p2pnet.net News View:- Let me ask you a question. “How much are you really prepared to pay for music?”. What I’m trying to get at is: what is the price point where you are prepared to buy music (and hence be relatively legal) as opposed to getting it from a file sharing system (and hence be relatively illegal).

I aso think that using p2p as a mechanism for distribution (particularly systems like BitTorrent) has a great deal of merit regardless of whether it’s for profit or not.

Before we try and answer that, let’s look at the fact the UK record industry wants to sue 28 alleged file-sharers in the UK, as well as others in Europe.

It now seems that the music industry madness is worldwide. We’re getting all the same lies and half truths to justify this in the UK, along with the usual suspects wheeled out to spout them.

The key point here, though, is the music industry is wedded to a process and distribution system that expects to use physical distribution of a limited quantity and range of product. Take it to its 30 year logical conclusion - they’re stuck with the need to develop the 20% of “Stars” who represent 80% of their revenue.

Then we have The Long Tail, a Wired article that explores the realities of Internet distribution. We’ve known all this for nearly 10 years now (or all the way back to Negroponte’s bits vs Atoms). In Internet distribution we have economies of scale that become economies of abundance rather than scarcity. A track that’s only downloaded twice a year costs no more to host and deliver than one that’s downloaded two million times.

If you solve the economies of scale, then one million tracks delivered twice each costs you the same as that one hit, but generates more money.

The implication for the record companies is that they should be digitising their back catalogues and all those copyright-free recordings as fast as they can and offering them for sale at a much reduced rate.

In fact, the best business model for them for downloading looks to be huge volume of inventory allied to a premium rate for the latest hits, rapidly dropping to near zero for back catalogue.

Never mind the one million tracks on iTMS or the 700,000 or 500,000 on the other paid download services. We need ten million, 100 million or whetever the figure is for every piece of audio that’s ever been recorded. Because somebody somewhere wants to buy that recording of Fats Waller live at Radio City or Reebop Kwaku Ba’s recordings of the Genoua in Morocco or the tape of Danny Rampling’s set on the beach of Anjuna Goa on 31-12-97

Now, for this to work, you, the customer, needs to actually buy all this stuff. Somebody, somewhere, has got to pay to cover the costs. Which finally brings me to the question.

How much are you really prepared to pay for music?

Here’s my answer.

The first thing I want is a product I actually want to buy. That’s a minimum of an mp3 digitised at 192Kb VBR with no DRM. That’s the point where the product is as good as something I rip myself from a CD. It’s also quite a bit higher quality than that available from iTMS, Napster, Sony, Rhapsody and the other online services. And I can play it anywhere. On my home PC, on my laptop, my portable music player, my mp3 CD player, or in the car. Without jumping through the DRM hoops and with the ability to back it up.

At the top end, for me $0.99 (or whatever the UK equivalent is) per song is too much. I have to think about whether I want to blow $10 on this album instead of that one. At the bottom end, grabbing it for free from a p2p service means too much hassle in locating it, fixing the tags and file names, assembling the album and discarding the badly ripped or corrupted copies.

Some p2p services are better than others but as one wag put it, it’s hard work at below minimum wage.

Now, what I’ve discovered is: if I buy it from AllOfMp3.com at $0.01 per Mb or about $0.06 per song, I don’t even think about the cost. $1 per album is so low that I’ll just do it. The end result is that I’m buying more music and listening to more music, and I’m actually spending more than I used to when buying CDs.

So for me, at least, the price point where I’ll switch from trying to get it for free and actually paying for downloads is somewhere between $0.06 and $0.99, or $1 and $10 per CD.

My guess is that for most people the point where they stop thinking about the price and download huge quantities is around $0.25 per song. I’m a cheapskate, so my personal boundary is probably $0.10. But I suspect the tipping point for most of us is a bit higher.

So, putting this together with the detail from The Long Tail, it seems clear to me that the best strategy for the music industry is to go flat out for scale so that the overheads drop well below $0.25. And then offer up everything they’ve got, even it only gets a couple of downloads a year.

Offer it at three price points:

• $0.50 for recent big name launches.
• Drop that to $0.25 for reasonably current releases after 6 months.
• And then sell everything else at $0.10 per song or $0.02 per Mb

From the labels’ point of view, this should look like Free Money. It’s from inventory that’s already covered it’s costs and wasn’t earning anything anyway.

And then we can all just forget about DRM, suing customers, price cartels and regional price differences.

And at that point maybe the p2p file sharing networks will just fade away because nobody can be bothered any more.

Julian Bond - voidstar.com

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See:-

28 alleged file-sharers - Big Music anti-piracy war, p2pnet, October 7, 2004

Internet distribution - The Long Tail, Wired Magazine, October, 2004

This entry was posted on Friday, October 8th, 2004 at 7:17 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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