Posts Tagged ‘pricing’

Will Music Copyright Holders Accept a Revenue Share Model?

October 1, 2008

Hopefully, they will.

Here is a good post at TechCrunch on this theme. Tomorrow there will be an announcement on the new rates of music copyright fees for digital music downloads for the next five years.

As always the music publisher are not realistic when it comes to pricing and even want to raise the fee from 9 to 15 cents per track. Apple is not amused and has vaguely threatened that it might have to shut down iTunes if the new rates go into effect.

Now Apple and the record labels are arguing that the rates should be changed from a flat fee per song to a percentage of revenues.
Hopefully Apple will be successful because this is the only chance for realistic pricing anytime soon.  It will make it possible to be much more flexible with pricing and to expand the business, which in the long term should be a big benefit for  artists.

We will see…

Music Access as Product Bundle

September 24, 2008

Sony Ericsson announced today more details to their new unlimited mobile music service. PlayNow Plus will launch in Sweden by the end of the year and will be available globally next year. Reuters reports, the service will cost 99 Swedish crowns (US $15.24) a month. Subscribers can download an unlimited number of tracks to the handset or to a PC. The handset will sync with the PC using broadband and 3G/HSDPA connectivity.

So here we go. After Nokia, Sony Ericsson is now the second big player in the game. We are just waiting on the iPod subscription bundle and then the transition is officially started. We are on the way to the “music age of access”.

Subscription services didn`t get a huge success on their own yet (like Rhapsody and Napster). But maybe they can find success with a device bundle. Of course there is the second big business model “Free”  with ad supported versions like Last.Fm or MySpace Music and there will always be the illegal “darknet” p2p version of music download, but getting your adored “high end” device subsidized is a big lure for many people to make a subscription contract. I´m sure there will be some devices exclusive with the subscription bundle comparable to the iPhone & mobile provider deals at the moment. If you`ve signed a contract and the music service is great, you wouldn`t want to loose it, because it`s “so convenient”. And most important, the service will “feel like it`s free” after a while.  At the moment, the price per month is still a little bit high, but when the price falls to 5 or 7 Dollars per month, many people really won´t care about this addition to their monthly mobile/internet bill.
And at this point there always comes the obligatory question: Do you know how much money you spend for water usage at home every month? Did you ever care about water costs standing under the shower?

Pricing Models For The Digital Age

September 15, 2008

I already quoted Chris Anderson yesterday and must once again. He brought to my attention this great paper by Prof. Hal Varian (for all of you who have had not the honor to study a few semesters of economics… he is “god” … well my professors told me so… by the way Mr. Varian is the “chief economist” at Google at the moment…)

In this paper, Varian describes 14 business models that allow content creators to make money even if they cannot stop the content from being distributed for free.

  • Make original cheaper than copy.
  • Make copy more expensive than original.
  • Sell physical complements.
  • Sell information complements.
  • Subscriptions.
  • Sell personalized version.
  • Advertise yourself.
  • Advertise other things.
  • Monitoring. (ASCAP monitors the playing of music in public places, collects a flat fee, which it then divvies up among its members.)
  • Site licenses.
  • Media tax.
  • Ransom. (Allow potential readers to bid for content. If the sum of the bids is sufficiently high, the information content is provided.)
  • Pure public provision.
  • Prizes, awards and commissions.

Some of these models are better than others… some only work for a very specific kind of content, but they are all options.

Three Business Models Of Free

September 14, 2008

Found this basic thought on Chris Anderson`s blog
If you want to make money with free products, you will have three options for your basic business model.

Of course you can combine this models. So everybody who tries to make money with media content will basically play in this area in the future. It´s as simple as that. Well it isn´t…

Sony Ericsson Comes With Music…

September 10, 2008

So, after Nokia, now Sony Ericsson starts with this subscription, or better, bundling pricing model (see Financial Times).

As you know I’m a fan of these business models… they “feel like free” and if there is enough added value they will have a chance to compete with the “free” alternatives. A crucial feature will be, if there is any portability of the music. Is there any chance to get this music from my mobile phone also on my big speakers in the living room? Is there any chance to hear the music in the car? et cetera… but of course the most important point is the price question: Where is the price point to have still this “feeling” “like free”?

Rafe Blandford did a bit of pricing research and showed that Nokia’s Comes With Music adds about 70 to 85GBP (US$123 to $150 or 85 to 105 Euros) to the price of a handset for a year music. That´s less than 10 Euros per month. For someone who is not an active “darknet” downloader and maybe iTunes customer… this is a reasonable price, if there is this mentioned portability. We will see.

Well, now we are waiting on the reaction of apple. When does the ipod or iphone come with a music subscription? I hoped Steve would announce it at his September keynote… but unfortunately not. Anyway there are this rumours it will come soon and the price will be around $130 per year…
It would be a lot of fun to use this new recommendation system “Genius” on ITunes 8 with a subscription model on a iphone…

The time of “a la carte models” in the music industry is ticking…

Dynamic Pricing ? ? ?

May 8, 2008

Warner experiments with dynamic pricing for digital albums… Well, is it a big thing in these times? Or maybe a little too late? Dynamic pricing would have been a great idea a few years ago… at the moment we are talking about more exciting pricing strategies like all kinds of bundles… ad supported solutions… “free content”…

I don`t think people pay for digital downloads cause they want to make a “bargain”. Simply why should they pay for a “bargain”? The “real” bargain is called “free”. People pay for the service and the customer experience at a downloadshop… They pay for an album cause they want the songs now and immediately. I don`t think people buy more albums, cause the price of a special album is for a short time a few cents cheaper than “normal”. I don´t think people will give an album “a chance” cause its cheaper at the moment. “Exploring” music happens in new ways these times …  where even “superstars” like Coldplay release their first single for “free” etc… Sorry, dynamic pricing this way feels like a model of the good old “CD world”.

The price range of the shop decides, if I will buy there frequently or not…

Personalized pricing…. what about that???

We will see… Just a thought.

120 Dollar For Unlimited Music On Your Mobile?

April 22, 2008

Today SonyBMG said yes… and it seems finally that Nokia’s “Comes With Music” project (more here and here) could launch with a “big library of songs”.
For some days now there are new rumours about the pricing of the service . You can find a short update/summary via Coolfer.

When Glenns calculation/assumption is right the on top price per handheld could be round about 120 Dollar… 10 Dollar per month… seems like a high price for me…
Well… if I would be able to connect my home-audio-system and my car with my phone… maybe…

… but I think you won’t get the young people… students, pupils… maybe some business guys… no time, enough money..
… on the other hand the kids spend incredible much money on ringtones…

We will see…

Apple Finally Did It

March 21, 2008

itunes-cover.jpg

I know, the news is from yesterday… but waiting for years… I am excited…

Here it is… Apple goes subscription! Steve changed his mind.  Bundling will win the “paid  content music game” (why? ).

The Itunes  store and the brand Apple have a good chance to survive against the “free competition”. For the rest … the quality level is high now.

About Tribal Management, The Seinfeld Curve And Marrying Someone

March 11, 2008

seinfeld.jpg

Seth Godin did a quite entertaining speech about and in front of the music industry (most of the ideas apply also for some other media industries…).

See the full transcript here. Here some of the best parts:

(…) if I asked you for the name and address of your 50,000 best customers, could you give it to me? Do you have any clue? Then what happens every day is you guys go to a singles bar and you walk up to the first person you meet and propose marriage and if that person won’t marry you, you walk down the singles bar to every single person until someone says I do. Thats a stupid way to get married. A better way to get married is to go on a date. If it goes well, go on another date. Wait to tell them on the third before you tell them you’re out on parole. (laughter) Then you meet their parents, they me your parents, you get engage, you get married. Permission is the act of delivery. Anticipated, personal, and relevant messages to people who want to get them.

(…)

The next thing is what I call the Seinfeld curve. The Seinfeld curve shows us Jerry’s life. If you like Jerry Seinfeld you can watch him on television, for free, in any city in the world two or three times a day. Or, you could pay $200 to go see him in Vegas. But there is no $4 option for Jerry Seinfeld. This is death. You can’t make any money in here. Because if you’re not scarce I’m not going to pay for it because I can get if for free. And one of the realities that the music industry is going to have to accept is this curve now exists for you. That for everybody under eighteen years old, it’s either free or it’s something I really want and I’m willing to pay for it. There is nothing in the center-it’s going away really fast.

(…)

The next thing is this idea that people care very much about who is sitting next to them at the concert. They care very much about the secret handshake. They care very much about the tribal identification. “Oh you like them, I like them”.

(…)

And the last one is back to this tribal thing. It’s really important to people to feel like they are part of that tribe, to feel that adrenaline. We are willing to pay money, we’re willing to go through huge hoops, trampled to death in Cincinnati if necessary, in order to be in the environment where we feel that’s going on.

(…)

So if the model that we loved about the record business in 1968 was A&R, taking care of artists, finding artists who people will love, and the model that we hated was brand management, I want to argue that the next model is tribal management. That the next model is to say, what you do for a living is manage a tribe…many tribes…silos of tribes. That your job is to make the people in that tribe delighted to know each other and trust you to go find music for them.

(…)

The next idea is this idea of liking. There is a lot of music I like. There is not so much music I love. They didn’t call the show, “I Like Lucy”, they called it “I Love Lucy”. And the reason is you only talk about stuff you love, you only spread stuff you love. You find a band you really love, you’re forcing the CD on other people, “you gotta hear this!”. We gotta stop making music people like. There is an infinite amount of music people like. No one will ever go out of the way to hear, to pay for, music they like.

Wal Mart Challenges The CD Price

March 5, 2008

walmart-karl-marx.jpg

Reuters reported
that Wal Mart is thinking about lowering the CD prices. For just $ 10 you will buy the top twenty, for $ 12 the current titels, the backcatalog starts already at $ 5.

Wal Mart was always a price leader in the CD market. They try to get more traffic with music products and maximize their profit with other products. If they want to hold this traffic they have to lower their prices in the current situation.

So music at Wal Mart was always something like a little bit “ad supported” or better said part of a bigger bundle. The problem for the music industry: Wal Mart has 22% market share. The whole market will drop the price. There will be a huge drop in revenues especially in a market segment of people who are not as price sensitive. On top the lower CD price will influence the album download price in the long term.

The pressure on the music industry to find fast a new online solution is increasing again.

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