Value, iTunes and Other Paid Music Download Services

By Richard Menta 4/27/05

I love the new plasma and LCD screens that fill department stores and electronic showrooms these days. I won't be buying one anytime soon though.

The reason such an item is not on my purchase list is because of value. $2,000 to $5,000 is more than I want to spend for a television set for myself. As enticing as a wide screen and high definition can be, I can't justify the expense. I do know that eventually prices will come down, so I will get one at some point. Maybe not down to the price of a standard definition set today, but over the next several years the costs will diminish and reach a price point I can be comfortable with.

Richard Menta

Early adoption of new services and products can be quite pricey at first. Remember when VCRs cost over $1,000? How about when $250 bought you an MP3 player with only 64MB of memory?

You see my point. Early adopters pay the high initial prices to both experience the future as well as be the first on their block to have the latest greatest. Everyone else is a price-minded consumer and while there are different price levels at which they will jump in with a purchase the overall goal is the same. They are searching for value, a point where the price paid is equal or less that the amount of pleasure said item delivers over the course of its product life.

The paid download industry is no exception to these rules of market. There are early adopters who pay a premium and the rest of us working stiffs who try to stretch their dollar as far as we can. This is why the media industries should take notice of the BBCs recent article on their industry.

According to the article Online Music Lovers 'Frustrated' UK consumers are dissatisfied with a number of elements regarding the purchase on online music files from the likes of iTunes and others. The two main culprits are prices and the restrictions imposed on them from the digital rights management (DRM) tools that are wrapped around each song file they purchase.

I personally have perched myself numerous times on the soapbox over this issue. Prices need to be lowered, but the record companies are pressuring online stores to raise them to numbers as high as $2.50 a track. DRM needs to be eliminated too as its use is moot with the hundreds of millions of files regularly traded through the free P2P applications.

The people who purchase songs on iTunes do so for a myriad of reasons and not just because of a fear of being sued by the same record industry they buy from. Some see the paid files as a superior product to what the likes of KaZaa offers (which raises their perception of value). Others feel it is only fair that some money exchange hands when acquiring music. Most of these people qualify for the early adopter category.

These consumers are the ones who are most sympathetic with the media industry's position in the online world, but they are still consumers. When they - and we are still speaking of the early adopters - become dissatisfied the record industry better listen. They better listen because it reflects value and the perceived value of the product they are trying to wrest $0.99 a song from. Lose this group and what chance do you have selling to the average consumer who is waiting for something a little more economical and under the best terms?

If consumers become sufficiently dissatisfied they shop somewhere else, there is no mystery here. In fact, it is the clear brutal truth of all forms of commerce. If you can't satify the few who buy your products now, it's time to adjust your business model.

All industries know that. The ones who fail are the ones who fail to heed its logic.


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