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Record labels want to raise online mp3

posted by Jason Kottke   Apr 12, 2004

Record labels want to raise online mp3 prices to $3 per song.

Reader comments

ScottApr 12, 2004 at 10:09AM

Those record execs just don’t get it, do they? Raise the price of music and “illegal” P2P will get worse. People will get more belligerent.

Ever since I started using the Apple iTunes store, I’ve been buying music again. If the prices at the iTunes store went up to $2.99 a song, I’d stop buying music, and find a cheaper (or free) alternative. I know there’s a lot of people out there who feel the same way.

Screw the record companies. Screw the RIAA. Let the bands themselves determine how they want it done. If [the bands] decide that they want to give their music away, fine. If they decide to sell their CD’s at $30 a pop, fine. Just stop letting these fat cat bastards make stupid decisions that are only detrimental to the music industry AND the consumer.

AndrewApr 12, 2004 at 11:31AM

The Wall Street Journal had a story not a week ago [link good until 4/19] about this, and was much less hysterical, saying that record companies are discussing raising prices of hot singles only, not entire catalogs, to $1.25-2.49. In many cases, the price of popular albums has already risen from the $9.99 mark, and prices for albums from EMI and Sony labels has always been higher, thanks to higher wholesale prices charged by those companies. The article quotes an industry exec as saying “For us right now the issue is not, ‘Do we make another $300,000 by raising the price five cents?’ It’s making sure the market grows.” Price hikes are not likely very soon.

jkottkeApr 12, 2004 at 11:55AM

Thanks for the link, Andrew. I tried (very briefly) to find the original WSJ article because you have to take everything that Orlowski says with a huge grain of salt (if he’s not out and out lying, that is).

BobbyMacApr 12, 2004 at 11:55AM

That would make it double the price of buying a real CD. That makes NO sense.

dowingbaApr 12, 2004 at 11:56AM

The problem here is that, the only solution to the record companies’ piracy woes is to lower prices*. That means make the prices lower than they are now.. Funny, making the prices three times higher is not gonna cut it.

* This has been proven. Independent music stores have seen increased sales as a direct result of filesharing, after forcibly lowering their own prices.

Kip IngramApr 12, 2004 at 12:26PM

I agree with Scott completely. With the maturation of Internet distribution channels the labels will become redundant. Intellectual property creators (writers and musicians) and consumers (us) may be willing to pay a small markup for label-offered “convenience” features, but in the long term the labels can’t get to greedy. They just haven’t fully accepted the fact that in the future they won’t have a chokehold on the distribution channel.

Mr5by5Apr 12, 2004 at 1:07PM

$6 - In my opinion, that should be the price of a cd. $6 and I’d go into a music store and come out with an armload of music. As it stands they get none of my money. (I tunes gets a little) but that’s it. The record companies have to wake up, The times are changing.

bobApr 12, 2004 at 2:18PM

i find that the only music i buy is from merch tables at shows. iTunes, eMusic, etc give artists pennies on the dollar while buying at shows gives the artist half usually, plus a cut of the door. Other than that, the closest i get to spending money on music is the paid downloading privledges on soulseek.

bobApr 12, 2004 at 2:21PM

…or soulseek, unless you speak german…

MikeApr 12, 2004 at 2:21PM

Mr5by5, that’s what I usually pay at the used CD shop. I’d much rather get a used CD for $6, than buy a new one for $12-16…I’ve also been buying a couple from iTMS and it’s great. I can get more music for less $$$.

Rob IracaneApr 12, 2004 at 2:42PM

This is simple economics. Every song should not be priced at 99 cents. Hot singles that all the kids want such as “Tipsy” by J-Kwon would still be as hot at $2.50 as it would be at 99 cents, so Arista has every right to jack up the price as high as demand allows. However, Arista had better be prepared to match price to songs with lesser demand (e.g. Barry Manilow’s “Mandy”), or else the entire idea of online music sales collapses. I’d pay 75 cents for that song. It’s a classic!

AdrianRApr 12, 2004 at 2:44PM

Unfortunately Kip, the record companies are a long way from becoming redundant. The distribution channel is slowly opening up and allowing the removal of these middle men, but unfortunately the real issue is the exposure. There is a whole macro economy revoling around back scratching and pocket lining in relation to the recording and radio industry. When you remove the one the other suffers, so they are both highly involved in retaining the status quo. Somehow you need to build an independent medium in between artists and radio outside record execs, then the open model will work.

First rule in dominant business teaching is to choke the supply lines. Microsoft does this in operating, much line Apple are trying to do in digital music. However, the RIAA control two strong supply lines, distribution and airplay.

StephenApr 12, 2004 at 3:38PM

Besides distribution and airplay, the major labels also make bombs! Well, sorta through their extended families.

MattApr 12, 2004 at 5:02PM

I’m not sure it’s so simple, Rob. I think one of the primary reasons for people buying music downloads is convenience. Much of the music that I want to listen to is very difficult to find on P2P networks. Even when I can find it, it’s next to impossible to put together a complete album of quality rips. I finally got fed up and started buying from iTunes.

I think it’s safe to assume that the likelihood of finding a high-quality rip of a hot single is very good. If that’s the case, why would someone pay $2.50, let alone $.99, for something they can get for free with very little effort.

This leads me to conclude that the market price for in-demand, plentiful music is actually lower than the market price for less-in-demand, scarce music.

MattApr 12, 2004 at 5:03PM

I hope no one stumbled on that missing question mark in my post. Sorry.

Brian BreslinApr 13, 2004 at 12:58AM

aren’t the record labels behind the terrible downloads on the p2p networks? weren’t they flooding the networks with bad copies in order to frustrate people?

MattApr 13, 2004 at 7:57AM

Supposedly. What are you getting at?

barnesApr 13, 2004 at 6:47PM

Is it just me, or do the applications of traditional economic principles to issues like file-sharing seem either half-assed or woefully idealistic?

MattApr 13, 2004 at 7:16PM

I’m not an economist, but I think traditional economic principles are pretty much universal. If more people want a scarce resource, the price is always going to go up. If supply exceeds demand, the price is always going to go down. It’s just a matter of taking all the factors into account, which a lot of people aren’t doing.

barnesApr 13, 2004 at 10:43PM

But when you invoke supply and demand rules on something as ephemeral as, say, music in electron-form, the metaphor is stretched beyond comprehension, IMO. I mean, what is the supply? What is the demand? What is the product, itself? The problem starts to involve a kind of incestuous logic when you think about how “demand” in the music industry is as directly manipulated (or artificial) as it is.

It seems to me that at the very least, new material and deep catalogs are entirely different products, and as such, they follow different economic rules. What gets me is that the labels see the inflationary function of “popular” music, and the inflationary function of “obscure” music (or deep catalog) as opportunities to raise prices. But, they categorize everything as either popular or deep, so every part of the corporate endeavor is driven towards price inflation, and in this, they think they’re doing the buyers a favor.

dowingbaApr 14, 2004 at 1:06AM

Barnes, “supply” would, I assume, refer to the bandwidth used for each song. A more popular song will use up alot more bandwidth than some obscure song that has only 3 fans.

PatrikApr 14, 2004 at 6:08AM

If bandwidth is an issue, then it would be the file size that determines the price of each song, and not how popular it is.
Your bandwidth costs remain the same if users download 10 different songs or 10 times the same song. So it should be calculated into the price of a single song anyway.

This thread is closed to new comments. Thanks to everyone who responded.