Gordon Gecko updated for the 21st century: 'Tiered Pricing is Good'

Filed in archive IPTV on December 7, 2005

The one bright spot for the music industry has been Apple's iTunes store, which has sold 600 million songs since 2003, accounting for 80 percent of legal downloads in the United States.

But what price is fair? Apple says it is 99 cents a song. Of this, Apple gets 4 cents, the music publishers snag 8 cents, and the record companies pocket most of the rest.

Slate's Adam L. Penenberg wrote a good piece called The Right Price for Digital Music, Why 99 cents per song is too much, and too little. In it he suggests that a NASDAQ-like should exist for music downloads. I include it here because it's well written and the idea could also apply to video as well.

Steve Jobs, who has been willing to take a few pennies per download so long as he sells bushels of iPods, calls tiered pricing "greedy." That view is shared by millions of consumers who believe the record companies have been gouging them for years. ...

What we need is a system that will continue to pack the corporate coffers yet be fair to music lovers. The solution: a real-time commodities market that combines aspects of Apple's iTunes, Nasdaq, the Chicago Mercantile Exchange, Priceline, and eBay.

Here's how it would work: Songs would be priced strictly on demand. The more people who download the latest eminem single, the higher the price will go. The same is true in reverse --- the fewer people who buy a song, the lower the price goes. Music prices would oscillate like stocks on Nasdaq ...

Since millions of tunes sit on servers waiting to be downloaded, the vast majority of them quite obscure, sellers would benefit because it would create increased demand for music that would otherwise sit unpurchased ...

The big wild card here is the impact of illegal file sharing. David Blackburn ... has argued that peer-to-peer systems increase demand for less popular recordings but dampen sales of hits. If that's the case, charging extra for top sellers might just push legal downloaders back into the outlaw world of peer-to-peer file trading ... A Digital Music Exchange may not be a perfect solution, but who would you prefer to set the price of music: consumers or record executives?