http://arstechnica.com/news.ars/post/20050925-5348.html
9/25/2005 5:29:15 PM, by Eric Bangeman
Last week, Apple CEO Steve Jobs called the music industry "greedy" when it began pressuring Apple to raise prices of individual tracks above the current 99$B!q(B level at the iTunes Music Store. That didn't go over too well with some industry execs. Warner Music Group CEO Edgar Bronfman, Jr. all but confirmed it with his comments that flat-rate pricing was unfair.
"There's no content that I know of that does not have variable pricing," said Mr. Bronfman at the Goldman Sachs Communacopia investor conference. "Not all songs are created equal$B!=(Bnot all time periods are created equal. We want, and will insist upon having, variable pricing."
Bronfman seems to be jealous of Apple's success. He commented that the record labels are selling their songs because of Apple's innovation, but aren't getting a cut of the dough from Apple's hardware sales.
"We are selling our songs through iPod, but we don$B!G(Bt have a share of iPod$B!G(Bs revenue," he said. "We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only.
"We have to keep thinking how we are going to monetize our product for our shareholders," added Mr. Bronfman. "We are the arms supplier in the device wars between Samsung, Sony, Apple, and others."
Following that line of reasoning, Apple should be more than happy to jack prices up at the iTMS and pass the additional income on to the labels. My, how things have changed from a couple of years ago, when the only action the industry could think of taking in the face of changing consumer behavior was suing music fans.
Actually, Bronfman's strategy sounds kind of cool. I'm thinking Comcast and Earthlink should raise the price of Internet access a few bucks a month and send the dough our way. After all, people wouldn't be going online if there wasn't interesting content to read. You guys wouldn't mind, would you?
From Bronfman's perspective, flat-rate pricing represents an undervaluing of its product. Historically, labels have priced newer and more popular releases higher, while saving the "deep discounts" for older albums gathering dust in the bargain bin. That kind of pricing may be appropriate to a mature market, but when iTMS hit the scene in 2003, both Apple and the recording industry agreed that a one-size-fits-all pricing strategy was needed in order to grow the nascent per-song download market.
The 99$B!q(B per song pricing showed cracks before too long, as some albums ended up being priced at US$11.99 and higher. With iTMS having established that consumers like being able to buy lossy copies of individual songs, the industry now feels the time is ripe to change the per-track pricing model.
Consumers' music-buying habits have changed as well. At the risk of revealing my weakness for a certain genre of television, a comment made by my fellow Chicagoan Marty Casey, a contestant on the recently concluded Rockstar: INXS, comes to mind. In response to a question from INXS, he said that the whole album wasn't as important anymore, that it was more about having those two or three hit songs. iTMS and other download services have enabled music lovers to order their music à la carte instead of having the full-CD extra value meal forced down their throats.
As the music distribution industry continues to evolve, the labels envision a world where the preeminent download service doesn't exist primarily to sell digital music players. Instead, maximizing revenue streams from the music would come first, which would mean that consumers will have to pay extra for the privilege of listening to what they want, where they want. If price hikes or variable pricing does come along, at least Apple will have a leg up in the public relations war$B!=(Bthe company will be able to point its finger at Bronfman and say "he made us do it."
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