Say no to iTunes, go Russian
I found this post courtesy of Digg. The post linked to at the bottom marked ‘read more’ lists out the alternative cheapo MP3 sites out there now AllOfMP3 has died.
I have some serious issues with much of the way the music industry has dealt with the move to digital music. They simply do not seem to have grasped the basic concepts of how to keep your end-users on side while making more money – that’s right kids, make it cheap! Paying iTunes 79p per track is insane, it’s the same price as a CD but they have to hold no inventory and they restrict what you can do with it. They do not even allow you to download it again should your hard-drive pack up. You get more for a lot less from the Russian sites. Ah, but what about the poor musicians you say, well they are no better off either. The publishers have never said that the Russian companies do not pay out royalties, it’s just that they have not signed up with the copyright holders, which means that they have to charge a minimum amount and restrict how and where it is sold. Now if they can make money at 15c a track (and send the right amount of royalties) and iTunes charges you 79p (approx ten times as much) and in restrictive formats, it does not sound like a good deal to me. If you aren’t interested in why this is actually a bad deal all round and why there is no advantage (even to the musicians) in making Apple richer, then vote with your feet (well fingers, I don’t know about you but I can’t type with my feet) and take a look at some of the alternative sites out there and click the link below. Go ahead and buy with a clear conscience. If you are interested, then I get all economicsy in the paragraph below, you have been warned…..
OK, In basic economic terms, we consumers have a price we are prepared to pay for something. Anything less than that is termed the consumer surplus, which means that if we find a car we want for £12 000 that we were prepared to pay £15 000 for, we are up £3000 as this is more money that comes into play in the overall economy (that includes things like your happiness, yes even that has a price!) If you lower the price, you not only increase the surplus, you tend to find that a consumer will still spend the same amount on those products, unless all others are not valued as highly by the consumer. So if they want to buy Bryan Adams Greatest Hits, they are not really a music fan so will probably not buy any other CDs either, however if someone is looking through the David Bowie back-catalogue they will may add a copy of Aladdin Sane to go with their Ziggy Stardust. On top of this increased consumer surplus, you will also capture the business of the consumers who place a lower value on those goods. This is true of pretty much all consumer goods, but I will use a CD as an example. The act of reducing the cost of a CD from £10 to £5 tends to mean that the people that would buy a £10 CD will now buy two £5 CDs (and their consumer surplus will be £10 as they would have paid £10 for each of them, so can be persuaded to buy more as they gegt better value for their money than they would spending it on another item that only has a surplu of £4) and you attract the consumers that would only pay £5 for a CD (although to get me to buy Bryan Adams Greatest Hits will cost you, then I will buy and scrap as many of you have) So cheaper is actually better, as with more money going through, the artists royalties will increase, not decrease with the lower price. This means that the copyright holders are doing themselves out of a large amount of profit. By all means clamp down on piracy, but if they are paying the royalties, then you should encourage as many folk as possible to sell them for you. More competition means lower prices, means more sales, means more money for you and the artists. Lastly, lower prices means that piracy makes less economic sense as the profit margin shrinks as competition from cheap, legitimate suppliers increases and the benefit of buying cheaply from a non-legitimate source for the consumer also decreases (consumers may be tempted to save themselves £6 on a £10 CD by buying a pirate for £4, but saving £1 on a £5 CD is not so tempting) so declines exponentially…..
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