Thursday, November 02, 2006

What Price Music?

As expected our Intellect Convergence Conversation session on "What Price Music" - started with a few strong positions and some edgy interactions, but surprisingly, got quite constructive towards the end with more than one participant suggesting a longer time-frame would have suited the discussion.

At the heart of the problem was the challenge of "competing with free" - how do you compete against the free giveaway? What can actually help increase the value perception and hence the price of the product? This is the big question the industry must answer.

A part of the problem lies in marketing - how to raise awareness of the value of music? Or, perhaps, how to raise the relative value of music, since, as somebody pointed out with this classic quote from a 12 year old - "we have to spend money on shoes, phones, music... if I could download the trainers for free on the net, I'd pay for the music!" Of course, the irony shouldn't escape anybody - the same consumers are probably downloading ringtones for 2-3 Pounds each.

On the other hand, perhaps this IS the future of the industry - the average price of the product has come down and this is here to stay. Certainly a large number of people are of the view that piracy is not really curable. It needs to be factored in to the economics of the business. This means that a part of the answer is structural - the industry has to re-organize itself against these lower prices. After all there are plenty of industries, which face the challenge of having to innovate in order to bring prices down year on year for their clients - ask any of GE's suppliers.

Isn't it funny though that there's such a consistency in music pricing? I mean its almost an arbitrary figure. Even though we quibbled about whether its actually consistent, the fact remains that there are only mild variations in the pricing of new albums (irrespective of number of songs, effort, quality of recording, past track record of the performers, etc. Even less so for tracks - which are uniformly priced at 79p, on iTunes and other platforms. Of course, the reason for this is that this is the only way the industry can work, without confusing the consumer and the retail environment by evaluative pricing for each piece of music.

The issue becomes a little clearer if you consider that digital music really has an "infinite supply" and so it needs an almost arbitrary price to make (and clear) a market. Although people have suggested alternative "stock exchange" type models with prices going up with the number of items sold, this is far too expensive to implement and also will not help tackle piracy.

There are other pricing models out there in existence - including those of Yahoo, eMusic and others - largely focusing on subscription revenues against which you can download or play tracks as you go. These have had mixed success and with Spiralfrog set to launch, these attempts are still playing themselves out.

One of the interesting thought-experiments you can conduct goes as follows: if you had access to ALL the music in the world, ever created, how would you decide what to listen to? Clearly, one lifetime would be far too little to even sample every piece of music! Therefore you would need somebody (or some tool) to evaluate and make recommendations to you. These could be based on your past preferences, defined parameters or by market opinion. Which ever it is, you might be willing to pay for this service, even if the music itself is free. This may well be one of the value sources for the music industry.

Another obvious point around which opinions largely coalesced is that one of the main ways to price music is to bundle it with services. These could be ancillary services which have a loose affiliation to music - such as broadband, or "coffee shop ambience", or they could in fact be the outcome of studying listening/ usage patterns for music. For example, it might be possible to charge a few pounds for creating playlists - based again on defined or assumed parameters. E.g. "weekend party at home" or "high energy music for exercise".

There are of course services out there which are doing some pretty complicated analyses already to match the kinds of songs you like to the kinds of songs you might like. Pandora is one such service.

The bottom line is that simply selling the songs will have a limited and potentially shrinking market in the long term. Prices will need to drop, and even then, piracy will not go away completely. All businesses in the industry will need to work harder at marketing the value of music to the consumer and ensuring that this is reflected in the price they're willing to pay for it. But more importantly, over the next few years, the industry will have to be structurally clever and innovative in product design so as to create a bundle of services around the music using which businesses can make the consumer an offer he can't refuse.

Until then, the debate on music pricing will go on.


Blogger Ingjerd said...

Also, read my version of the discussion:

8:44 AM  

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