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Some thoughts on the pricing model for online music.
At the Future of Music Coalition Policy Summit in Washington, D.C., Glaser recounted his general frustration in getting the record labels to offer creative pricing beyond the 99-cents-per-download model. In fact, some labels -- emboldened by consumers' apparent willingness to pay a buck a song -- are talking about raising per-song fees rather than lowering them to increase volume.
"Can you explain what planet the record labels are on?" asked Walt Mossberg, tech columnist for The Wall Street Journal and moderator of a one-on-one interview with Glaser at the conference.
Glaser smirked. "I guess I'd call it Planet Spreadsheet," he said. "The problem is that they don't look at it holistically."
Glaser has tried to convince the labels to compromise -- perhaps by charging more than a buck for newly released songs (and more than $10 for newly released album downloads), but then slashing the price a few months later to drive demand after the new-release sheen dulls.
So far, response has been muted, Glaser said. On a host of packaging issues, he said he can often get a couple of major labels on board. But then they hear that a couple of other labels aren't playing ball, and they back off for fear of being the only ones to make a mistake. The result, according to Glaser, is the "lowest common denominator."
Glaser's proposal seems immently reasonable to me. Not only does that address the needs/desires of the market, it also has the added benefit of mirroring the pricing model of CDs in the physical world. The brand new CDs are sold for full price (or discounted as a loss leader in some stores), the not-so-new CDs are sold for less, and the older/poorly selling CDs are sold as "budget". Musicians are compensated for sales in these strata as well -- full royalties, then 70-80% royalties and finally 50% royalties. Why the labels are resisting this is beyond me -- it would simply be an application of their existing business model to the internet.
The labels should really be focusing on answering this consumer driven need. Otherwise, people are going to fulfill their needs on their own.
Posted by Casper at May 6, 2004 04:05 PM"The best-selling CD in the country is blank," said Flansburgh [from They Might be Giants].