On the price of music

Image by via CrunchBase

Amazon launched their mp3 store in the UK with prices at £3 per album for some new releases. This is the start of some sanity in music pricing on the Internet. When we started Zoimusic I remember asking someone who had a lot of pirated music how much he would be prepared to pay, he said £1 per album and it now looks like we are getting there.

Until recently we had the bizarre spectacle of an album on iTunes being more expensive than a CD from Amazon. People are not stupid, they know the cost of delivering a download is fractional and that the record labels were insisting on a huge markup. There was not much people could do in the 90s when record industry profits were at their peak and filesharing didn’t exist but with a free alternative fat profit margins don’t fly.

Unlike Mike Arrington I don’t think the concept of paying for music is dead. I just think the concept of paying a lot per unit is dead. However much the music industry disliked it allofmp3 demonstrated an appetite for music bought online if the price was right. Because the costs of distribution are close to zero the way to make money is massive volume at a low cost. The continuing popularity of filesharing shows the appetite for recorded music is there, to start peeling it away all that is needed is a realistic approach to pricing from the labels.

An Amazon spokesman admitted in the Telegraph:

“I don’t want to get into the economics of it, but we want to encourage our customers to get into MP3 who have never downloaded music before”

Which suggests Amazon are taking a loss on each album to show the labels that volumes increase at lower price points. As a big company they have the pockets to do this and in a way it helps startups. Apple got the first big concession by getting them to drop DRM and now Amazon seems to have got them to drop prices. There is still a way to go but they are heading the the right direction. Slowly.

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On Amazon Unbox

Kara Swisher’s festival of tech announcements, otherwise known as D Conference, continues apace with the revelation Amazon is soldiering on bravely with the Unbox in the mistaken belief people will pay for streamed video. I am glad that the Wikipedia picture captures Bezos in a suitably evangelical pose. Maybe he can manage it, having previously foist the Kindle upon the world.

Schonfeld rightly castigates him for not implementing free streaming with ads. For my money there are two successful models for online video. One is streaming with contextualised ads. This would require some kind of linkup with social networks which hold all the necessary data to do the contextualisation properly and I presume someone, somewhere is working on this.

The other option is paid for, downloadable video without DRM so content can be easily switched between devices. The current stumbling block in this is, I imagine, the content owners who are demanding DRM on video. It has taken the music industry a while to realise that technology companies were selling them a dud with DRM. The basic problem is that no matter how long you spend developing it as soon as it is released some Norwegian hacker cracks it in about thirty seconds then puts a DRM free version of whatever you are trying to peddle on Pirate Bay (or wherever) for nothing.

Now we have an answer to this but there is no point us even trying to speak to video content owners at this stage as they are not yet ready to abandon DRM. The day will come but it will take another couple of years. Fortunately I think it will take a similar amount of time for the technology to get there so in the meantime we are concentrating on our other projects.

On Arseblog, OleOle and facebook

On Wednesday one of my favourite non-technology blogs, Arseblog, was acquired by OleOle, the football centric social network. I’m not even an Arsenal fan but Arseblogger is one of the best writers around and I always enjoy reading his entertaining posts on the ups and downs of the Flamster et al. He’s there 7 days per week come rain or shine with something interesting to read, even for the general football fan and this has led to the acquisition by OleOle.

OleOle is a football social network. I know that niche social networks are the new thing and I can sort of see the value in one based around the worlds biggest sport. That said I started out as a social network sceptic and I am not totally cured. Any new venture, OleOle included, faces the facebook dilemmas – Why can’t I do this on facebook? and Why should I be arsed to set up another account somewhere else?

Also facebook, brilliant though it is, still has the feel of a Google looking for its Adwords. There is no doubt that facebook can sell things, I’ve bought stuff after seeing updates from my friends and I can begin to understand the $15bn valuation since FB will be worth a lot more if they crack it. I have no idea what is going on inside facebook but from the outside it looks like a fair amount of stumbling around. As far as I understand it most of their cash comes from a big ad deal with MS which is not really a good basis for an independent business.

I see the merit in opening up the platform to developers – if even a tiny percentage manage to develop a money generating widget facebook is in the hay without having to do anything. The problem is that none of the widgets make any money (please correct me if I’m wrong) not even Slide with its pedigree. Levchin himself recently conceded that startups had to look beyond advertising but that $80bn by 2010 pie which drew MS to Yahoo looks mighty inviting and most people can’t take their eyes off it even though they know Google will eat most of it.

FB has a chance too but it needs to make it far easier to buy straight from the site then take a cut from the sale. I’ve already told FB what my favourite films are and through that it can link to other like minded people and recommend me things I might be interested in. FB doesn’t do this right now – at least not in any way I notice when I’m using it.

Ultimately that’s all advertising is – getting people you trust to recommend things you like. One of my favourite film reviwers is Matt Cale, every time he releases his top 10 films of the year I buy the number one sight unseen and I’m never disappointed. I never would have bought Cocaine Cowboys were it not for his review but he doesn’t see any cut from the sale. And I won’t see any cut when you rush to Amazon to buy it either, but you will buy it.