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The new iTunes pricing
Instead, the majority of songs will drop to 69 cents beginning in April, while the biggest hits and newest songs will go for $1.29. Others that are moderately popular will remain at 99 cents.
DRM will change too, here is much more information. This is first a way to raise prices, yet without the consumer seeing nothing in return. But it's also a sign of the maturing of the market. The most popular songs will be less of a loss leader for the hardware. Relaxation of DRM suggests that Apple fears long-run competition from less regulated sources, including CD burning from friends. Most of all this is a sign that the music business continues to experience economic troubles. You could call it the "do anything to increase revenue now" strategy. For 30 cents a song you can make your entire current collection DRM-free.
By the way, on DRM and related issues, I recommend the new James Boyle book Public Domain. The book is free and on-line here. You can buy it from Amazon here.
Posted by Tyler Cowen on January 7, 2009 at 07:34 AM in Music | Permalink
Comments
This is something Apple have been pushing for and which the music companies have held back while allowing other distributors, notably Amazon, to do for some time and without higher costs. Recording from CDs is not a new threat and is a feature of iTunes.
Apple's largest fear might actually be the claims of a lack of interoperability and a resulting monopoly that went with its DRM which was initally introduced at the demand of the record labels. Removal of DRM was an Apple proposal to address the issue.
Posted by: Bunbury at Jan 7, 2009 7:50:44 AM
We now have the opportunity to observe what songs are purchased prior to the price change in April and which songs are purchased after. Sounds like a micro comprehensive exam question in the making...
Posted by: bastiat at Jan 7, 2009 7:56:02 AM
Apple has been fighting, ostensibly, for DRM-free licensing for a while.
http://www.apple.com/hotnews/thoughtsonmusic/
Posted by: Michael at Jan 7, 2009 8:11:10 AM
As more retailers enter the DRM-free online music download space, I believe (and hope) price competition will become more prominent among stores, particularly as challengers like Amazon and Walmart attempt to put a dent in iTunes' dominating market share. Interestingly, until recently there was no single tool to compare prices on downloaded music. I actually created such a site, called DownloadShopper.com (www.downloadshopper.com), that compares prices between iTunes, Amazon and Walmart.
Posted by: Matt B. at Jan 7, 2009 8:18:09 AM
The only thing that keeps iTunes going it the lack of understanding of how BitTorrent works in the general population. I don't know anyone who uses iTunes to get music when it can be obtained for free elsewhere. The only time I've ever seen my son use it is when he gets an iTunes gift certificate from an unaware relative or something.
The same thing goes for "ad blocking" software. It blows my mind that anybody would run a browser without installing some form of ad blocker. I've always thought that the easiest way for Microsoft to eliminate Google as a competitor would be to include an ad blocking service in their browser.
Perhaps they couldn't do it themselves directly without the Justice Department getting involved, but they would certainly make it simple to install and promote it's use.
Posted by: Winslow Theramin at Jan 7, 2009 8:31:16 AM
Winslow: I do buy music I could get for free. I even have bought legit versions of songs I already had, although I won't claim that I was quite so principled back in college.
That said, once Amazon came out with DRM-free downloads, I completely stopped using iTunes store except to upgrade my existing collection.
Anyhow, not claiming I'm representative, but just saying that there exists a case.
Posted by: Greg Sanders at Jan 7, 2009 8:56:26 AM
@Tyler, do you think that giving a the pdf version, but selling the e-version which comes with automatic updates, and can be transformed into a hardcover, is the business model we will see for books, especially textbooks, in the future? Typically, textbooks are revised so as to lessen the value of their previous editions. Many of these revisions are not worth the money, but are needed to prevent a crash in the new text book market.
@Winslow, your reasoning seems incomplete. The mix between free/paid is unlikely to have an equilibrium point with a dominant strategy. You might want to re-think why people don't use BiTorrent, and what signals of quality, reputation are available from iTunes. You might also consider the white space you would encounter surfing the net if publishers had to develop a counter to ad blockers. You might wonder about the strategic aspects of this game also, and if and when it called for regulation.
Posted by: michael webster at Jan 7, 2009 9:33:07 AM
It was easy enough to circumvent the DRM on iTunes songs. This just removes some red tape that most likely just impacted small-scale music trading among friends, and allows them to raise the price on higher-demand songs.
Posted by: Mark at Jan 7, 2009 9:36:04 AM
@M. Webster
"the business model we will see for books, especially textbooks, in the future"
I have never understood why college bookstores don't lease textbooks. With print-on-demand technology now available, college bookstores should just print out the latest, revised versions as customers wait & lease 'em, no?
@Winslow
"BitTorrent"
Torrentz are a PITA. Connections are slow and uncertain among peers - you often have to connect a couple of time to finish getting an album and it can take 20 mins. Rather than put up with the frustration, most consumers just pay the 99 cents. What will keep Apple in the lead even as the download market changes is its awesome interface, ease of use, and speed. Apple has made it easy to stay legal; this should be a fine example for Cass Sunstein, I'd think.
Posted by: StreetWalker at Jan 7, 2009 10:16:09 AM
@Streetwalker who wrote: "Torrentz are a PITA. ... and it can take 20 mins."
Or a LOT longer. Classical music in FLAC format can take almost a week. Very painful. I am a nerd and even I find Torrentz to be very frustrating. I can not imagine the average person EVER using BitTorrent.
Posted by: Dave Barnes at Jan 7, 2009 10:47:20 AM
Apparently Apple is very good at implementing Geek Tax
Posted by: nyet at Jan 7, 2009 12:03:59 PM
Tyler,
My understanding is that a loss leader is an item sold for less than it costs the seller. While there may be a high fixed cost associated with producing a song, the copying of bits is highly efficient. So I'm not sure where the loss leader is. Could you explain?
Posted by: Adam at Jan 7, 2009 12:10:18 PM
@streetwalker
Wrt to leasing or renting textbooks, Brandenburger and Nalebuff made this suggestion over 10 years ago in their book, which was not leased, called Co-opetition.
I remain as puzzled as you why digital books are not sold like software.
Posted by: michael webster at Jan 7, 2009 12:25:10 PM
What keeps iTunes going is the best MP3 player on the market + human inertia.
I switched to Rhapsody about 2 years ago; bought Ibiza player a year ago; my wife and kids are switched to Sandisk Fuse by now. (And I do acknowledge iPod is a better device)
I explored more music in the last two years than in a decade before. I ventured into genres and styles that have been sitting on the backburner eternally; revisited musicians long time forgotten; checked out my wish list (the yards-long scroll rather) practically all the way to the bottom.
The only (sort of) shortcoming is 160 kbps limitation on streams. Not a biggie at all for a commute-listening. And anyway I buy CDs of those records that a) deserve high quality sound of my home rig; b) I know for sure I will listen again and again.
Examples:
Tyler mentioned Vince Mira recently; I had it on my next morning commute. Love it, will keep it on MP3; not going to buy CD. Would I pay $8 to download it from Amazon just to see if it's any good? Not likely.
While checking online Monk’s discography stumbled upon his son’s tribute album (“Monk on Monk”) which I’ve heard of when it was originally released (’97) and completely forgot about. Checked it out right away via Rhapsody; loved it; bought CD. Would I rush to buy it without checking? Maybe, but more likely I would forget about it for another 10 years if not forever.
One day weary of Cesaria started looking for the similar music on Rhapsody; through some chain which I don’t even remember by now ventured into Senegalese music; opened the whole new world to myself. Did I know it exists? Yes. Did I have time/resource to investigate it before Rhapsody? No.
Anyone who is into music should really try subscription service to realize how utterly dumb is any other distribution scheme.
Posted by: Ozornik at Jan 7, 2009 12:28:11 PM
"What will keep Apple in the lead even as the download market changes is its awesome interface, ease of use, and speed."
Pretty much. I used to torrent everything, but now I restrict that mostly to things I just want to try out (new music, TV, etc.) When I know I want it, it's an easy purchase from iTunes, and it's especially great for singles. Yes, I know certain torrent applications can tease out a single MP3 but searching for that album and waiting for peers, etc is well worth avoiding for 99 cents, in my opinion.
Posted by: Liz at Jan 7, 2009 12:51:41 PM
Both torrents and P2P have serious faults. Connections are unreliable, download speeds are unpredictable, and you don't know exactly what type of file quality you're downloading. Reasonably priced downloads from Amazon (which I've been using almost exclusive since it began offering MP3s) and iTunes, however, are fast, reliable, and a known quantity in terms of quality. Plus, I have no problem paying for music, just as I have no problem throwing a few dollars into the guitar case of the bluesman who plays at Marty's Bar. Of course, if I were a broke college student, I wouldn't tip as well, and I'd be more likely to spend time (rather than money) torrenting.
Posted by: Franklin Harris at Jan 7, 2009 1:53:08 PM
The record companies will die as musicians, who made a living for millennia without recordable music, will realize that giving their recorded music away for free increases demand for other tangible products such as concert tickets and t-shirts. Fat useless record executives will need to find a new line of work, consumers will have more variety at cheaper prices and more musicians will make a living off their talents while fewer make millions.
Posted by: Huck Finne at Jan 7, 2009 2:44:58 PM
I avoid torrents for several reasons:
1) Personal moral and legal considerations
2) I value the idea that I am supporting the artist, if not very much directly, than by indirectly sending a signal to their distributor that it is worth distributing them
3) I like knowing that I am getting the actual recording of the track I desire at the quality I desire.
Those factors are worth the price difference to me (and are often worth enough that I will spend more to order a physical album online than simply purchase a download).
I know I'm in the minority, but Apple's new pricing and 256kbps DRM-less is a big deal for users like me who already spend a lot of money on music, most of which is not the most popular stuff supported less enthusiastically by a greater number of people. I suspect the majority of the singles I've purchased from iTunes will now be in the less-demanded 69 cent pricing, and a combination of a 30% price-drop and a 100% increase in quality is a huge incentive to spend a greater proportion of my music purchasing at the iTunes store.
Posted by: Josh at Jan 7, 2009 2:55:43 PM
StreetWalker: It's not really efficient, in terms of time or cost, for a bookstore to print out a few hundred copies of a multi-hundred-page four-color-printed book "while customers wait" (or even "before each term starts"), even if we bracket the issues of binding the books.
Back on DRM, to amplify what Franklin Harris said, plenty of post-college adults are willing to pay $10 for a previewed album of songs in very high guaranteed quality, which is what the iTunes Plus 256kbit AAC files are.
I, like Greg Sanders and countless others, do buy music - even music that I've already downloaded for free, because I want to support the producer, and because then what I have is the highest possible quality available - and I, like others, have no problem at all using P2P software to acquire it illicitly.
(Another advantage of retail is that you can trivially acquire things that are not very popular - amplifying Josh's comment - and thus very hard or impossible to get from a P2P source easily.
It costs a record label almost nothing to let you buy songs from iTMS, so there's no reason not to for things that would otherwise be a limited edition of a few hundred CDRs, that would then vanish effectively forever from the legitimate market, and be very hard to acquire even illicitly.)
Posted by: Sigivald at Jan 7, 2009 6:58:34 PM
count me as another who only buys DRM-free music from Amazon and only bothers with torrents when I can't find a copy on Amazon. I usually find the torrents not-too-painful, but the slight added annoyance and moral cost are enough for me to be fine with paying for songs when I conveniently can.
Posted by: Mike at Jan 7, 2009 7:30:51 PM
I have never understood why college bookstores don't lease textbooks. With print-on-demand technology now available, college bookstores should just print out the latest, revised versions as customers wait & lease 'em, no?
They do this already -- it takes a couple of forms. One is textbooks that are 'customized' for a particular university/professor/class. They delete unused chapters from the PDF and maybe add some custom content (sometime even a paper written by the prof for which they pay kickbacks royalties. And then print POD (though not while the student waits). The book can't be resold because it's a little different every time. Another approach is to include in each copy of the textbook a code to access online tests. The book can't be resold because the code won't work again the next semester.
What I don't understand is why universities allow textbook publishers to capture so much of the total tuition. Universities could charge more if they crammed down the text costs -- and universities are certainly in a position to do this. If I were a university president, I'd institute a ban on 'customized' texts and institute a policy that a prof could assign any text he/she liked but was required to teach the course to accommodate owners of the last TWO editions, not only the most current. Students would love being able to buy cheap used texts (the U could portray itself as battling against outrageous books costs) and the students wouldn't realize this made it possible for the U to jack tuition by an equivalent amount ;)
Posted by: Slocum at Jan 8, 2009 11:57:01 AM
I certainly concur with many of the above, in that I appreciate the convenience and 'known quality/commodity' of iTunes. In addition, call me old fashioned, but I acknowledge the importance of supporting (to whatever extent) the artist by paying for the music that I enjoy - seems only fair. Don't think there is a viable argument for the contrary position - at least not an an argument that isn't predicated on basic selfishness and lack of empathy.
Posted by: jim at Mar 4, 2009 12:29:14 AM
Amazon.com has digital downloads for 99cents. The same hot tracks that are on itunes. When I saw that a song I wanted was $1.29, I said I aint paying that much for a song. This will hurt them in the long run as piracy will rise, or in my case I will download from amazon and upload them to my itunes library to store on my ipod. In the middle of an economic crisis this was a stupid move for itunes.
Posted by: Stephen at Apr 30, 2009 7:26:31 PM
