In the Wall St. Journal, columnist Jason Fry examines The Ringtone Riddle— why the $2.49 price point may work for ring tones but not for full tracks. A short snippet of a song may command a premium over a complete track, because users usually buy only one ringtone over the life of a phone, in order to have a distinctive personal style on a phone, but tie the value of a single track in with the value of an album. Fry believes that the $2.49 digital download is doomed to fail:
My bet is the labels won’t be able to get away with it for downloads over cellphones, either. The labels and wireless carriers seem to be basing their hopes of commanding $2.50 for cellphone song downloads on two things: customers’ willingness to pay a premium for instant gratification and the idea that since people with cellphones vastly outnumber people with MP3 players, the cellphone will become the default device for listening to digital music as phone capabilities improve and more and more people dip a toe into digital music.
WSJ Technology columnist Walt Mossberg thinks that Sprint’s $2.49 download price is “a lethal combination of two industries many consumers believe typically charge too much.” I discussed the $2.50 price point last week: Digital Music, Mobile Phones and Price, and noted some evidence pointing to high price elasticity for digital song downloads.
Earlier this week, the NY Times ran an interesting article discussing the increasing number of subscription services that are available for the entertainment-hungry consumer: How to Tame an Inflated Entertainment Budget:
The game industry is trying to push prices higher for the hottest games, to as much as $60, but even at that price, on a dollar-to-minutes-of-enjoyment basis, video games may be one of the best values, about 12.5 cents a minute for the easily bored, or fractions of a penny for those who can play “Half Life” their whole life.
Among the worst?
Live opera works out to about 37 cents a minute, for a middling seat in the New York Metropolitan Opera house to hear “Aida,” compared with 7 cents a minute for “Harry Potter and the Goblet of Fire” at a Loews Cineplex.
But a Gwen Stefani concert, in again, middling seats, is about $1.25 a minute and that’s with a serving of Black Eyed Peas thrown in.
With the variety of entertainment options available, copyright owners have to be very careful with deciding how to set prices. Digital delivery may create new services, but those services are competing for limited free time and entertainment budgets with existing media, so these prices are not set in a vacuum.
When Apple debuted the iTunes video store, although there are no established competitors selling music videos or television episodes, there are an immense number of television shows available on DVD. If Lost sells for $49 for a 24 episode season on DVD, who would buy episodes online for $5? The standard price point for television on DVD falls in the range of $30-$40 for a full 22 episode season of a half-hour program and between $40-$60 for a full season of an hour-long program (with The Sopranos commanding a premium over the typical market price.) So buying 24 $1.99 episodes of Lost is competitive with the cost of the DVD box set (trading immediate acquisition for extra features and greater video quality.)
Although time-shifting television is even more popular with digital video recorders than with VCRs, medium shifting video onto the computer remains relatively rare. Few computer users have video content ready to sync onto a video-capable iPod or other media player.
2006 will be the year where video starts to get portable.
CBS made a deal with Comcast to offer $0.99/episode on-demand access to its most popular programs (including “The Amazing Race”) on digital cable. NBC made a deal with DirecTV. Time Warner plans to make its archive of television programming available online for free on an ad-supported basis. None of these services figure into the portable media ecosystem. These are services tethered to a computer or television. But networks are experimenting with using the web as a delivery device to find audiences for new shows. CBS is offering streaming episodes of “Threshold.” The Sci-Fi is streaming an episode of the new Battlestar Galactica series.
Marc Cuban, however, thinks that new technology will lead to a Golden Age of Television: ” People want content, where and when they want it.” Digital delivry methods have the opportunity to fill all types of demand.
TiVo announced that it will enable users to medium shift recorded programming onto video iPods and PlayStation Portables: TiVo to Transfer Shows to iPods, Sony PSP: “‘This is another thing we can do to add value for our subscribers,’ said Jim Denney, TiVo’s vice president of product marketing. ‘We’ve seen reasonable demand and interest from people to bring their videos with them.'” Transferring video from a TiVo to an iPod will be a slow process, since it requires converting from the MPEG2 format to the MPEG4 format– converting video from one format to another requires considerable computer processing time. This is one reason why medium-shifting video is not yet popular.
Variety reports that copyright owners are unhappy with TiVo allowing users to medium shift programming: Peeved over TiVo : “Several TV and studio execs told Daily Variety that they were considering legal action against the company, whose main product has huge brand awareness but is increasingly being pushed aside by no-name DVRs offered by cable and satellite companies.” The copyright maximalist position suggested here seems to be that one time shift is tolerated under Sony, but that a time-shift and a medium-shift exceed the bounds of fair personal use.
Joe Gratz considers whether a service that bundles a video iPod with DVD movies and medium shifts those movies to the iPod is liable for copyright infringement: TVMyPod. While it is certainly within the real of fair use to make copies for personal use on a device, is it fair use for a company to provide such a service? Unlike MP3.com, TVmyPod requires customers to buy the DVD at the time of purchasing its services.