Chris Kitze, the CEO of Yaga (and former CEo of NBC Internet ) e-mailed me some thoughts on the music market, in light of the bundled deals which Apple has been doing: “Just like airline seats, a few suckers will pay full boat retail just so everyone can establish the “value” of music. Retail stores will all be selling the same thing for 1 cent over cost. One store is the same as the next and they are all only a click away from switching. And just like airline seats, you can “earn” a free seat by using your credit card, buying products or services, etc.
Look at their revenue model and except for business travel and consumers too stupid or lazy to play the games, lots of people use miles to travel for free…most people will get their music bundled with other things…university tuition, soft drinks and hamburgers, etc. Music companies will make more money from these kinds of licensing deals because there are virtually zero selling costs and (net of royalties) pure margin.” Interesting way to look at it…
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