Viacom To Record Labels: If You Want More Money For Music In Video Games, We'll Find Other Music

from the when-giants-fight dept

You may remember that Warner Music Group's CEO, Edgar Bronfman Jr., has been beating the drum for a while that video games like Guitar Hero and Rock Band should be paying more to use songs in those games. This, despite the fact that having a song in those games helps sell more albums. It's the typical fallacy of the record labels: overvaluing the content and undervaluing the platform or the context. So, what happens when two entertainment industry giants collide in such a debate?

Viacom, owners of MTV, which own Harmonix, who own Rock Band (and originally created Guitar Hero), seems to feel differently about all this than Warner Music -- recently declaring that it wants to pay less for the music in video games, and if the record labels don't like it, Viacom will find cheaper music elsewhere:

As we go forward, we are continuing to focus more on software than hardware, looking to reduce the cost structure associated with Rock Band, being selective in the music titles that we choose for Rock Band based on their cost. The music industry will assist with this category to make sure that it can continue on a profitable basis in the future and then finally we think we have the best games in the category, we'll continue to rollout exciting products.

Filed Under: music, pricing, video games
Companies: viacom, warner music group

Author Claims $9.99 Is Not A 'Real Price' For Books

from the oh-really? dept

The NY Times is running an article about how publishers' recent attempts (mostly successful) to boost the retail price of ebooks may backfire really badly as consumers revolt. Most of it is not particularly new to regular readers here, but it does talk to one author whose book received bad reviews on Amazon after his publisher decided to hold off releasing an ebook, hoping that it would "protect" hardcover sales. The author, Douglas Preston, lashes out and attacks his fans, rather than being willing to admit that his customers are telling him something:

"The sense of entitlement of the American consumer is absolutely astonishing.... It's the Wal-Mart mentality, which in my view is very unhealthy for our country. It's this notion of not wanting to pay the real price of something.... It gives me pause when I get 50 e-mails saying 'I'm never buying one of your books ever again. I'm moving on, you greedy, greedy author.'"

So, what's a bigger sense of entitlement? The one where your customers tell you that you've priced something too high and that they're going to spend their money with others who are offering something at a price point they like? Or the one where you insist that books have to be priced high because you want them to be priced high? I'd argue it's the latter... Along those lines, $9.99 is a real price. Just because you don't like what the market decides a book is worth, doesn't mean that it's not a real price.

Filed Under: books, douglas preston, ebooks, entitlement, pricing

Duh: Raise Music Prices To $1.29/Song; Music Sales Growth Slows

from the like-you-couldn't-predict-that dept

Last year, we warned that treating digital music sales as the savior of the market was a dangerous thing, since there were indications that the market was fragile. In fact, we had already seen that after years of major record labels pleading with Apple to let them raise prices on songs, the initial results suggested a decrease in sales. Well, shockingly enough, it looks like the basic econ 101 concept of price elasticity works in music as well, as Warner Music has finally realized that raising prices of songs to $1.29 has slowed growth in the market. The digital music market, which had been growing pretty rapidly, slowed drastically following this pricing change. Warner Music is claiming that this this is because the market has "matured," but gives no evidence of that whatsoever -- and given the size of the market, that seems highly unlikely. Now, to be clear, the market is still growing, but only at 8% as compared to 20% the year before. And market growth should be expected to decline over time once the market matures, but it's difficult to believe that the digital music market has reached the point of maturity yet. In fact, just a few weeks ago, we wrote about an economic study that suggested that if the labels wanted to maximize revenue on digital sales, they should be lowering prices. But, again, execs at major labels haven't been known to be particularly good with their understanding of economics.

Filed Under: itunes, pricing
Companies: warner music group

Amazon, Macmillan Fight Over Ebook Prices; After Amazon Removes Macmillan Titles, It Caves To Higher Prices

from the too-bad dept

On Friday, there was a sudden realization that Amazon had removed books published by publishing giant Macmillan, apparently over a dispute concerning ebook pricing. Of course, Amazon wasn't just removing Macmillan ebooks, but the physical books as well. After a bit of back and forth over the weekend, Amazon caved in and accepted the way Macmillan wants to price books, which means that Macmillan sets the retail price, and Amazon gets a cut. Previously, Amazon had paid a wholesale price and then got to set the retail prices itself.

I had been under the impression that when manufacturers tell retailers what the end user price is, it's a form of price fixing, but apparently not...

Of course, what may seem odd about this is that it appears Macmillan will make less per ebook under this model. That's because with its old wholesale pricing, Amazon was actually losing money on every ebook sold. As the NY Times notes:

In the model that Amazon prefers, publishers typically collect $12.50 to $17.50 for new e-books. Under the new agency model, publishers will typically make $9 to $10.50 on new digital editions.

So why are publishers specifically trying to limit their own profits from ebooks? Because they're afraid of ebooks cannibalizing hardcover book sales, which is why they're also looking to delay ebook releases. In fact, in this case, Amazon was given the choice of either increasing the retail price for consumers on Macmillan ebooks, or getting them many months later. All in all, this looks like publishers hurting themselves, yet again, by going against what consumers want in a misguided effort to preserve the way things used to be. Yet, in an age when users are punishing authors and publishers who don't treat them right, this could backfire in a big way.

Filed Under: ebooks, pricing
Companies: amazon, macmillan

Econ 101: Study Shows That If Record Labels Lowered Prices On Music, They Would Sell A Lot More

from the profit-maximization dept

Having talked with a bunch of music execs recently, as well as a few different companies that do analytics in the music space, one thing became clear: unlike most other industries, record label execs tend not to be particularly data or analytics-driven. Let's just say they didn't get into the recording industry because they were good at math. There are a few exceptions, obviously, but getting many industry execs to think logically and examine data isn't particularly easy. This isn't that surprising, given how many examples of actions by big record label execs that make little to no sense when thought about analytically.

Yet another study has come out suggesting that the industry has pricing all wrong, pointing out that the increase in sales from dropping the price of music would increase profits. And yet what has the industry been trying to do? That's right: trying to raise the price. The study suggested that the "optimal" price for music might be closer to $0.60 per track. That still seems way too high to me when you look at how people flocked to services like Allofmp3.com, but in general I think the basic concept makes sense. You can maximize revenue by dropping prices, but it doesn't seem like many record industry execs have realized that.

Filed Under: demand, music, optimization, pricing, supply

Guy Buys $3 Billion CD-ROM

from the economy-must-be-looking-up dept

There have been plenty of stories over the years of mispriced goods being found on various e-commerce sites. In the past, I recall stories about airline flights for $10 or computer monitors for $1. All of them were typos, and often the company behind them would deny the sales even as thousands rushed to buy. I never had a problem with companies denying such sales, but many insist that they should be enforced at the stated price. Last year, Taiwanese regulators forced Dell to live up the $15 price it accidentally posted on monitors to the 140,000 people who bought them. Whenever we write about these things people insist that, like in Taiwan, companies should be forced to honor the price.

So I'm curious what people think when the situation is reversed. In an extreme example, a guy bought an obviously mispriced $3 billion CD-ROM on Amazon. Well, the full price was actually $2,875,934,133.57, but amazingly, it did not include shipping (and handling) which added an additional $3.99 to the bill. Of course, it didn't take long for Amazon to alert him that it was unable to complete his order and that he was not charged for it. But do the people who support forcing the retailer to honor the deal in the first case support it in stories like this as well?

Filed Under: pricing, pricing mistakes
Companies: amazon

Sony Ebook Boss: DRM Needs To Stay And Ebooks Should Cost More Than $10

from the good-luck-there dept

PaidContent has the details on an interview with Steve Haber, the boss of Sony's ebook reader business, where he trashed the $10 ebook and praised DRM. And now you all know why no one buys Sony ebook readers. Basically, the product's boss has decided to take an anti-consumer stance. Why would anyone want to shell out hundreds of dollars on a product when you know the company that makes it wants to screw you over?

On the price of ebooks -- a topic of widespread debate -- he insists that $10 can't possibly work:

"The $9.99 price point is not a money-maker. Certain bestsellers are sold at that price for retail, competitive reasons. But you need to have a range. You could go from $10 to $20 even to $100 for an e-book. There's no sweet spot and it's certainly not $9.99."

Well, first, let's be clear. The only reason that $9.99 isn't a money-maker is because publishers are still charging more at wholesale for the ebooks, still pretending that the lack of printing, materials and shipping shouldn't result in a lower price. Basically, the publishers are in denial, and Sony shouldn't be supporting them.

How about DRM? Remember, this is Sony, we're talking about, which has a history of abusing DRM against consumers. It's also the same Sony who keeps having its top execs claim that DRM holds up innovation and that open solutions win in competitive markets. And then they release their next DRM'ed/closed offering. So, how does Haber explain his love of DRM?

"You need an orderly process to sell books and DRM makes that possible, mainly because it allows content creators and distributors to make money from that content."

Huh?!? What does DRM have to do with making money from content? Absolutely nothing. iTunes sells a lot of music -- and it's all DRM free (finally). You don't need DRM to make money from content. You don't need DRM to have an "orderly process" to sell things. You only need DRM to limit what consumers can do, limiting the value of the content, making it less valuable to pay for.

It seems that the only thing keeping Sony in this business is the fact that the competition is basically just as bad on these issues, but one of these days someone's going to figure this out -- but it doesn't sound like it will be Sony.

Filed Under: books, drm, ebooks, pricing, steve haber
Companies: sony

See, The Palm Pre Can Be Offered For Free

from the was-it-such-a-ridiculous-suggestion? dept

A little over a month ago, I suggested that Sprint and Palm were making a big mistake in not offering the Palm Pre for free (more specifically, saying that Sprint should subsidize the full price). I don't think I can recall a post where more people told me I was so totally wrong. People insisted it was the dumbest idea ever, and that it would harm the brand value of the Pre, while costing Sprint way too much money. Yet, I still stand by that claim. Sprint doesn't make money selling the phone, it makes it by getting people to sign up for at least two years of Palm Pre service -- which is on the higher end of the service scale. The Pre is not as good as the iPhone, and did very little to really stand out from the competition. So the way to get around that is to offer the device for free.

At least some people seem to agree.

The device is now being offered in the UK... exactly as I suggested: free with a two year contract. At the same time, through some tricky step following, you can actually get the device for free in the US as well. I don't see how that takes away from the prestige of the device at all. If anything, it's only going to help make it easier for some people to at least try it out as a phone.

Of course, my other big complaint with the Palm Pre -- its weak developer support still stands. Famed developer Jamie Zawinski just wrote about his absolutely ridiculous experience trying to get two simple apps available on Palm Pre phones. It's taken months, and they're still not available, even though he wants to make them available for free. Instead, as with the iPhone, the "approval" process of getting apps into the app store are positively ridiculous. I had been seriously considering getting a Palm Pre (in fact, a few months ago, I was positive I was going to get one), but without real developer support, it's just not worth it. I'll wait until a decent Android phone is available instead.

Filed Under: palm pre, pricing
Companies: palm

Sony Music Does Deal With Amie Street... But Using iTunes Pricing?

from the how-does-that-make-sense? dept

Well, this is odd. Amie Street is the well known indie music site that lets people purchase music with a dynamic pricing system -- the music is cheap at first, but as more people buy, the price goes up. It has some neat features to it. So it seemed like a big deal to hear that Sony Music had done a deal with the company to offer its music on the site... except that it's not using the dynamic pricing. Instead, it's pricing the music at $0.69, $0.99 or $1.29, based on popularity. In other words: the exact same pricing as iTunes. So what, exactly, is the benefit of offering the exact same pricing on Amie Street? About the only good thing you can say for this deal is at least it didn't muck up the pricing of everything else, like what happened when Sony Music did its deal with eMusic. Though... it is worth noting that Amie Street did recently put some additional restrictions on redownloading songs. Perhaps the company tried to separate out the announcements so that no one connected the two things...? If that's the case, why bother signing with Sony Music in the first place. Amie Street offers no benefit to people who want Sony Music. All it seems to do is go against the very point of Amie Street.

Filed Under: dynamic pricing, music, pricing
Companies: amie street, emusic, sony music

Sprint Offers Palm Pre For $100 For A Month, Maybe Two... Then, Oops, Not At All

from the great-moments-in-marketing dept

I recently explained why I thought Sprint made a rather large strategic marketing error in pricing the Palm Pre at the equivalent price of an iPhone: $199 (after annoying mail-in rebate that turns many buyers off). In fact, I argued why it would make a lot more sense to further subsidize the phone all the way to free, and make up the money on the backend with more subscriptions. Given how heavily invested Sprint was in the Pre, and how pathetic the sales have been to date, it really makes very little sense to keep the price so high. So, at the very least, I thought it was a good first step this morning when it was "announced" that Sprint was offering the Pre at $99. Of course, there were some silly things about this promotion as well. First, it only applied to new customers, transferring numbers over from other carriers. What better way to mock your loyal customers than to offer others a better deal? Second, they didn't just discount the phone, but gave you a "credit" that was split over the first three bills (better than a mail-in rebate, but still annoying). However, what was even stranger was that Sprint didn't even seem to understand the promotion itself. John Paczkowski noted that in some places on Sprint's website it said the promotion ran until October 10th. In others it said October 31st.

Apparently, the confusion at Sprint headquarters went well beyond that, because as the company attempted to sort out the confusion, it announced that it was doing away with the special promotion entirely. And yet, even after announcing it, the offer page remained on Sprint's site. It's not at all clear what happened here, other than Sprint seems somewhat clueless in how to do basic promotions, pricing and marketing. Obviously, the company intended to offer the phone for $99 -- it's on the company's own site. And yet, now it's suddenly claiming that it was a mistake? I can already see the business school case study on how not to launch an innovative smart phone.

Filed Under: marketing, palm pre, positioning, pricing
Companies: palm, sprint