We love our iPods and iTunes here at Medialoper, so here’s some team coverage on one of the bigger stories of the week. As you probably know by now, Apple won its latest round with the music industry by refusing to move from their flat-rate pricing model to a more tiered model where new releases are significantly more expensive than long tail catalog product.
And while yesterday Kirk had a real nice insight as to why the record companies backed down, I have a slightly different take.
The music industry has long had control over nearly every aspect of their pricing, to the point where the only thing more certain than death and taxes was that record prices were going to go steadily skyward, even after the record companies promsied that they were going to lower them.
In the digital world, that’s all changed: because the alternative was free, download prices needed to compete with that, as opposed to the arbitriarily and artificially high prices set by — wink, wink — nearly all of the record companies. Which, of course, is just coincidence, and in no way should be considered collusion.
The record companies are long used to having the power to set their tiered pricing, and — like everything else involving digital music — are having a bit of trouble adjusting.
There is something to say for a tiered pricing structure — cheap catalog product has traditionally been the lifeblood of any music collection — so I bet that someone down the road is going to figure out how to do it. But not until after the flat rate and subscription prices start inching up to the point where they don’t seem like bargains for even the hoariest old piece of catalog.
That’s going to be awhile: as I said, downloaded music currently feels like a bargain to consumers. And no matter how many grandmothers and college students the RIAA busts, they simply can’t fine every single person who downloads music. They can’t stop it. So the alternative is to allow the downloads to be a bargain in a way that purchasing music has, well, never been.
So yay! for Apple for realizing this and sticking to their guns.
It’s not just Apple, of course — a quick survey of many of the leading download music services shows that none of them are going with a tiered model:
- iTunes: flat-rate
- eMusic: subscription
- Napster: subscription
- Yahoo! Launch: subscription & flat-rate to burn to CD
- Rhapsody: subscription
None of these have a tiered model — no song is worth more than the other — and I think that represents the paradigm shift in not just how people are consuming music, but also a shift of pricing power from the music industry to the retailers.