April 27th, 2009

How to fix variable pricing for music

The variable pricing models itunes and amazon are using is flawed. It lets the music publishers set the prices. That's the wrong way to do it. The prices need to be dynamically set via some sort of aggregate consumer interest model. I am not an opponent of paying for music.  I am willing to pay for music... but how much I am willing to pay for it depends directly on the risk of liking the music versus the cost.  And I think variable pricing for online music can work..if a similar sort of risk assessment is done.

So assuming a flat cost model, how do I currently evaluate risk?

For artists I've never heard of before,  they are just too damn risky and I avoid purchasing their stuff. I have to listen to some of their songs before I'm willing to purchase any of their music.  I actually enjoy finding new artists more than purchasing new music for existing artists..but its also riskier. If I find a new artist that is really appealing I'll pay retail as a premium for "appealing to me". I use to get exposed to a lot of music back when I had personally interactions with other people before I was digitized into a purely cybernetic entity, now not so much so my rate of artist discovery has gone down.

For artists that I generally like, I have a music budget of sorts and I'll actually wait till the cds go on sale to add to the collection. Its pretty rare nowadays to buy out of this category. The music budget gets eaten up by the other risk categories.

For artists that I know I like..a lot..I'll pay retail price in a brick and mortar retailer for their newest album sight unseen.  Because I've established that as a low risk I'm willing to pay without a taste testing. It's not perfect of course, I will buy crap albums this way..but if that happens then the artist goes up on the risk scale and they enter the generally liked category. Seldom do artists ever come back from the generally liked category.

So can variable pricing of online music incorporate that sort of risk model? Can we implement variable pricing that puts a pricetag on likelihood of personal enjoyment? Would you pay more for potential music offerings ranked highly for your own tastes in a tiered pricing model? Would it make sense to mix that with an aggregate popularity pricing scale so that less popular music is discounted even when you are likely to enjoy it to encourage you to help build up the core fanbase for that relatively unpopular work?  I like polka, its generally not that popular. So in this variable pricing scheme, polka albums for me would get ranked highly and thus cost more than the average offering,but would also get discounted for being relatively unpopular in aggregate with other purchasers. The devil would be in the details on how the personal and aggregate pricing weights would work together, but I think the concept makes sense.

The pricing weights would need to be updated somewhat dynamically..say on a daily or weekly basis..to account for evolving aggregate popularity as well as the evolution of your own musical tastes. I think this sort of thing makes sense, or at least far more sense than the music publishers self determining which pricing tier to put music into. I think I would buy into that sort of variable pricing model if a retailer implemented it.


Netbooks and sales estimates

So it looks like there was a recent doom and gloom article about netbooks not making their sales targets for 2009 Q1:

Asus,Acer and MSI all report lower than expected sales though only Asus gives hard numbers saying they missed their estimated target of 1 million by 10%.  You'll note in the article that as a result Acer and MSI are going to ramp up production of "ultrathin laptops" as the next market segment to go after. 

Hmm, this is an interesting development...especially as it comes before the ARM based netbooks have hit the streets and before Windows 7 is available.  I would have expected the real shake up in the netbook segment to happen when either one of those landed.  If the market is softening already, and dominate players in the market like Acer are already redirecting their resources to other market segments that paints a very different landscape. Is the goldrush over?  Is the softening of the market going to impact introduction of ARM based devices which are slated to rollout this year?

I wonder how HP, Dell Toshiba are doing in the space. These dominate OEM players in computers generally speaking across all segments and they each do have netbook offerings in some locations. Are their netbooks also hitting sales targets for Q1? I don't think these OEMs historically provide breaken out sales numbers for individual models on a quarterly basis so we might not get a good answer to that.  
This report from IDC talks to this a little however: http://www.idc.com/getdoc.jsp?containerId=prUS21797609

If "mini notebook" is what IDC calls a  "netbook", then Dell didn't do so hot. Sure a 3rd of their mini's are being sold with Ubuntu, but if Dell is struggling across the board to compete with other OEMs..that might not be as big enough a number of units to matter much.. 30% of a small number is a small number. In fact reading the IDC report, even HP's sales were not bouyed up by "mini notebooks" In fact IDC doesn't single out HP or Toshibia as having singificantly strong "mini notebook" sales. If anything their sames numbers came from more traditional laptop form factors...if I'm reading the IDC terminology "laptop"=="Portable PC." But "Portable PC" could include "mini notebooks." They need an appendix of defined terms and do a better job of keep the numbers for different segments seperated.