Former Music Industry Exec Says Album Prices Should Be Drastically Lower

from the he's-onto-something... dept

Fri, Oct 15th 2010 3:45pm — Mike Masnick

Robert Katz was the first of a whole lot of you (really, this may be the story with the most submissions ever) to pass along the news that former Warner Music UK boss Rob Dickins is suggesting that the record labels lower the price of albums all the way down to £1 -- about $1.60. He points out that, at a price like that, it becomes much easier for people to buy. With the prices today, he says there's simply too much of a mental transaction cost to determine if people are willing to pay the much higher amounts. Not surprisingly, others in the industry complained about his suggestion, first mocking him for presiding over Warner when the prices were so high (true, but that has nothing to do with what he thinks now) and then someone else tossing out the obligatory misunderstanding of the difference between price and value:

"A piece of music is a valuable form of art. If you want the person to respect it and value it, it's got to cost them not a huge sum of money but a significant sum of money."

Yeah, so that's not how value works, actually. And the problem, which Dickins appears to have figured out, but Jonathan Shalit who made the quote above has not, is that whether you like it or not (and whether it is legal or not), music today is already competing with free music online. So, it's not a question of "value," but of market prices.

Dickins seems to recognize the actual economics at play here, noting that by making albums so cheap, the number of sales would shoot way up, offsetting some of the price decline when it came to revenue and getting more people more interested in more acts, leading to greater revenue from alternative sources like concerts and merchandise. Of course, plenty of folks have been suggesting this same thing for years, but it's nice to see an "insider" get it, even if he's mocked by those who are still confused about these things.

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Filed Under: albums, music industry, pricing, rob dickins

28 Comments

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Marcus Carab (profile), 15 Oct 2010 @ 3:38pm

It's nice to see someone talking about albums. I mean yes, I know that the album is dead - but it's "dead" in the same way the paperback is "dead", meaning it will still be around in some capacity for those who enjoy it. I count myself among them and when I look at digital music prices, I see what must be a wonderful playground for single-song-lovers but doesn't offer an album listener anything new or any particularly significant savings.

I never thought of it like this before, but it is of course the mental transaction cost. Song buyers aren't really getting fantastic savings either, but it feels like they are because the individual price tags are so low.
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Anonymous Coward, 15 Oct 2010 @ 3:53pm

Re:
I am guessing from your comment, you have never accidentally dropped a hard back book while reading it.
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Marcus Carab (profile), 15 Oct 2010 @ 4:02pm

Re: Re:
Heh, no, I'm a paperback reader ;)

But I'm just talking about the way a lot of things are declared "dead" nowadays, but it usually just means they are trending towards "specialty item" as the years go by.
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Anonymous Coward, 15 Oct 2010 @ 4:31pm

But if album prices are lower then rock stars won't be able to buy more than one mansion and that's just sad.
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Anonymous Coward, 15 Oct 2010 @ 4:32pm

I bet his time presiding has a lot to do with his opinion now.
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Dementia (profile), 15 Oct 2010 @ 5:05pm

Re:
Considering how little, if any, they get from album sales, I don't think they'll be limited to just one mansion any time soon.
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Anonymous Coward, 15 Oct 2010 @ 5:12pm

Re: Re:
Pity the poor starving rock star. If only they could rock their bellies full.
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Stephen, 15 Oct 2010 @ 5:24pm

cheap albums
The best deal in music is the Amazon download deals noted on their twitter feed. They have a hundred albums each month for $5. That's still a bit high, but for $3 I'd buy a whole lot more.
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Anonymous Coward, 15 Oct 2010 @ 5:24pm

the way record labels see it is.
at the current price there only getting X amount of money so reducing the price will get them so much less, the only way something like that could become the norm is if an artist or a small label does it and wins big.
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out_of_the_blue, 15 Oct 2010 @ 5:26pm

Commoditizing of a costless product.
First, the goal of Katz is clearly not to bring prices in line with *costs* -- that'd be economics -- but to bring in more money from existing *data* -- that's marketing. The market in question relies on unlimited sales with near zero costs. They may now be arguing about the price point which will maximize income from data that's already on the servers; has nothing to do with initial production or new ideas, in fact, may to some degree hinder "new" production.

Music has no *intrinsic* objective value. Any of us can live without it indefinitely. Its costs, even on some form of physical media, approach zero in a mass market. Therefore "price" has very little meaning; it's simply what they think, or find, the market can be gouged for.

Your notion of more interest in more acts for more "revenue" through concerts and logoed products fails to consider that any person's time is limited, and so is interest in junky "merchandise". That's going to place an upper limit on what you view as the potential benefits.

And the MBA focus on "revenue" and commodotizing music is a *big* part of what's wrong with the whole system.
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Anonymous Coward, 15 Oct 2010 @ 5:44pm

Right now a dollar is to expensive for me, I wouldn't spend a penny on their offerings.
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Matthew, 15 Oct 2010 @ 6:21pm

"Albums"
The album is dead because it is a completly obsolete concept in the digital realm. If I like a song, I download that song. If I really like an artist, I downloads all their songs. Given that I can pick and choose my own playlist at will, why should I pay a fixed price for a random number of songs that the artist has decided for me. If the artist is adamant that a certain number of songs must be played together in a specific order, then they should release it as one long track (and charge as much or as little as they like for it).
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Marcus Carab (profile), 15 Oct 2010 @ 7:33pm

Re: cheap albums
I was thinking about that... what if, in iTunes, songs still cost $1-2 but when you bought them it offered you the whole album for, say, $3. I'd love to see the real numbers but I'm willing to bet that the mean number of songs purchased from an album is one - so they'd be nearly tripling their revenue and potentially moreso by drawing in people like me who really want whole albums.
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Marcus Carab (profile), 15 Oct 2010 @ 7:37pm

Re: Commoditizing of a costless product.
Your notion of more interest in more acts for more "revenue" through concerts and logoed products fails to consider that any person's time is limited

Actually, that's kind of the core of the new music business model: charge for that which is limited (time, physical goods) and not for that which is infinite (music)
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Tails, 15 Oct 2010 @ 8:01pm

I've been doing some thinking about this.

Gaming is my main hobby, if we add all the games, consoles, and accessories I've bought over the last 15 years, you get ~$3000, which works out to an average of $200/year.

Movies and Music are secondary hobbies. I do not buy DVDs, and I rarely pirate movies. I watch anywhere from 5-10 movies in theatres a year when I was in highschool (i.e. when I was regularly watching the most movies). That's ~$150/year on movies if I take the higher estimate.

Over the last 5 years I've accumulated about 3500 mp3s, that's 700 mp3s per year on average. That means, at current prices, I'd be spending ~$700 (actually $1000 if you're using the new $1.29 price for many songs).

It's insane for a minor hobby to cost more than twice as much as my two main media based hobbies combined. Prices of songs would have to be at the very least 1/4 of what they are now to even seem somewhat worthwhile. For $2 per album (1/10 of the current price) I'd probably be buying all my music legally.

Even if there are people that'd still pirate at that price, it's probably better that the music industry get $70 a year from me rather than the $0 they're getting now.
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Hephaestus (profile), 15 Oct 2010 @ 9:47pm

Several really big problems ....
1) At 1 pound sterling it devalues the album ... LOL ... okay, infinite goods who am I kidding.

2) Yeah the lead up to the eventual words ... "Now that ACTA has been signed we will see a reduction in the prices we all pay for digital media". Which everyone in the news media will cheer.

3) Ths US goverment (office of the president) pushing a socialist support the artists (record labels) tax on internet and cell phone access.

I could go on but its late here ...

Fun stuff speculating on the future
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AR, 15 Oct 2010 @ 11:04pm

My First thought
My first thought (if anyone were to care ) was DUH... YA THINK? As a costumer Who remembers that the average price for arecord was about $7.99. It seems that with the use of digital technology, the ease and lower cost involved in reproducing a cd (which is what they are talking about when they say album) should be a lot lower than $7.99. Let alone the $15.99 that they have been priced at since, pretty much" their introduction. Even with "inflation" the mark up isn't justified. Its about time people "in the industry" started acknowledging this and stop calling people (the fans) criminals.
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Tom Landry (profile), 16 Oct 2010 @ 3:00pm

"A piece of music is a valuable form of art. If you want the person to respect it and value it, it's got to cost them not a huge sum of money but a significant sum of money."

This how we have been conditioned to think. How about we stop it?

In the games industry, Asian MMO's are nearly ALL free to play with micro-transactions supporting the game. This model is only now starting to make inroads in the west but people here DO tend to turn their noses up at some free products.
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Batarang, 16 Oct 2010 @ 5:04pm

Personally I like albums
...and would be willing to pay $5/album for wav files and 1200 dpi cover art reproductions. Also, I'd need an account which would allow me unlimited access to all the stuff I paid for. Either that or I'd pay $30/month for unlimited access anywhere in the world to every piece of recorded music ever. This means no more of those "special" prices for import-only albums such as D'Angelo's Live at Jazz Cafe.
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Gene Cavanaugh, 16 Oct 2010 @ 10:20pm

Music and value
I can't help thinking about a "Survivor" type situation:
I am on an island, with food, water, a shelter, but no music. Someone else is on a nearby island, no food, water, or shelter.
He's feeling very sorry for me - he has all the music. After all, who needs food, water, shelter, a job, or any of that trivial stuff, when you can play some music?
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Anonymous Coward, 17 Oct 2010 @ 8:28am

Duh! When you can get your first 1,000 CD's made with Shrink wrapping and ready to put into stores for only $1.39 each with the price going down dramatically with larger runs. The price of a CD is ridiculous.
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Anonymous Coward, 17 Oct 2010 @ 8:41am

lets see
ten cents to STOMP ( NOT BURN ) in mass producing machines
5 cents for a label and 5 for a chinese made case.

20 cents
COST TO YOU
19.95 at walmart now....
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Anonymous Coward, 18 Oct 2010 @ 5:46am

Re: lets see
I understand your premise, but Walmart has actually been one of the pioneers of lower priced music and movies, even signing direct distribution deals with the artists and selling new albums for under $10. Still not where it should be, pricewise, but a move in the right direction.
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Anonymous Coward, 18 Oct 2010 @ 6:43am

Re:
I hope that’s some wonderfully subtle British humour.
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JohnK, 18 Oct 2010 @ 11:37am

Songs > 3 min long, the concept album, maybe these will return.
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nasch (profile), 18 Oct 2010 @ 11:59am

Re: My First thought
As a costumer

This must be a busy time of year for you! ;-)
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nasch (profile), 18 Oct 2010 @ 12:02pm

Re: Re: cheap albums
Better yet, songs for 35-50 cents and albums for $3. I would buy way more music (well, from Amazon not iTunes but same idea). Music player manufacturers should push for this - I would need to get a new MP3 player if this happened.
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Magnificent Nobody, 18 Oct 2010 @ 5:30pm

My take on the music industry.
Most people aren't looking for art. They're looking for entertainment and a music album tends to be a poor choice in that regard. Entertainment is about escaping real life by immersing ones self in a world of fantasy. This is why things like movies and especially video games are doing so well. You also have to take into account the fact that most folks, the younger generation especially, are often strapped for cash and have to choose carefully where their entertainment dollars go. This may be another reason why live music performances are steadily increasing in popularity. They are far more fun than simply sitting in a chair at home, staring at the ceiling while listening to an album. Music is pleasant and certainly art to be appreciated, but entertainment-wise tends to be the most boring of all the possible options a consumer has at their disposal. Look at what happened when music and video games were combined. Titles like Rock Band were a huge success and prove the point I'm trying to get across. The music industry keeps blaming piracy for their losses while continually failing to realize a simple truth; people that appreciate music will be the ones that both download and purchase. Those who don't find music interesting are the ones that will do neither, even though they probably do listen to things such as the radio. The music industry needs to stop attacking the very people who support them as well as realize that, as a form of entertainment, the product they're peddling has very little value to the majority of society. Yes, as art it may hold a high value if it is any good and/or rare, but that is not why most folks buy an album. Adjust your prices accordingly, stop acting like greedy prick, and you will see sales go up, I guarantee it.
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