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Yet another Internet Advantage Destroyed by Greed...

Written by on April 9, 2004

First it was micro payments - now music downloads. Both started out with the promise of a cheaper way to get things, but turns out to be overly expensive.

With micro payments the ideas was that e.g. every morning you could skim the headlines of varies newspapers, select the ones you was interested in - and only pay for those. The newspapers would earn more money because the production costs were minimized and the reader would get more news, from several sources, cheaper than buying a regular printed paper. This was (is?) a win-win situation.

Micro payments were distorted into maxi payments. The newspapers boosted prices to as much as a dollar per article - effectively destroying the entire concept. No one would read 12 articles for $12 if you can get the printed version - 7 days of week, with several hundred articles - for about $5.

The same pattern is now emerging within the music industry.

Wired: 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.

It is a shame really. Apple had a very interesting concept (and profitable too). If the price of a CD is higher on the net, than in the physical world, then people would either turn to piracy or buy the music as we used to - on a CD.

In the meantime I am happily listening to one of the many online radios, reading the latest news headlines for free in my RSS reader.

Update (17/6/2003):

In an interview with Wall Street Journal, Steve Jobs elaborated on this subject


WSJ: Let's talk about the record labels for a minute. One year into this, when you only have this 2% share, and there's still a ton of piracy out there, they're actually discussing raising the price of singles. What's going to happen if they say to you, "Our hot new singles have to be $1.29, not 99 cents?"

Mr. Jobs: Well, we've just finished renewing our deals with the music companies. And we had to express our opinion fairly strongly that we think the customer doesn't want to pay more than 99 cents for a song. And it turns out the music companies make more money when we sell a song for 99 cents than they do when they sell it on a CD. The prices aren't going up on iTunes, I can tell you that.


Read the full interview

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Thomas Baekdal

Thomas Baekdal

Founder of Baekdal, author, writer, strategic consultant, and new media advocate.

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