Virtual Music Prices

According to a wrap up from the National Association of Record Industry Professionals, which I blogged about over at InformIT, using the iTunes example yields 34 cents for Apple, 55 cents for the label, and 10 cents for the artist. I'm sure some of Apple's 34 cents is going to pay for things like the 5-cents-per-song affiliate program and processing fees, but are they really only making a few pennies per song?

Apple seems smart enough to not price their songs below the profitability line. They also aren't desparate. If the margins are really only 4 cents at 99 cents, how does mega-discounter Wal-Mart get away with charging only 88 cents for songs? Does that mean they are losing 7 cents on every song? That doesn't seem like a Wal-Mart move. 100 million songs at 4 cents is still $4 million dollars, which doesn't even cover a billion dollar company's advertising budget, let alone justify the effort. Apple has an obvious path to success here - they want to sell more iPods. What's the motivation for all these other gold rushers who seem to be coming up short?

Rob Glaser would have us believe Real ran a $0.49 sale at a loss in a recent effort to drive traffic away from iTunes to the Real Music Store. According to his recent Slashdot interview: " While wholesale prices vary depending on the label, today most labels charge approximately 65-70 cents per song. Publishing costs a fixed rate of about 9 cents per song. And the other costs average a few pennies per song. Thus, as we have made clear, selling every song in our store for 49 cents a song is not sustainable unless/until the labels change their pricing philosophy." The pre-bubble pricing doesn't make much sense; at least he admits its not sustainable, but why didn't the NAIRP mention publishing rights in their assessment of song pricing? Or maybe that's the 10 cents for the artist?

At any rate, my money is currently going to the Napster subscription plan. Sure, it's renting a library of songs, but I can test drive about 1 million songs for the price of 12 albums per year. Based on my normal music buying habits, that's what I was already doing. I'd pick up a CD when it was on sale for $10 to see if I liked it. If not, it's in a pile of music I'll never listen to again. At least with the Napster solution, the selection keeps getting bigger and I'm still only out of pocket for 1 album per month.

How much money are download sites really making when they sell us songs for $0.99? Apparently it depends on who you ask. One thing that's very clear is that record labels are making more money per download than they would on a per song basis for CDs, so their legal wrangling of the online marketspace probably doesn't hold much water. According to a wrap up from the National Association of Record Industry Professionals, which I blogged about over at InformIT, using the iTunes example yields 34 cents for Apple, 55 cents for the label, and 10 cents for the artist. I'm sure some of Apple's 34 cents is going to pay for things like the 5-cents-per-song affiliate program and processing fees, but are they really only making a few pennies per song? Apple seems smart enough to not price their songs below the profitability line. They also aren't desparate. If the margins are really only 4 cents at 99 cents, how does mega-discounter Wal-Mart get away with charging only 88 cents for songs? Does that mean they are losing 7 cents on every song? That doesn't seem like a Wal-Mart move. 100 million songs at 4 cents is still $4 million dollars, which doesn't even cover a billion dollar company's advertising budget, let alone justify the effort. Apple has an obvious path to success here - they want to sell more iPods. What's the motivation for all these other gold rushers who seem to be coming up short? Rob Glaser would have us believe Real ran a $0.49 sale at a loss in a recent effort to drive traffic away from iTunes to the Real Music Store. According to his recent Slashdot interview: " While wholesale prices vary depending on the label, today most labels charge approximately 65-70 cents per song. Publishing costs a fixed rate of about 9 cents per song. And the other costs average a few pennies per song. Thus, as we have made clear, selling every song in our store for 49 cents a song is not sustainable unless/until the labels change their pricing philosophy." The pre-bubble pricing doesn't make much sense; at least he admits its not sustainable, but why didn't the NAIRP mention publishing rights in their assessment of song pricing? Or maybe that's the 10 cents for the artist? http://interviews.slashdot.org/article.pl?sid=04/09/14/1347226&tid=176&tid=98&tid=95&tid=11 At any rate, my money is currently going to the Napster subscription plan. Sure, it's renting a library of songs, but I can test drive about 1 million songs for the price of 12 albums per year. Based on my normal music buying habits, that's what I was already doing. I'd pick up a CD when it was on sale for $10 to see if I liked it. If not, it's in a pile of music I'll never listen to again. At least with the Napster solution, the selection keeps getting bigger and I'm still only out of pocket for 1 album per month.