Speaking of Music Piracy ....

[desdemona]

Speaking of Music Piracy ....

Associated Press

03:11 PM Apr. 08, 2004 PT

To see the future of online music prices, look no further than Fly or Die, the new album by rock-meets-hip-hop trio N.E.R.D.

For months, digital-music services have been touting albums for $9.99 to entice more people to buy online. But Apple's iTunes Music Store has been charging $16.99 for Fly or Die, while Napster sells the 12-song collection for $13.99. Both prices are higher than the $13.49 that Amazon.com charges for the CD itself. The same pricing shifts are showing up on albums by a growing slate of artists, from Shakira to Bob Dylan.

Unburdened by manufacturing and distribution costs, online music was supposed to usher in a new era of inexpensive, easy-to-access music for consumers. In many cases, buying music online is still cheaper than shopping for CDs at retail outlets. But just a year after iTunes debuted with its 99-cent songs and mostly $9.99 albums, that affordable and straightforward pricing structure is already under pressure.

All five major music companies are discussing ways to boost the price of single-song downloads on hot releases -- to anywhere from $1.25 to as much as $2.49. It isn't clear how or when such a price hike would take place, and it could still be months away. Sales of such singles -- prices have remained at 99 cents -- still account for the majority of online music sales.

The industry is also mulling other ways to charge more for online singles. One option under consideration is bundling hit songs with less-desirable tracks. Another possibility is charging more for a single track if it is available online before the broader release of the entire album from which it is taken. There is also talk of lowering the price on some individual tracks from older albums.

Several record-company executives acknowledged that pricing changes are being discussed at all five major companies.

The new pricing developments come as digital-music sales are growing steadily. Around 25 million digital tracks were sold in the first three months of this year, compared to 19.2 million for all of the second half of last year, according to Nielsen SoundScan.

That growth is why some in the industry are uncomfortable with the talk of price increases. Most music-company executives believe that the download market is still in a critical early-growth stage, which could be disrupted by raising prices. "For us right now the issue is not, 'Do we make another $300,000 by raising the price five cents?"' says a music company executive. "It's making sure the market grows."

Revenues in the music industry have been dragging in recent years, which the industry blames on online piracy. Raising digital-music prices could spur additional illicit downloading. Weaning people off those illegal services by giving them an alternative that they consider viable is critical to the industry's future profitability.

N.E.R.D's Fly or Die is far from the only album that now costs significantly more to download from iTunes than to buy on CD. And many high-profile albums from two of the big five music companies, Sony Music and EMI, are now priced on iTunes and its competitors well above the $9.99 norm. Sony artist Pete Yorn's Musicforthemorningafter, for example, costs $13.99 on iTunes and $10.88 on average in retail stores.

The reason this disparity is so pronounced at EMI and Sony is that both companies routinely set wholesale prices for online albums higher than their competitors, according to people familiar with the matter.

A much smaller number of titles from the other major music labels also cost more than $9.99 on iTunes. A handful of albums from BMG, Warner Music Group and the Universal Music Group also cost more online than they do as CDs. But these tend to be double discs such as OutKast's Speakerboxxx/The Love Below, which incur higher costs in certain kinds of royalties when sold online than as traditional CDs.

"There's a lot of experimentation in the industry," says Peter Csathy, president and chief operating officer of Musicmatch Inc., which sells digital music.

The music companies are reluctant to talk openly about their wholesale-pricing strategies, but they are quick to blame the retailers for higher prices. A spokeswoman for EMI, for instance, stresses that the retailers, not record companies, ultimately set the prices consumers pay.

However, the digital-music services say they base their retail prices directly on the wholesale prices the music companies charge. "Our pricing comes when the fees come in from the labels," said Csathy.

ITunes, the market leader among downloading services, and its competitors offer music at two distinct price points: Single tracks cost 99 cents. A full-album has generally cost $9.99, regardless of how many songs are on it.

Napster was until recently the lone holdout among the major online services on full album prices, charging $9.95 for numerous titles that cost between $12.87 and $16.99 on iTunes. But two weeks ago, it relented and created a higher tier of album prices, set at $13.99.

Separately, Walmart.com, the online arm of Wal-Mart Stores, recently rolled out a slightly cheaper 88-cents-per-track price. Many observers, however, argue that any advantage conferred by the 11-cent difference will be offset by a user interface that early reviews have called less friendly than those of other services. Executives at competing services also contend that research shows that consumers don't care much about price differences within the band of about 75 cents and 99 cents.

The issue of online music prices raises philosophical debates for music executives. Some executives, for example, believe they should be charging a premium for the online versions of older tracks because consumers may be willing to pay more for harder-to-find material

http://www.wired.com/news/digiwood/0,1412,...=wn_tophead_11w

[Bombardier]

But Apple's iTunes Music Store has been charging $16.99 for Fly or Die, while Napster sells the 12-song collection for $13.99. Both prices are higher than the $13.49 that Amazon.com charges for the CD itself.

.....

Sony artist Pete Yorn's Musicforthemorningafter, for example, costs $13.99 on iTunes and $10.88 on average in retail stores.

and guess what? It's even cheaper than that used (eventually will sell it for ~$5.00) and it's free online.

I always knew the RIAA would try and find a way to twist online music sales to bilk people out of the same bucks and they were in the retail stores. iTunes is no improvement to buying at Fred Meyer. In fact, it could be more expensive for an audio format that is more retricted.

Given the choice between a $13.99 CD on iTunes with low quality files and DRM and a $10.88 CD in Fred Meyer that can be ripped to whatever quality I desire (& have no copying/burning restrictions), I'd choose the retail store.

By setting iTunes prices above retail store prices is actually a step backwards for online music.