Recognizing the Obvious: Diversity in Song Quality and Wealth
posted by Frank Pasquale
Online music pricing seems to take the old adage de gustibus non est disputandum to an extreme–everything from the worst to the best songs is $1 on iTunes. Now it looks like some flexibility may be worked into the pricing:
Arguably the No. 1 item on record labels’ to-do list for the year is, “Establish variable pricing for digital downloads.” . . . The idea behind variable pricing is to make more money from those 33% who downloaded up to 50 songs in six months by slightly raising the price on certain tracks, while at the same time convincing those who only downloaded 10 or fewer to buy more by slightly lowering the price of others.
How that’s done is where the real science kicks in, which is why even those labels pushing for variable pricing most aggressively are still only in the test phase. The latest is Warner Music Group (WMG), which last month began a trial of a dynamic pricing system from Digonex.
The company’s system recommends raising or lowering the price of a track and/or album based on a variety of factors. In some cases, new releases selling very well may get priced higher, but so might catalog items appealing only to the die-hard fan willing to pay more. In other cases, the system recommends lowering the price of even new releases to spur more sales.
Everyone seems to be tip-toeing around the fundamental basis of price-discrimination: ability to pay. Why try to squeeze blood from a stone? And why not expect the wealthy to act as “patrons of the arts” by paying more for their music? As I’ve said before, “Given that the median net worth of the top 10% in the U.S. was $833,600 in 2001, and that of the bottom ten percent was below $7,900, Americans live in very different economic worlds.” That gap has only grown the past 7 years.
June 7, 2008 at 8:33 pm
Posted in: Economic Analysis of Law, Intellectual Property
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Responses (5)
Sean M. - June 7, 2008 at 9:28 pm
I doubt iTunes would go for this. $1/track is its hallmark (though iTunes plus makes this slightly different in some cases) and I can’t see it going more just because some songs are “hot.”
KipEsquire - June 7, 2008 at 9:49 pm
“[W]why not expect the wealthy to act as ‘patrons of the arts’ by paying more for their music?”
Maybe because what Private Party A and Private Party B do between themselves is none of your business?
Stated differently, your unhealthy need to engage in economic voyeurism is simply not a compelling argument.
(Incidentally, you would make a good Eurocrat.)
Anon - June 7, 2008 at 10:07 pm
How is iTunes supposed to figure out what your income is? Price discrimination only works if there’s some credible way to discriminate, like the way airlines go after business travelers with high midweek rates. All Apple can measure is your willingness to pay, not your ability to pay. So should it assume that poor people don’t like classical music, say, and charge accordingly?
Jon Garfunkel - June 9, 2008 at 2:07 am
Frank– it’s not obvious to me. There’s not many markets in *goods* which use variable pricing based on the buyer’s income.
I welcome points on the growing disparity in U.S. personal income, but this seems to be a stretch.
Jon
anonymous - June 9, 2008 at 2:35 pm
Prof. Pasquale, are you really suggesting that it would benefit anyone if iTunes started demanding people’s tax returns?
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