I missed this, Paying for the music, a great posting from Julian Bond, when it appeared in October 2004!
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. …
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.
… 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. … 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. … 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. …
From the labels' point of view, this should look like Free Money. It's from inventory that's already covered its 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.
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