more for a single track if it is 
>available online before the broader release of the entire album from which 
>it is taken. There is also talk of lowering the price on some individual 
>tracks from older albums.
>
>Several record-company executives acknowledged that pricing changes are 
>being discussed at all five major companies.
>The new pricing developments come as digital-music sales are growing 
>steadily. Some 25 million digital tracks were sold in the first three 
>months of this year, versus 19.2 million for all of the second half of last 
>year, according to Nielsen SoundScan.
>That growth is why some in the industry are uncomfortable with the talk of 
>price increases. Most music-company executives believe that the download 
>market is still in a critical early-growth stage, which could be disrupted 
>by raising prices. "For us right now the issue is not, 'Do we make another 
>$300,000 by raising the price five cents?"' says a music company executive. 
>"It's making sure the market grows."
>
>Revenues in the music industry have been dragging in recent years, in part 
>because of the rise of illegal downloading services. Raising digital-music 
>prices could spur additional illicit downloading. Weaning people off those 
>illegal services by giving them an alternative that they consider viable is 
>critical to the industry's future profitability.
>
>N.E.R.D's "Fly or Die" is far from the only album that now costs 
>significantly more to download from iTunes than to buy on CD. And many 
>high-profile albums from two of the big five music companies, Sony Corp.'s 
>Sony Music Entertainment and EMI Group PLC, are now priced on iTunes and 
>its competitors well above the $9.99 norm. Sony artist Pete Yorn's 
>"Musicforthemorningafter," for example, costs $13.99 on iTunes and $10.88 
>on average in retail stores, according to the NPD Group. Albums by EMI 
>artists from Kylie Minogue to Blur also cost more in digital than physical 
>form. (EMI also distributes N.E.R.D.)
>
>The reason this disparity is so pronounced at EMI and Sony is that both 
>companies routinely set wholesale prices for online albums higher than 
>their competitors, according to people familiar with the matter.
>
>A much smaller number of titles from the other major music labels also cost 
>more than $9.99 on iTunes. A handful of albums from Bertelsmann AG's BMG, 
>Warner Music Group, and Vivendi Universal SA's Universal Music Group also 
>cost more online than they do as CDs. But these tend to be double discs 
>such as OutKast's "Speakerboxxx/The Love Below," which incur higher costs 
>in certain kinds of royalties when sold online than as traditional CDs.
>
>"There's a lot of experimentation in the industry," says Peter Csathy, 
>president and chief operating officer of Musicmatch Inc., which sells 
>digital music.
>
>The music companies are reluctant to talk openly about their 
>wholesale-pricing strategies, but they are quick to blame the retailers for 
>higher prices. A spokeswoman for EMI, for instance, stresses that the 
>retailers, not record companies, ultimately set the prices consumers pay.
>
>However, the digital-music services say they base their retail prices 
>directly on the wholesale prices the music companies charge. "Our pricing 
>comes when the fees come in from the labels," said Musicmatch's Mr. Csathy.
>
>ITunes, the market leader among downloading services, and its competitors 
>offer music at two distinct price points: Single tracks cost 99 cents. A 
>full-album has generally cost $9.99, regardless of how many songs are on 
>it.
>
>Napster was until recently the lone holdout among the major online services 
>on full album prices, charging $9.95 for numerous titles that cost between 
>$12.87 and $16.99 on iTunes. But two weeks ago, it relented and created a 
>higher tier of album prices, set at $13.99.
>
>Separately, Walmart.com, the online arm of Wal-Mart Stores Inc., recently 
>rolled out a slightly cheaper 88-cents-per-track price. Many observers, 
>however, argue that any advantage conferred by the 11-cent difference will 
>be offset by a user interface that early reviews have called less friendly 
>than those of other services. Executives at competing services also contend 
>that research shows that consumers don't care much about price differences 
>within the band of about 75 cents and 99 cents.
>
>The issue of online music prices raises philosophical debates for music 
>executives. Some executives, for example, believe they should be charging a 
>premium for the online versions of older tracks because consumers may be 
>willing to pay more for harder-to-find material.
>--
>carrie mclaren
>stayfreemagazine.org
>carriemclaren.com
>ph: 718.398.9324
>
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