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March 10, 2004
Why the ala Carte Music Model is Doomed
It costs $499 to buy a new 40G iPod.
It costs $10,730 to fill it with songs purchased online at 99 cents each.
Anonymous blogger Cypherpunk argues that:
The thing is that this factoid is not as meaningful as it sounds. The iPod just holds music, and there's no significance in how its price compares to the price of the music you buy. I'm looking at my CD shelf unit, which probably cost about $40, and is holding maybe 200-250 CD's, probably about $4000 worth. Is there any cosmic significance in the fact that I could buy a shelf for only $40 that would cost 100 times that to fill with music? I don't think so. And the same is true for the iPod.
Here's the thing, though. Generally, people won't buy a shelf that can hold 1,000 albums unless they already own or expect to own 1,000 albums. Instead people by a shelf for 40, 100, or 250 albums, what they own or what they expect to own. Having so much storage changes people's expectations. If you have a lot of bookshelves you are going to fill them with something (might not be books). When you buy a 40G iPod, you are going to expect to use a substantial amount of that storage for music.
I also believe that the nature of MP3 players also increase expectations. When I could only listen to a CD in my car I knew that, physically, there was a limited number of CDs that I could bring or listen to. Even when I listened, I could only listen to a single CD at a time (and I am pretty lazy about switching them - I generally only did it at the start of a trip). Now, my expectation is that I will listen to an extensive playlist, not more than a hundred songs or so in reality, but my expectation is that the playlist is essentially unlimited. "Why shouldn't I have access to all music at my fingertips" my expectations tell me.
Apple is selling lots of 40G iPods to people who don't have 500, 800 or 1,000 albums. Apple and its MP3 player competitors are deliberately raising people's expectations about how much music they should own, and those expectations will continue to increase.
What this factoid points out is that at current ala carte prices these expectations are entirely unrealistic. Something's got to give. I don't think that it will be digital storage in which advances continue to outpace Moore's Law. I don't think it will be people's expectations. Thus, it is going to have to be the ala carte pricing point. However, I think the only realistic ala carte pricing point is going to be in the micropayments realm, which is unlikely to work. Thus, a subscription-based model will be the only likely, voluntary solution.
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