Music industry faces pricing probe

Elliot Spitzer is an overly-ambitious little man with a girly voice. He's wants to be NY governor; this is the prism through which to view any and all action from this hack.

Who cares what Spitzer sounds like? The music industry is dominated by previously competing entities who have now united to form a cartel with the aim of dethroning another outlet who threatens their control of their revenue source, and Spitzer has seized upon their obviously illegal behaviour to further his own career. To which I say - go, girl ;-)

Like this statement: The music companies want to move beyond the flat-price model pioneered by Apple, arguing that new hit songs should cost more than 99 cents, while perhaps older material might cost less.

Might? Might? Yeah, right, they might. But more likely, they want to raise prices of new stuff, and leave existing stuff where it is. (BTW, notice that CD prices of older stuff isn't exactly cheap in the stores, unless you hit the "We're trying to give it away" bins).

However, saying all that, I agree with the labels on two points. One, new stuff should be charged more for. Its the whole nature of capitalism. Charge more for stuff people want. (and Apple's one to speak out on overpricing, since they do it on all their computers).

And, second, they should be able to charge what they want, not what steve jobs (who, by the way, doesn't run a music label, nor has any stake in them either) says they should charge.

If anything, they should look at apple, using their monopoly powers as a distributor of digital content to force suppliers to offer them a specific price.

[Oh sure, it'll get slammed by the "Steve is God" folks, as well as the "RIAA is evil" folks, but looked at objectively, its all true.]

The record companies who were able to induce artists to sign their soul away can charge whatever they like for their product. It's their property. As consumers we can either buy it or not.

I do think their reasoning has no basis in reality but that is their prerogative. If all songs cost the same amount, the more popular songs will sell more copies and thus return a larger profit. It's not like you actually have to produce additional physical goods for each new song sold. Once it has been produced, additional copies are basically free to them.

Secondly, Steve Jobs doesn't have a monopoly. The iTunes music store is only one way to get music. Since he owns / controls that particular outlet, he has every right to say what pricing will be through his store. If the record companies don't like it they can take their business somewhere else.

"One, new stuff should be charged more for. Its the whole nature of capitalism."

This is normally the case, but not in the music industry. WIth new technology (which most products are) there is risk involved, cost issues... think xBox profit loss... and other considerations. Not so with Music biz.

With music, the labels are basically giving the master to Apple, Apple digitizes it, adds it, and it;s done. The music company has to put out very little effort, so there is not need to "charge more". Youre talking close to 80% profits for doing... err.. nothing. and at no risk, if the song doesnt sell, what do they lose?

...Apple would become a label of their own and start signing all sorts of bands to the iTunes label - and charging what they see fit for the songs. Once the other labels see how successfull selling music at a low price point can be, they'll change their tune. For every 99 cent song sold, they'll sell more than 2 at 50 cents. Apple could kill P2P and make more money for the labels if they sold everything at 10 cents a song. But because of greed and "percieved value" it will never happen.

As for the "older music COULD be sold for less than 99cents per song": Yes, it could. But in the history of CD sales, no major band's early albums have ever gotten cheaper in the brick and mortar stores - why should we believe you now?

I also wish that apple sold songs at a higher bitrate for a little more money to cover the bandwidth.

With music, the labels are basically giving the master to Apple, Apple digitizes it, adds it, and it;s done. The music company has to put out very little effort, so there is not need to "charge more". Youre talking close to 80% profits for doing... err.. nothing. and at no risk, if the song doesnt sell, what do they lose?

What does it matter how much effort goes into a product? Pricing is based on (a) cost, (b) revenue streams, and (c) what the market will bear. If people are willing to pay $1.50 for the latest Britney Spears crap, why would you only charge 99 cents? Just to make LESS money? Yeah, that makes perfect sense.

BTW, it would be nice if you're going to argue the "It doesn't cost a thing to sell it" to at least make a perfunctory attempt to appear objective and point out that, yes, it does actually cost money to produce and market a singer or band. Not to mention that, depending on the contract signed, that this may entail thousands to millions of dollars.

One last thing, you mention the xbox. Game consoles are sold at a loss because (a) the market isn't there to sell them at cost or at a profit, and (b) they make their money on game sales.

The only reason apple wants 99 cents is because it sells alot of music, which in turn helps spurn iPod sales, which apple really wants people to buy (since its the only thing holding the company together at this point). Apple doesn't own the music, so they could care less what the labels want, its about how it affects apple.

Now, think about what happens if the labels decide that the iTMS doesn't meet their needs and pull out. First, no more iTMS (sure, it'll still be online, but just some indie artists and the like). Then comes the scary part. Less reason to buy an iPod. (I know, I know. The iPod is an iconic symbol that will sell billions and billions every year, sales increasing logarithmically until the end of time, but let's pretend that people actually decide they don't need it as much, since they have to buy CDs again anyway, then any player works). Now Apple's losing two revenue sources. Add in disappointing sales of the new intel macs (as most people wait to see how badly they'll be exploding before purchasing one), and you're in for some rough quarters.

Yeah, but I know, Steve is God, he does no wrong, so the above is all just crap...

The record companies who were able to induce artists to sign their soul away can charge whatever they like for their product. It's their property. As consumers we can either buy it or not.

Correct. I just wish more people realized this...

I do think their reasoning has no basis in reality but that is their prerogative. If all songs cost the same amount, the more popular songs will sell more copies and thus return a larger profit. It's not like you actually have to produce additional physical goods for each new song sold. Once it has been produced, additional copies are basically free to them. Yes, they're "free". But that's not the point. You're economics 101 teacher should have shown you a nice chart of supply/demand and another one of price/demand. Supply/demand theoretically doesn't play with digital content. But price/demand does. That's the graph that shows x number of people are willing to spend y amount of money on a product. So, there might be 100,000 who'll spend $1 on a song, but only 75,000 who'll spend $1.50 on a song. So selling for less gets more purchases. But, in actuality, pricing it higher gets more money ($12,500 more, to be exact). So, more money actually means more profit. (Yes, these numbers are made up, but that's not the point). Of course, every song doesn't have the same graph, but there's some music you know would sell just as well at a higher price. Why not let the labels charge for it?

Secondly, Steve Jobs doesn't have a monopoly. The iTunes music store is only one way to get music. Since he owns / controls that particular outlet, he has every right to say what pricing will be through his store. If the record companies don't like it they can take their business somewhere else. Well, considering the iTMS sells most of the digital music out there, its a de facto monopoly (its like saying MS didn't have an OS monopoly because there was Unix and OS X and Linux, but no one would make that stupid argument - oh, wait, MS tried, and failed).

And if the iTMS didn't have a monopoly, how can you explain the ability of Stevarino to keep prices down, regardless of what the labels want? I mean, we all know he's got an RDF (which has enveloped most of the people who post to these boards - luckily for me I'm a shut-in, living with my 25 cats), but that can only carry him so far.