Wednesday, January 7, 2009

Apple's Tiered Pricing-DRM Swap Could Sink Record Labels

GigaOm: Most pundits agree that Apple's announcements at this year's Macworld were underwhelming, to say the least. However, GigaOm's Om Malik says there was one announcement that stood out: The news of DRM-free sales from all major music labels at variable prices through iTunes. Now, the world's largest online music store will start selling songs for 69 cents, 99 cents or $1.29 a pop.

Who cares about this? Digital rights management watchers certainly do, but what about the average consumer? Malik points out that Apple has such a stranglehold on the digital music market that most are happy to buy songs from Apple regardless of what format the songs come in, as long as they can be played on an iPod.

The more important part of the news--at least from a recording industry point of view, Malik says--is variable pricing. After resisting the pleas of the music industry for years, Apple CEO Steve Jobs has finally agreed to variable pricing; it looks like Apple has offered that in exchange for DRM-free music. However, this could prove to be a double-edged sword for the labels. While they hope to sell the bulk of their hits for $1.29, "the reality could be very different," Malik says, adding that, "they could easily wind up conditioning the market to expect even lower prices for most of the music they buy, apart from the mega-hits."

This IS EXACTLY what the fuckers need.

Two fellas, Mr Gerd Leonhard and Dave Kusek, wrote a book called The Future of Music. It mentions how music should be available in tiers like drinking water is- you go all the way from the poor/average quality of tap water into high quality premium product a la San Pellegrino- yummy, that stuff is like velvet when it goes down.

These guys, they were on to something. The die hard music fans would purchase the creme de la creme and the not so interested would sample and if they were keen, go on to buy. Having this type of model is a step in the right direction for the music labels. As with all things with the IT, there is a way to crack the DRM and people will continue to do that. But, a lot of people won't and they will purchase the DRM free.So bravo Apple to you too- for finally agreeing to this.

I'm looking forward to seeing how it pans out. The entertainment industry is a huge part of society these days and as internet speeds get faster, movie downloads/music downloads will become more and more prolific. People will be able to download content almost instantaneously, then watch on the content on a big HDTV in the next second. Meaning, the next big target after the record labels is going to be the production houses and right now, I don't know how they're going to formulate an effective online plan which gives them the same returns that they've seen in the past.

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