When you ask the wrong question, you will get the wrong answer
Thursday, 18 October 2007
Posted by austin in: Apple, Technology, trackback
In Slate’s What’s the future of iTunes? by Ivan Askwith, the wrong question is asked. Not surprisingly, the wrong answer is reached. Specifically:
…Whomever you believe, the fact remains that content providers have been pushing Apple to loosen up its pricing restrictions, and Apple has refused.
Regardless of demand, each song on iTunes costs 99 cents, each television program $1.99, and each feature-length movie $9.99. Most consumers are likely to agree that iTunes’ pricing seems illogical; there’s no obvious reason that Vanilla Ice’s ‘Ninja Rap 2′ should cost the same as the newest tracks from Soulja Boy. For content owners, this is more than illogical: It’s bad for business.
The question isn’t about Vanilla Ice. The question is about Led Zeppelin, Pink Floyd, The Rolling Stones, The Who, and the Beatles. There’s no reason whatsoever that newer, “hotter”, music should be more expensive than legendary music by these bands. Is the latest Justin Timberlake even remotely as good as “Behind Blue Eyes” or “Paint It Black” or even “Yellow Submarine”?
The usual standard presented by the recording industry morons is variable pricing based on the freshness and popularity of the music, where the more popular and fresh the music is, the more expensive it is. This works in a scarcity model, but music isn’t scarce. Music’s value increases the more that it’s heard and the more people internalize it. But if you’re going to price Soulja Boy’s latest tracks more than Harrison’s masterpiece “While My Guitar Gently Weeps”, you’re implying that Soulja Boy’s music has more value than the older, and better, music.
Why does Apple stick with fixed pricing? Market analysts generally say that this is because iTunes sales are a means to an end, where the end is selling iPods. As such, Apple’s interest is ensuring that desirable content for the iPod costs as little as possible.
John Gruber addressed this quite nicely in September. I’m not trying to say that Apple is perfect (far from it!), but I would assume the obvious: multiple price points confuse people unnecessarily. Those market analysts, of course, are wrong. Ivan Askwith gets this one right:
The more likely explanation, however, lies with the company’s obsession with simplicity. ITunes has been a huge success because it’s easy to use, and (at least for now) has the most digital content of any online store. Apple’s refusal to budge on pricing indicates it’s prepared to defend simplicity at the expense of selection.
That target of simplicity is important: the harder it is for people to play the media they want on the devices they want, the less they’ll buy the one they need less. (And, so far, the iPod is the device people overwhelmingly want. People will forgo on-line purchases if the rest of the device is easy enough to use. I’ve bought a total of four things from iTMS, and two of those were audiobooks.)
Simplicity matters. Amazon works, despite the pricing differences, precisely because it makes the shopping and shipping simple. Amazon’s music store works well because it integrates with iTunes, too.
Comments»
what was the wrong question that he asked?
The wrong question is the comparison between Vanilla Ice and Soulja Boy. Vanilla Ice was low rent back in the day — his second album was a live version of the first album, and his “superstardom” lasted about a year. Soulja Boy’s rap may be better than Vanilla Ice’s rap, but it’d be better to compare Coldplay or Oasis (people with more than one album to their name) to The Beatles or Pink Floyd when asking whether the singles price on iTunes is good, or whether they should be variably priced.
Radiohead may have hit on the right way to handle variable pricing, but that only works when you know you’re sending the majority of your money directly to the band. Most people don’t want to make the soul-suckers at the labels any richer than they need to be.
I think a lot of people read or hear “simple” and think it means user interface, or other things that are tangental to Apple’s goal with fixed pricing. I think it’s useful to ask “what does simple mean here?” and “why does simple matter?”
The reason that fixed price is “simple” is that it removes the question of price from the customer’s mind while they are shopping. They already know the price, and if they are shopping, they have (at least tacitly) agreed to it. The shopping experience thus becomes something that is _only_ about finding something they want.
With variable price shopping, of course there are sales where a user wants a song, and pays a higher price because they want it right now, and the music execs feel like they’ve done their job of optimizing revenue.
But focusing on track-by-track sales optimization is short-sighted. Apple’s approach takes a longer view, and I honestly don’t think it’s just about keeping content “cheap” so that they will sell more iPods. Apple’s approach is, psychologically, removes the money from consideration in the customer’s mind, and I am betting that Apple believes that this will lead to more purchases per individual, and thus more purchases overall.
I dunno if that means more profits (after all, you have to pay out to more artists), but it will mean more revenue, and I know that personally it has lead to more customer satisfaction.
interesting — i read that differently. soulja boy is currently listed as one of the top 10 downloaded songs on itunes, which gave me the impression that his point was about demand. (right now, lots of people want that new hit single, and far fewer people want the old single that now sounds like crap.)
so i thought it wasn’t about which musician was “better” — i don’t especially like either of those songs, personally — but about which musician’s product was currently more “in demand.”