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Rob MacLachlan
2005-02-01, 13:11
From: "Mike Hartley" <mhartley (AT) comsolusa (DOT) com>
Date: Tue, 1 Feb 2005 15:03:00 -0500

> For me, the question is "why does a CD with 13 songs cost $13.00 in a store
> and $13.00 on the internet"? Isn't the internet distribution more cost
> efficient? There isn't a cost for the CD, there isn't a cost for shipping
> and warehousing, and there isn't a traditional brick and mortar store-front
> that has to be supported with profit margin. And yet the price is the same.
> The same amount goes to the artist (maybe less in some cases). And to top
> it all off, you can usually do LESS with what you bought on-line.

Curiously, I've read in "The Economist" that the online music sellers
(ITUNES included) are *not* making money. Apple justifies this by
selling ipods, but it's not clear what is going to happen to the rest of
the competition.

I don't know the cost breakdown, so I can only speculate, but perhaps
the online sellers have cut deals with the record labels that are too
generous. Credit card processing fees on lots of small transactions are
probably taking another big bite. The credit card industry is another
notoriously inefficient pre-internet information conduit, which we can
only hope is also headed for a fall.

Rob

Mike Hartley
2005-02-01, 13:41
Rob,
I have heard the same thing about Apple. My IIR, the reason they are not
making any money is that they had to agree to give such a high percentage of
the per-song price to the RIAA/Lables in exchange for being able to provide
the service that the remaining $ didn't cover the bandwidthand HW cost.
That was what actually what got me thinking about this issue in the
first-place.

Mike
----- Original Message -----
From: "Rob MacLachlan" <ram (AT) ri (DOT) cmu.edu>
To: <discuss (AT) lists (DOT) slimdevices.com>
Sent: Tuesday, February 01, 2005 3:11 PM
Subject: [OT- rant- ] [slim] mp3 files--It's about collecting the
toll


> From: "Mike Hartley" <mhartley (AT) comsolusa (DOT) com>
> Date: Tue, 1 Feb 2005 15:03:00 -0500
>
> > For me, the question is "why does a CD with 13 songs cost $13.00 in a
store
> > and $13.00 on the internet"? Isn't the internet distribution more cost
> > efficient? There isn't a cost for the CD, there isn't a cost for
shipping
> > and warehousing, and there isn't a traditional brick and mortar
store-front
> > that has to be supported with profit margin. And yet the price is the
same.
> > The same amount goes to the artist (maybe less in some cases). And to
top
> > it all off, you can usually do LESS with what you bought on-line.
>
> Curiously, I've read in "The Economist" that the online music sellers
> (ITUNES included) are *not* making money. Apple justifies this by
> selling ipods, but it's not clear what is going to happen to the rest of
> the competition.
>
> I don't know the cost breakdown, so I can only speculate, but perhaps
> the online sellers have cut deals with the record labels that are too
> generous. Credit card processing fees on lots of small transactions are
> probably taking another big bite. The credit card industry is another
> notoriously inefficient pre-internet information conduit, which we can
> only hope is also headed for a fall.
>
> Rob
>

Jack Coates
2005-02-01, 15:22
Rob MacLachlan wrote:
> From: "Mike Hartley" <mhartley (AT) comsolusa (DOT) com>
> Date: Tue, 1 Feb 2005 15:03:00 -0500
>
>> For me, the question is "why does a CD with 13 songs cost $13.00 in a
>> store
>> and $13.00 on the internet"? Isn't the internet distribution more cost
>> efficient? There isn't a cost for the CD, there isn't a cost for
>> shipping
>> and warehousing, and there isn't a traditional brick and mortar
>> store-front
>> that has to be supported with profit margin. And yet the price is the
>> same.
>> The same amount goes to the artist (maybe less in some cases). And to
>> top
>> it all off, you can usually do LESS with what you bought on-line.
>
>
> Curiously, I've read in "The Economist" that the online music sellers
> (ITUNES included) are *not* making money. Apple justifies this by
> selling ipods, but it's not clear what is going to happen to the rest of
> the competition.
>

I'd be shocked if the big ones like Apple and Napster are profitable.
Like you said, they're saddled with DRM software costs on top of the
usual and offering the most popular stuff (read: the least favorable
record label contracts), and they're accepting micropayment transactions.

That said, I wouldn't be surprised if outfits like eMusic were at least
in shouting distance of breaking even. They've got no costs associated
with tracking and protecting the record company's rights, they're
working with relatively unpopular tracks, and emusic at least uses a
monthly subscription model. I know that a friend of mine used to manage
a small label and was very pleased with his direct MP3 selling venture
-- IIRC it broke even within a couple of months.

> I don't know the cost breakdown, so I can only speculate, but perhaps
> the online sellers have cut deals with the record labels that are too
> generous. Credit card processing fees on lots of small transactions are
> probably taking another big bite. The credit card industry is another
> notoriously inefficient pre-internet information conduit, which we can
> only hope is also headed for a fall.
>
> Rob

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