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January 22, 2004

Comments

amos

You'd think it would go the other way -- the more popular the song, the lower the price. Storing a song and making it available costs money. The more a song gets downloaded, the lower the marginal cost of storage. So all songs start at, say, $1.50 and decrease in cost as they are downloaded. Incentive to get others to buy. Actually, incentive to get others to buy first, so your cost will go down!

Earl Mardle

Pretty close I think. Nothing like giving everyone an incentive NOT to be the first buyer, great business strategy that.

On the other hand, I'm not convinced by the lower cost of storage argument. The cost of storage for one song is not nothing, but it is trivial. The storage revolution really has changed the game. Toshiba's 1.8 inch 40GB hard drive in the iPod is pretty insane, but their new hard drive is less than an inch across, can store 4 GB of data and is cheap enough to propose putting the things in anything bigger than a cigarette packet.

The possibility of reducing the measurable storage cost on any individual song is hardly worth pursuing.

My take is that musicians in future will have the technology and the incentive to give their recordings away free to anyone who wants them as a marketing strategy and will depend for their income on concerts and other live performances, just as they did before the days of the gramophone.

The recording industry (as distinct from the music industry) is resisting this like fury, as you would expect, but they are making buggy whips and the sooner they realise that, the better for everyone.

amos

Just to be clear, my reference to 'storage' cost includes overhead, connectivity, etc. etc.

And from what I hear, dealing with the promotion industry isn't much better than dealing with the recording industry.

Jeremy Eglen

I appreciate your look at our business, though I take issue with some of your characterizations.

The MusicRebellion model has nothing at all to do with scarcity, at least, not in any direct and obvious way. Digital files are, as you say, in essentially infinite supply – ideas always have been. Copyright law creates an artificial scarcity – it always has, since the printing press revolutionized communication. The US Constitution allows Congress to “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Congress is granted the power to create an artificial scarcity in order to provide more money to authors and inventors (in the case of copyrights and patents, respectively).

That is the world into which MusicRebellion was born. We are not legislators or lobbyists, and that seems to be your main criticism. I have never read a solution to the difficulties facing the music industry which would not require a massive rewriting of the copyright law (not to mention revisions to a hundred years of contracts between publishers and artists).

Our solution to the problem is to provide music to consumers at the lowest possible cost. The prices on our site go up and down according to demand, and I believe your analysis didn't consider the "down" part of it. The cost of storage is, as you suggest, minimal -- on the other hand, bandwidth is not. Our major cost is, of course, royalties. Each digital download further requires us to pay 3 royalties: a performance royalty, a publishing royalty, and a recording royalty. The first two go to songwriters, and the last to the label. We have to convince each and every person to which those royalties are paid that our system will make money. Telling them simply that we want to lower the price of their music to a third of its current level will not succeed. If, on the other hand, we can guarantee that prices will be as high as the market is willing to bear, then we’ve got something attractive.

Our pricing experiments in January and February started prices at $.05, $.10, or $.30, and we lost money on absolutely every sale. As I write this, the prices on our site begin just above what we ourselves actually pay to “the business.” We are at least trying to introduce a different business model into an industry, and have committed our careers to doing so. MusicRebellion is the only digital download service selling major label music on a sub $.99 per song level. I don’t see exactly why selling music cheaper than anyone else is a bad thing, but clearly you know more about such topics than I. While the “Bubblegeneration” model is interesting, I think its author would find its introduction into the music industry a practical impossibility.

I suggest to you that attacks against a retailer are unwarranted and totally unhelpful. We may not be digital geniuses, but we have a fair amount of experience in dealing with the music industry. If you want a target, complain to someone who actually has some influence on how licensing in this country is done – your congressperson would be an excellent start. Those of us risking our livelihoods on our own innovations, however minor, would appreciate it if you at least gave us a fair chance.

Jeremy Eglen
Vice President of Licensing and Operations
MusicRebellion.com

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