How much should music cost?
Three interesting developments today on the issue of music pricing and price elasticity, a subject close to my heart. While one label starts flirting with the idea of lower prices to stimulate demand, another backs away from it. And meanwhile, Trent Reznor gives away more songs.
On the plus side, Warner Music Group announced
a pilot with Digonex Technologies Inc., a company that enables sellers
to adjust the price of goods dynamically in response to demand.
Indianapolis-based Digonex automatically adjusts prices up or down in
an attempt to maximize returns. Unlike AmieStreet.com,
which bumps up prices as items grow in popularity, Digonex also tries
to boost demand for goods by cutting prices as sales fade. Details of
the WMG were scarce, other than that the trial would be for a limited
period of time and involve just a portion of Warner's downloadable
catalog. No word on which artists, songs, or online retailers would be
involved, or the prices charged. One possible model is the deal Digonex
announced last October with the ever-adventuresome Nettwerk Music Group
and PassAlong Networks, which called for the price of singles to be
adjusted weekly between three tiers -- 33, 66 or 99 cents (albums would
go for $3.30, $6.60 and $9.90). Digonex used to operate
MusicRebellion.com, a site that sold music for as low as 5 cents per
track, but that was just a proof of concept, spokesman Chris Pohl said
in an e-mail. "We closed it down because we didn’t want to be
competing with our customers for music sales," Pohl wrote.
By contrast, ABKCO
is moving the other direction, pulling its collection of vintage (and
prized) Rolling Stones albums from eMusic after only one month. David
Harrell at Digital Audio Insider has a nice analysis,
which notes that eMusic's payments lately have been a little less than
what the labels collect per song from iTunes. (Harrell had previously noted
that eMusic subscribers responded avidly to the old Stones titles,
putting 17 into the eMusic Top 40 after one week.) EMusic CEO David
Pakman has long argued that major labels and artists should use his
company to sell items that have been molding in their vaults, because
collecting something for those recordings is better than collecting
nothing. Evidently, the strong response to the Stones' releases
persuaded someone that eMusic was undercutting higher margin outlets,
such as iTunes. More likely, though, the lower price was unlocking
demand from marginal buyers. As Harrell put it, any sales lost at
higher-priced sites "would probably be more than offset
by downloads by eMusic subscribers who previously had no interest in
paying for Stones downloads."
Finally, Nine Inch Nails offered its latest album, The Slip, online as a free download in advance of its release on vinyl and CD in July. This is a bit of a twist on its last, four-disc outing, Ghosts I-IV;
only one quarter of that set was available as a free download, and the
freebie was clearly a teaser to encourage people to buy the rest of the
package (for $5 to $300, depending on the format and the packaging).
This time, folks who care only about the digital files can get the
whole shebang in lossless digital formats for free. There may be an
upsell opportunity here, but I think the main strategy is simply to
grow the audience for NIN. To NIN, giving away a portion of its output
and helping fans remix and share
its tracks are ways of harnessing Web marketing and economics for
long-term gain. And in an environment where consumers have
ever-expanding choice, trying to capture new fans with free,
first-quality product makes a lot of sense. Besides, the band's not
hurting for cash: according to Billboard, it collected $1.6 million from sales and orders of Ghosts I-IV in the first week alone.
Photo of the album cover for The Slip is courtesy of the Nine Inch Nails' website.
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