Thursday, January 4th, 2007
In online music news, the Record Industry Association of America (RIAA) is suing the Russian website allofmp3.com for the comical sum of $1.65 trillion, more than double Russia’s nominal GDP of $763 billion. To be sure, allofmp3 is skating on thin legal ice by using loopholes in lax Russian copyright laws to sell MP3s discounted as much as 90% from iTunes pricing. But if it weren’t so legally ambiguous, who would complain about song downloads for as little as a dime?
A few weeks ago I had the good fortune of happening upon a Tower records in the process of liquidating its CDs for half price. The place was mobbed. It seems that while people no longer can stomach paying $19 for a CD, the $9.50 price point was much more tolerable. This is not as much a lesson in bricks and mortar versus online music, the lesson is that people buy more music when the music is less expensive.
iTunes has noticed that the $10 price point is significant to customers. But it’s still too high. After all, they’ve compressed a higher quality digital format, cut out shipping costs and eliminated printing of CD booklets. It’s possible to buy CDs online for a similar price, the only trouble is that you’ll have to wait for several days to receive it.
A couple of years ago during an NPR round table about digital rights management (DRM), someone suggested a groundbreaking approach. Why not put every song ever recorded online and let users download them for a nickel each? When allofmp3 started that’s basically what they did. At that price, there’s no reason not to be impulsive. Five cent downloads would reduce incentives for file sharing and encourage listeners to experiment with new music.
A nickel per song doesn’t sound like much revenue for artists, but artists would drastically increase sales volume. If artists picked up 60% of the revenues, or 3 cents per song, then selling an albums with a total of 15 songs would only earn them $.45. If 10 million people downloaded the album they would earn $4.5 million on album sales alone. And what if the artists benefited from the mashups and amateur remixes that now proliferate on the web? Artists could offer up song pieces for sale and then split revenues with bedroom DJs.
As hard drive prices decline, the cost of storing music approaches zero. And if the price of acquiring the music approaches zero, then people have no reason not to buy it. Imagine the innovative companies that might spring up: online DJs who choose playlists from your own MP3 collection. Or, while listening to online radio you could simply push the repeat button for a song you like. The service would charge you a nickel, download the song instantly to your hard drive. Better yet, store your music library of thousands of songs online and stream it wherever you go.
This will never appeal to the RIAA lawyers who make their living by imagineering $1.65 trillion lawsuits. But it would benefit the artists and the public. And artists that no longer make their living attempting to sell overpriced albums can always sell overpriced tickets to sold out concerts (there’s evidence that this is already happening), incentivizing bands to play live more often.
Statastico would love a copy of TV on the Radio’s critically acclaimed “Return to Cookie Mountain.” The single Wolf Like Me is fantastic, as is their live show and nearly everything they’ve produced thus far. So how does someone like me get music? At about $.27 per track emusic.com is the best value out there. If emusic doesn’t carry the album (and they don’t), then I buy the CD and endure the long wait. There are many other options, so I decided to evaluate them compared to my dream website anysongonearthforanickel.com.
Statastico compiled an entirely biased and unscientific assessment of the methods most people might use to acquire music. There are two scores, the price score and the usability score. Price score was taken as the inverse of the price as a percentage of $11.50. In other words, if it’s free it scored 100 and if it is close to $11.50 it scored near 0. The usability score is based out of 100 and is the average of the scores from the following 6 categories:
- 1. Legality: Sharing songs with friends, file sharing and allofmp3.com scored 1 and 10 in this category; all others scored 100.
- 2. Ease of Use: File sharing is time consuming and risky, while amazon.com and iTunes are straightforward. Emusic was marked down to 75 because they require a subscription.
- 3. Music Selection: How many albums can you find? Predictably, our theoretical “any song on earth for a nickel” came out on top.
- 4. Flexibility: Can users share the music easily with other, are there digital rights management, can you re-download MP3s that you may have lost (as on emusic)? CDs scored slightly higher because they allow users to select their own music compression, allowing flexibility for more advanced compression formats in the future.
- 5. Audio Quality: CD format was given 100, AAC was rated higher than MP3s because of better quality at lower bitrates, and file sharing was marked down to 50 out of 100 because of inconsistent downloads.
- 6. Instant Gratification: How long it takes to get the music? Physical transfers involving UPS scored low, online transfers (except file sharing) scored higher.
As you can see, the fictional website anysongonearthforanickel.com wins. Of the next four best options only allofmp3 would (allegedly) pay royalties to TV on the Radio (emusic doesn’t carry the latest album).
The RIAA should remember that customers - especially young customers - are extremely price sensitive and tech savvy. The RIAA will never shut down peer-to-peer networks, (in fact allpeers just developed an add-on for Firefox). The RIAA must embrace innovation rather than outmoded business models. By shifting the paradigm to low-cost song downloads, artists may once again get paid for their hard work.
For full source data click here.