That being said, while hot new music is less price elastic, its also abundantly easier to pirate. If I were them, I’d spend time coming up with an algorithm for *rareness* and price that stuff up.

More for those interested @ http://www.hypebot.com/hypebot/2009/04/itunes-hits-129-but-emi-amazon-walmart-buck-trend.html

And thanks OM for the kind words about Hypebot.com.

On a side note, I used Amazon MP3 for the first time last week and was pleased to see they had a version of their download client for Ubuntu and it was easy enough to get working on a 64bit system too! Impressive.

when real competition does not exist and firms have monopoly or duopoly power do they try to force metered usage (a.k.a. per song pricing). witness the music industry trying to keep their archaic model intact.

i don’t want to pay for mp3s with low bitrates or previously proprietary codecs, nor do i want to order actual cds, so i suffer through one of the balkiest and worst UIs i’ve ever used – rhapsody – in order to listen to most anything i like. on an ex-MSFT guy could keep such a great underlying concept and service completely hamstrung with a horrible web and desktop client UI.

apple will go subscription at some point. only a matter of when, not if.

As for the spectre of ‘variable pricing’, everybody knows that the premium priced stuff is going to be hot pop properties like whatever the Pussycat Dolls do next, not a Vladimir Horowitz recording from 1949.

If music people are smart, they will realize that the real money is to be made through Guitar Hero and Rock Band re-issues of old properties. That’s the one place I’d sell my soul to become a deal making IP attorney. Any idiot can just *listen* but a million consumers will pay big bucks to *play*. Nobody complains about DRM for video games. Nobody. And there are no XBox titles on Pirate Bay. In fact, the market for 3 year old XBox titles has now gone one way because demand is so low. GameStop stopped buying XBox titles in February, so your used games are worthless. But nobody is complaining.

It is and always has been about value. The value of DRM free music is high. Thanks Apple. Now fix your memory pig of a player.

What’s unclear to me is how, when fully implemented, these models work for the artist. Presumably music companies allocate artist royalties based on the number (and percentage) of plays on a given service, but with a fixed subscription or ad revenue model the upside capped. Therefore, the outcome is fundamentally distributive. That is, one artist’s hit effectively takes money from other artists.

Further, while it’s true that once you have a digital master, the marginal distribution costs for DRM-free music are near zero, the terms between an artist and his/her record label are a significant driver of any given song’s cost structure. If the top line is fixed across subscription services, record company A&R managers lose flexibility when contracting with and motivating talent.

I think that, while they currently enjoy a cross-subsidy from CD and online pay-per models, subscription services are unsustainable. I suspect that pay-per (streamed and/or downloadable) will eventually dominate, but record companies are going to have to get a lot more sophisticated about pricing. Getting back to Om’s post, now that DRM is effectively dead, dynamic, not variable, pricing will be the key enabler.