Idiot Award Winner

[gitreel]

RIAA - When will they gitaclew?

The Idiot Award Goes To...
Posted by Tom Barger on September 20, 2004 at 2:41 PM (printer friendly)

http://www.msnbc.msn.com/id/6037780/site/newsweek/

Forecast: Song Costs May Fall Like Rain
Memo to music labels: lowering prices will get you more sales
By Steven Levy
Newsweek

Sept. 27 issue - As residents of the Gulf Coast were reminded last week,
there's no turning away nature. You can't pass a law that snuffs a hurricane
at the border. You can't sue it. You've got to understand it, and make the
right plans to deal with it. Technology generates its own form of nature, a
set of conditions that enforce an artificial, yet equally unstoppable,
reality. With the Internet, fast computers, cheap storage and high
bandwidth, it's now just a fact that digital files-be they documents, images
or Hoobastank tunes-can be sped through the ether with ease, a phenomenon no
easier to halt than a storm surge.

That's why it's so fascinating to watch the music industry's efforts to
claim some high ground in its fight against piracy. For the longest time,
the labels viewed digital music as something that could hurt them with
hurricane force but made no efforts to adjust to this new reality, let alone
exploit it. Finally, they were persuaded to license their works to online
music sellers. Apple's iTunes Store, which sells songs for 99 cents a shot,
became a template for a mini-industry that clearly represents the future of
music. Microsoft opened its own long-awaited online outlet earlier this
month. And just last week Yahoo dropped $160 million to buy Musicmatch and
its store.

This summer provided a clue to further harnessing the force of digital
nature. For three weeks, Real Networks tried to lure new customers by
slashing prices to 49 cents a song and $4.99 per album. Since Real paid the
full royalty load to the labels (almost 70 cents a tune), the company lost
money on every transaction. CEO Rob Glaser says that the company did get new
customers, but here's the real news: Real sold six times as much music and
took in three times as much money.

This reflected the experience of Audible, which sells audiobooks on the
iTunes Store. Working in conjunction with publishers and Apple, Audible
offered some online titles at a fraction of the normal price. One of those
buyers was me-I had been thinking of getting a David Sedaris audiobook to
entertain my family on a summer drive, but balked at paying $11 for
something I might play just once. After I got an e-mail informing me I could
get it for $2, I snapped it up. Audible CEO Don Katz says the featured books
on that single e-mail were downloaded at 60 times the previous rate.

OK, you already knew that people like to buy stuff at lower prices. But the
labels should understand that the nature of the digital world rewards price
cutting much more than in the physical world. With CDs there's cost involved
to manufacture every unit; trucks must move the goods, and retailers return
unsold items. Digital has none of these obstacles.

Lower prices won't happen unless labels and artists agree to smaller royalty
fees per song. But this version of the Monty Hall Problem isn't too tough to
crack. Behind Door One is the money you can make by selling a million copies
of a tune. Behind the other door is the money to be reaped by selling 6
million copies at half the price. Do the math, guys!

What's more, the benefits of low price and wider distribution don't stop
there. When you've got more people buying music, you grow your fan base and
encourage experimentation. And the lower prices go, the less reason there is
to get pirated songs.

But instead of embracing this idea, the labels are either standing pat or,
by some accounts, figuring out ways to raise the price of online music. So
far, 99 cents for singles is holding firm, but at the labels' insistence,
some albums now cost more than the standard $9.99. The idea, one insider
explained to me, is to uphold the "perceived value" of music.

Right now this makes some sense, since the huge bulk of revenues are still
in CD sales. But eventually, this stance falls apart because of the
persistent presence of file-sharing services where the perceived value of
music is zero. It's a fact of nature: the best way to serve music lovers, as
well as the most effective method to curtail piracy, is to go cheap and sell
tons of songs. If the moguls don't see this, they're as deep in denial as
those stubborn souls who refuse to evacuate shoreline bungalows in the path
of a Category 5.

[Capmaster]

Is bazooka getting a rest?

[gitreel]

Is bazooka getting a rest?

For a little bit.

I am starting to like having 2 profiles.

[Capmaster]

Is bazooka getting a rest?

For a little bit.

I am starting to like having 2 profiles.

Well,at least that way you can come to your own aid in a flame war Clever

Naked Geek tried that. Wait ....he ended up looking like a moron.
.
.
Never mind

[jimmalenko]

When are we going to see northcat_4, northcat_5, northcat_6 & northcat_7 become members ?

His other four personalities are missin out !

[tgpo]

Image of the RIAA at work:



Screw the RIAA, support independents!

[adam]

Personally, I think the idiot is that author. Its obvious that high volume/low price is one way to market your product. But just because this can work doesn't mean it always will, or that it is a good idea. His evidence is that Real increased sales dramatically by selling their music for a loss. Well no kidding.

There is alot more to music production overhead costs then just royalties. Suggesting that cutting royalties in half will automatically result in six times more revenue is a gross oversimplication and wishful thinking.

Since when is diversification a crime in economics? Why shouldn't the music industry be allowed to walk the tightrope between online and instore sales? If they sold songs online for pennies how many cds do you think they'd sell? Authors like this would start complaining, "if you can sell it online for this much why not on a disk? Hey just cut the royalties some more."

I'm not saying that its a bad idea to lower cd and online music prices and make up the loss through higher volume sales. But this article just sounds like typical media mogul bashing. The entire music industry is so out of whack it is perverse. It is probably the most corrupt and unorganized industry in America. To suggest that all of the problems can be solved by just changing two numbers (royalty % and price) is ridiculous.

BTW: What does this have to do with the RIAA guys? They don't set the prices.

[gitreel]

They do.

They represent the labels. The labels set the prices.

The point of the article is the paid services are going nowhere.

The companies doing the service lose money on the deal and the artist gets shafted again.

If the prices were lowered, they would make up for the lower prices with sales.

It is called supply and demand.

The consumer overall thinks 99 cents is still too much to pay.

[IAIHMB]

If multimillion dollar companies weren't always trying to find more ways to squeeze money out of the consumer, piracy wouldn't be nearly as popular as it is. That reminds me, to hell with Metallica.

[jimmalenko]

CDs retail for about $20 AUD over here. I can't quote any hard statistics, but I am led to believe that the artist sees about $1 of that, with the other $19 going towards production costs, label profits, store profits etc etc. so it would seem that the artist is getting a raw deal IMO if these figures are anywhere close to accurate. After all, most people buy the album for THE ARTIST'S contribution, not because of the label it's released on.

[adam]

The RIAA is the watchdog organization that looks out for the music industry's rights. They have no control over music prices, not directly at least. The individual labels can charge as much or as little for their albums as they like, and distributers can charge as much or as little as they like (within license restrictions of course), as evidenced by Real. If a label wants to sue somebody they do it through the RIAA. If the collective industry wants to push new legislation then RIAA lobbies it. If a label wants to cut prices on an album they released then they just do it, its their product. Anytime anyone wants to bash the music industry they just label it "RIAA," but that's not how it works.

Even if online sales services were losing money it wouldn't be any suprise. 90% of all startups do just that. Online music sales are still very new, so they need time. But aren't some doing incredibly well like Itunes? I thought they were voted like the best new service of the year and showed incredible revenues for such a new business.

I think with the increased popularity of online sales, music prices are naturally going to go down anyways. But its extremely naive to just assume that everything will work out by dropping the prices drastically and making up the loss with increased sales. The author just assumes that price changes will have a direct correlation to revenues. He ignores such fundamental logistics like bandwidth and storage. If you sell 6 times more music online then your bandwidth and storage costs will be 6 times greater. A high volume/low cost approach could easily bankrupt some labels. If this were a foolproof method for every commodity then everything would be sold like that. Obviously nothing works for everybody all the time. Some companies like Real are experimenting with this, some aren't. Its that diversification and competition that drives prices down in the first place.

Supply and demand? Exactly! You let the market set the price, not the other way around. You don't just slash prices and assume that demand will always pick up the slack. With something so easily distributed, and so freely shared as music, you could very easily saturate the market and then you're just selling for a loss.

Look, my point is that the music industry has been in shambles for years. Probably about a dollar of every cd sale literally gets sniffed right up someone's nose. You've got artists whose albums are selling 10's of millions of dollars, and they can't even afford to pay their rent, they just subsist off their label. The mismanagement and downright corruption in the industry is the major reason that prices are so high. You can't just lower prices and expect these things to go away. Lower music prices will be the result of widespread reform in the industry, not the driving force behind the reform.

[gitreel]

You are right adam, however, Itunes is losing money.

Apple makes up for it by selling ipods.

[northcat_8]

When are we going to see northcat_4, northcat_5, northcat_6 & northcat_7 become members ?

His other four personalities are missin out !

I just let them all use the northcat_8 name because they are all ******** too, so I don't really see the need. Except for James and we caught that little nicey nice SOB saturday night while he was trying to read bedtime stories to blind kids, he's duct taped and hanging by his feet in the frontal lobe right now.