MIDEMNet Blog: Variable Pricing – What It Should Really Mean

The following appears courtesy of MIDEMNet’s Blogs. See all of Ted Cohen’s blogs for MIDEMNet at MIDEM.com.

March 27, 2009

Yesterday, I was quoted in the Los Angeles Times story on the impending iTunes pricing changes, it read like this:

Some music industry veterans are criticizing the 30% hike price, saying the timing is tone deaf because it comes in the midst of a recession and at a time when spending for online music appears to have reached a plateau.

“This will be a PR nightmare,” predicted former EMI Music executive Ted Cohen, who is managing partner of digital media consulting firm TAG Strategic. “It is for the music industry what the AIG bonuses are for the insurance industry.”

It appears, based on calls and e-mails that I’ve received, that my position on this issue wasn’t evident. While I wasn’t misquoted, it did appear outside of the context in which it was intended. So, let me clarify where I stand.

I am a huge proponent of the variable pricing concept. I lobbied for this early on with iTunes when I was at EMI, with no success. I therefore applaud the recent efforts by the labels to bring it to market, it’s long overdue.

What didn’t come across in my comments is that I believe it’s important that for variable pricing to succeed, it must achieve two clear goals:

* Offer tangible value to music fans
* Maximize revenues for artists, labels, publishers and the services

These are not mutually-exclusive objectives.

As we continue to try to wean a whole generation off of ‘free,’ it’s critical that we don’t ‘jump the shark’ at this juncture. Moving to the ubiquitous availability of DRM-free tracks is just part of the solution. It’s time to mature the a la carte digital music marketplace. Variable pricing can significantly contribute to this sorely-needed evolution. While Amazon has led the way by putting certain releases on sale for a fixed time period, the pricing of digital music has, for the most part, been flat. There have been few meaningful calls-to-action, this has to change.

We have an amazing opportunity to bring paying music customers back into the fold. This can be achieved by putting new artists on sale and creating customer value through creative digital bundles, such as mining back catalogue through well thought-out campaigns.

At the same time, there is nothing wrong with putting a premium price on a new track from U2 or Jay Z. There just has to be a balance that demonstrates concern for the fan.

Based on what has been revealed so far, it appeared that there was far more focus by the major labels on pricing upward and less on increasing value to the customer. If this is not the case, I publicly apologize for prematurely ringing the alarm. If, however, it proves to be true, we are squandering a golden moment.

I sincerely hope I was wrong.

Posted by Ted • Friday, March 27, 2009 .