Really, you wonder what part of "significant price increases will likely lead to signficant increases in downloading and file sharing part of the equation they're missing.
The major labels are looking at increasing the price of iTunes Music Store downloads to as much as $2.49 -- with experts predicting the move could kill the service. The US record industry believe iTunes song are too cheap, and the five top labels (Universal Music Group, EMI, BMG, Sony and Warner Music) are discussing a price hike ranging from $1.25 to $2.49 per song.
The Washington Square News notes: "At that price, downloading music will become far more expensive than buying CDs, which would practically destroy the online music market. This is counter to everything the record companies should be doing. If anything, they should be cutting prices to make it more attractive to download music legally. Instead, this move will push online music junkies back into the world of file sharing. After all, who wants to pay more for less? If the price hike happens it would be more logical to buy a CD. You might pay a couple bucks more, but that extra money buys pretty packaging, better sound quality, often some sort of video extra and, significantly, use unrestricted by Digital Rights Management. The record industry doesn't understand that the reason people flocked to free downloading services is because music simply costs too much."
Some CDs cheaper than downloads as labels put up prices (PCPro UK, Thursday 8th April 2004): Record labels in the US are already trying to cash in on the success of online music stores like iTunes and Napster by forcing up the prices for certain albums from $9.99 to $13.99. In some cases this is more expensive than the higher-quality CD version. The new album from N.E.RD. - Fly or Die - is one example, with Amazon selling it for 50¢ less than iTunes and Napster. It is by no means alone; similar price differences apply to albums from artists as diverse as Blur, Kylie Minogue and Bob Dylan.
Downloads rise as file traders seek new venues
By Dawn Kawamoto
April 26, 2004, 9:09 AM PT
Music downloads among U.S. adults have risen sharply during the past several months, despite a crackdown by the music industry to curb such behavior. Between February and March, the number of people who reported they download music files increased to an estimated 23 million, compared with 18 million between November and December, according to a study released Sunday by the Pew Internet & American Life Project. That's an increase of 27 percent within a matter of months. [...] "Last January, we reported that after the recording industry lawsuits were launched into the public eye, there was a considerable drop in the percentage of Internet users who said they were downloading music or sharing files," Madden said. "And while its clear that the industry's legal campaign has made a lasting impression in the minds of American Internet users, we are also seeing evidence that a segment of users are simply moving away from the most popular and highly monitored file-sharing networks and are instead using alternative sources to acquire files." Kazaa, for example, lost approximately 5 million users between November and February, the report showed. But smaller file-sharing applications, such as iMesh, BitTorrent and eMule posted an increase in the number of users. And on the paid music front, more than 11 million U.S. users visited six major music download sites, according to the report.
To be sure, there are people who would use free downloading options no matter what the record labels do. But it does seem fairly clear that around $1 is about the price point where people are willing to tolerate paying for music. And who in their right mind is going to continue to use a service designed to dissuade them from downloading when it actually costs more than just buying the stuff in the first place? People certainly aren't going to pay for iTunes or Napster or Rhapsody or any of the other services is they not only have to pay more for the music, but even pay for the CD media themselves should they choose to store things that way. (Yes, they already do that, but they probably don't think of the CD costs in quite that way, because the RIAA isn't currently forcing the fact into their faces in quite the same way.) The pay services are alreadly likely somewhat skewed to an older user base -- it may just be that I'm no spring chicken myself, but most of the people I know using iTunes and Napster aren't college age or younger, and those are the people that the RIAA most needs to reach, since they do seem to have the most severe disconnect between the concept of music as a commodity that should be paid for and music as simple entertainment along the lines of radio or television, which isn't paid for directly. Making the pay services cost significantly more (and a more than 100% increase in prices is truly spectacularly brain-damaged policy) will sharply increase price resistance at those lower age levels, in part because they have less disposable income in the first place.
People will probably continue to create new filesharing methods that the RIAA hasn't detected yet (what on earth are iMesh and eMule?), continue to use anonymizing services to make it more difficult for them to track people down ... really, this is just plain stupid on their part.Posted by iain at April 26, 2004 12:54 PM