3 ms·

If last.fm, etc. are providing so much value why are their margins so thin? Are they providing value less than 30% of the cost of the base product?

yungchin 16y ago
Their margins are so thin because in reality they all compete with The Pirate Bay. It's only when you take that competition into account that the 30% starts to sound unreasonable.
- alanfalcon 16y ago
  iTunes competes with the Pirate Bay with 30% margins and does reasonably well from a revenue perspective.
potatolicious 16y ago
What yungchin said, but also because last.fm and Pandora's source supplier has a stranglehold over the market (aka the traditional labels). Like Netflix, their entire business revolves around having the right to play their content, so the content producer can take them to the cleaners easy peasy. And now they're being squeezed from the other side. Life sucks right now for services that make content discovery and recommendations better.
- justincormack 16y ago
  I don't think discovery and recommendation are worth much. I pay for Spotify for the access, I would not pay for recommendations, which can be built on any addressable technology via social networks anyway. Spotify already have negative margins though so 30% wont work.
- swombat 16y ago
  The real problem there is that there are already two sets of distributors in the music market. The songwriters/artists/producers create the songs. The record companies distribute it. The "distribution plus" companies like last.fm distribute it. Now they want Apple to distribute it too (quite reasonably). Well, one of those distributors is going to have to drop their rates. I'd suggest the one that already takes most of the pie, rather than the poor "distribution plus" innovator squeezed in the middle. But, as we know, the record companies are insane and will not accept this suggestion. Could they afford to do this if people weren't paying for music? No. Solution: stop paying for music in any form that ends up in the pocket of the big recording labels.
  - Macha 16y ago
    But they don't want Apple to distribute it. Apple is telling them that if they want to distribute to Apple users, it has to be through Apple.
yahelc 16y ago
Your argument is known as the Paradox of Value. http://en.wikipedia.org/wiki/Paradox_of_value http://en.wikipedia.org/wiki/Paradox_of_value Lots of Value !== Lots of Profitability

yungchin 16y ago

Their margins are so thin because in reality they all compete with The Pirate Bay. It's only when you take that competition into account that the 30% starts to sound unreasonable.

alanfalcon 16y ago
iTunes competes with the Pirate Bay with 30% margins and does reasonably well from a revenue perspective.

potatolicious 16y ago

What yungchin said, but also because last.fm and Pandora's source supplier has a stranglehold over the market (aka the traditional labels). Like Netflix, their entire business revolves around having the right to play their content, so the content producer can take them to the cleaners easy peasy. And now they're being squeezed from the other side. Life sucks right now for services that make content discovery and recommendations better.

justincormack 16y ago
I don't think discovery and recommendation are worth much. I pay for Spotify for the access, I would not pay for recommendations, which can be built on any addressable technology via social networks anyway. Spotify already have negative margins though so 30% wont work.
swombat 16y ago
The real problem there is that there are already two sets of distributors in the music market. The songwriters/artists/producers create the songs. The record companies distribute it. The "distribution plus" companies like last.fm distribute it. Now they want Apple to distribute it too (quite reasonably). Well, one of those distributors is going to have to drop their rates. I'd suggest the one that already takes most of the pie, rather than the poor "distribution plus" innovator squeezed in the middle. But, as we know, the record companies are insane and will not accept this suggestion. Could they afford to do this if people weren't paying for music? No. Solution: stop paying for music in any form that ends up in the pocket of the big recording labels.
- Macha 16y ago
  But they don't want Apple to distribute it. Apple is telling them that if they want to distribute to Apple users, it has to be through Apple.

yahelc 16y ago

Your argument is known as the Paradox of Value. http://en.wikipedia.org/wiki/Paradox_of_value http://en.wikipedia.org/wiki/Paradox_of_value Lots of Value !== Lots of Profitability