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November 20, 2005

Differential pricing

Joel Spolsky:"The reason the music recording industry wants different prices has nothing to do with making a premium on the best songs. What they really want is a system they can manipulate to send signals about what songs are worth, and thus what songs you should buy."

The problem with Joel's analysis is that the music industry has had differential pricing for ages, and it doesn't work the way he says it does. Differential pricing is essentially time-based: new albums appear at an introductory price, then rise to full price as they go into the back catalogue, then either get deleted or are re-issued at "mid" price. (Except for the Beatles, and even they have started turning up on "special offer" increasingly often.)

In fact, for new albums, differential pricing works exactly opposite to the way Joel says it does. Chart albums -- which, by extension, means any album the record company wants to be perceived as a chart contender and to be positioned at the front of the record store -- are actually priced cheaper than non-chart, non-promoted albums. Compare the week-of-release prices of the new Madonna album and the latest 77-minute Norwegian death metal opus. In the UK, with supermarket discounting, front-of-store records would typically be at least one-third cheaper in the week of release than records that went straight to the main racks.

Joel's theory that the record industry wants differential pricing as a means of leverage doesn't hold water either. When a musician gets uppity, all the recording industry has to do is threaten to release their next album with no promotion. No plugging on the radio, no video, no adverts in the music rags, no interviews, no purchasing of front-of-store space, no in-store displays. That may kill it stone dead. Threatening musicians with promotional discounts? Er, I don't think so.

November 20, 2005 in Music | Permalink

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