WSJ.com - Downloading Music Gets More Expensive

WSJ.com - Downloading Music Gets More Expensive

This Wall Street Journal article (subscription req'd) talks about moves to raise prices on some online downloads above the price of the same CD purchased in physical form. Un-freaking-believable. The article points to examples of both entire CDs priced higher in download form as well as moves to raise prices on some singles about the $.99 level.

For months, digital-music services have been touting albums for $9.99 to entice more people to buy online. But Apple Computer Inc.'s iTunes Music Store has been charging $16.99 for "Fly or Die," while Roxio Inc.'s Napster service 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. [snip] All five of the 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.

As the article points out - legal online downloading comes without many costs to the record companies.

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.

Which means that raising download prices means even fatter profit margins rolling back into the record companies. NOT rolling back to any artists though, or at least only indirectly. You just had to know that the freaking rip-off artists at the major record companies, who came to legalize downloading years too late, would somehow find a way to screw this up to. If lower prices for legal downloads (lower relative to physical CD costs) were starting to offset illegal file-sharing piracy and starting to create new growth for legal music sales, this kind of thinking will only kill the growth genie and reignite the fire under illegal file-sharing.

The article does allow how some music industry people think that raising prices at this time is a mistake.

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 5 cents?"' says a music company executive. "It's making sure the market grows."

ARRRGGGHH! Even with legal downloading, I think the business model of the record industry is broken in fundamental ways. There's going to be a lot more disruption before things settle down in the music biz.