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"Digital music pricing has such small profit margins that only offering a discounted item is infeasible." This doesn't make sense to me. Since there is no phys

by mr_eel 17y ago

"Digital music pricing has such small profit margins that only offering a discounted item is infeasible." This doesn't make sense to me. Since there is no physical distribution — thus less material cost and middle-men — digital music can be sold cheaper, while still maintaining the same or similar margins. So a discount just means a smaller margin. As a temporary way of boosting sales and getting your name about, it makes sense. Also, with music there reaches a point where all the costs of production are covered after X amount of sales — depending on pricing and recording outlay. Thereafter most of the cost of music is profit, making larger discounts entirely feasible. Of course this can be complicated by things like marketing costs, but the point is that it's workable. Even in the case where production costs haven't been recouped, a discount can be a good way of boosting sales and just getting an artist's name and music about. In that sense, without any profit the discount becomes and exercise in marketing, without being pure cost like other marketing pushes.

abscondment 17y ago
Everything you write makes sense, but only in a world where music prices aren't set by psychotic rights owners. Regardless of market influences and reduced cost of distribution, the majors demand ~$0.70 per track. This is why major label mp3s cost $0.79-$1.29 just about everywhere. When you have that baseline which you can't control, profiting from a discounted mp3 album isn't really possible. Costs of distribution are lower, but they exist. Your profits can quickly become costs unless you stay at the standard pricing levels. I cite these prices based on what I've seen working at a music startup & based on others' summaries; i.e. http://daringfireball.net/2007/09/more_amazon_mp3_store http://daringfireball.net/2007/09/more_amazon_mp3_store I'm definitely not arguing that it should be this way, but describing the status quo.
- mr_eel 17y ago
  "Everything you write makes sense, but only in a world where music prices aren't set by psychotic rights owners" Ouch. That's really unfair. Those sorts of prices are demanded by independents as well, including unsigned artists — look at indie artists on iTunes for example. The psychotic rights owners you describe are artists themselves and surely they have a right to price works as they choose? Just as punters have a right not to buy if they think it's too expensive. "This is why major label mp3s cost $0.79-$1.29 just about everywhere." Or you could just as easily argue that this is market forces at work. That's the price people are willing to pay, so that's how it's priced. These sorts of prices apply to many different releases, on both major and indie labels. "When you have that baseline which you can't control, profiting from a discounted mp3 album isn't really possible." I don't understand what you mean by baseline. As for the second half of the statement; plenty of digital retailers offer discounted releases and I hardly think they'd be doing that if rights holders weren't making money. Have a look at 7digital for example. Lots of majors, plenty of discounted releases. "Costs of distribution are lower, but they exist. Your profits can quickly become costs unless you stay at the standard pricing levels." To reiterate my basic argument; once production and marketing costs are recouped, margins are much higher, making discounting viable. The costs that you refer to would be a proportion of the sale given to the retailer. So if you want to make money, discount it, but not so far that it kills your profit margin. Imagine a 30/70 split your way. You might decide to discount a release so your split is smaller. _You can still make a profit_.

by mr_eel 17y ago

abscondment 17y ago

Everything you write makes sense, but only in a world where music prices aren't set by psychotic rights owners. Regardless of market influences and reduced cost of distribution, the majors demand ~$0.70 per track. This is why major label mp3s cost $0.79-$1.29 just about everywhere. When you have that baseline which you can't control, profiting from a discounted mp3 album isn't really possible. Costs of distribution are lower, but they exist. Your profits can quickly become costs unless you stay at the standard pricing levels. I cite these prices based on what I've seen working at a music startup & based on others' summaries; i.e. http://daringfireball.net/2007/09/more_amazon_mp3_store http://daringfireball.net/2007/09/more_amazon_mp3_store I'm definitely not arguing that it should be this way, but describing the status quo.

mr_eel 17y ago
"Everything you write makes sense, but only in a world where music prices aren't set by psychotic rights owners" Ouch. That's really unfair. Those sorts of prices are demanded by independents as well, including unsigned artists — look at indie artists on iTunes for example. The psychotic rights owners you describe are artists themselves and surely they have a right to price works as they choose? Just as punters have a right not to buy if they think it's too expensive. "This is why major label mp3s cost $0.79-$1.29 just about everywhere." Or you could just as easily argue that this is market forces at work. That's the price people are willing to pay, so that's how it's priced. These sorts of prices apply to many different releases, on both major and indie labels. "When you have that baseline which you can't control, profiting from a discounted mp3 album isn't really possible." I don't understand what you mean by baseline. As for the second half of the statement; plenty of digital retailers offer discounted releases and I hardly think they'd be doing that if rights holders weren't making money. Have a look at 7digital for example. Lots of majors, plenty of discounted releases. "Costs of distribution are lower, but they exist. Your profits can quickly become costs unless you stay at the standard pricing levels." To reiterate my basic argument; once production and marketing costs are recouped, margins are much higher, making discounting viable. The costs that you refer to would be a proportion of the sale given to the retailer. So if you want to make money, discount it, but not so far that it kills your profit margin. Imagine a 30/70 split your way. You might decide to discount a release so your split is smaller. _You can still make a profit_.