Are CD Prices Getting More Dynamic?
One of the more interesting items we've discussed has been the different pricing strategies that studios use with DVDs versus what the labels do with CDs.
The studios, to their credit, use a form of dynamic pricing -- they intelligently recognize that a content item's value is highest when first released, and then subsequently fades. That's why DVD prices come down over time, to capture those marginal buyers. The consumers who will not pay $49.99 for Seinfeld Season 1 & 2, might pay $29.99.
The labels have mostly avoided this strategy -- but perhaps that's changing. I had just finished reading a post about Amazon's conference call, and on it Amazon's management discussed their Long Tail strategy. I went over to the site, and thru some random clicking and scrolling, noticed this little tidbit: a long list of interesting CDs for sale on Amazon for between $6 and $10:
Blowout Music Bargains
• As Low as $9.99
• As Low as $8.99
• As Low as $7.99
• As Low as $5.99
Here's my short list of favorite moderate priced CDs off of the Amazon sale:
Jack Johnson : Brushfire Fairytales - another great one -- grab it.
Stripped -- an under appreciated stone album
Tattoo You the same -- kicked off the modern Stones, and it rocks
It's Only Rock N Roll classic
James Brown - 20 All-Time Greatest Hits! If you you don't have the 4 CD set, go with this
Bruce Springsteen - Greatest Hits I prefer the individual CDs, but if you want a full dose of Bruce in one shot, this is it.
Wish You Were Here I have the full box set, but after Dark Side of the Moon, this is it.
Motown an interesting twist on Motown
- Fashion Nugget Killer album that introduced me to the band:
"He's going the Distance, he's going for speed . . ."
Sublime A great album . . .
Pablo Honey not my favorite Radiohead, but . . .
Get Rich or Die Tryin' Not my taste, but a big seller
Thursday, August 04, 2005 | 06:49 AM | Permalink
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The Big Picture: Are CD Prices Getting More Dynamic? has some interesting commentary on dynamic pricing of CDs and DVDs. [Also take a look at Amazon discusses its Long Tail strategy which discusses Amazon’s growth in third party business and... [Read More]
Tracked on Aug 9, 2005 1:47:05 PM
Comments
The $6 list is pretty thin (I have a real soft spot for Steven Wright, but that's about it), but the $8 one ain't half bad. You have a few greatest-hits fillers, your Nick Drake studio LPs, and a whole buncha classics from the Velvet Underground to Public Enemy. You could do worse than buying the whole lot.
Of course, they should still be priced at $3 each rather than $8, but that's just off the top of my head.
Posted by: wcw | Aug 4, 2005 10:28:10 AM
I would be an even bigger CD buyer between 5 and 8 bucks, and I tihnk many other music lovers would too.
The big beneficiary of that sort of aggressive pricing would be the bands -- more exposure, more fans for the tours, bigger ropyalty stream, happier fans.
Posted by: Barry Ritholtz | Aug 4, 2005 11:15:02 AM
Did you know that right now in Houston, McDonalds is testing its RedBox, a coke-machine like way of renting movies after finishing your Big Mac?
Well, put another one on the board for the mushrooming DVD market.
These days, the DVD is the most fashionable medium for cinematic content.
As both the New Yorker and Investor's Business Daily pointed out earlier this week, blockbusters are bombing left and right, week after week.
It's strange to think how DVD sales have cannibalized the traditional movie theatre experience, bringing in receipts 2X the box office's.
The traditional Hollywood formula of creating high-risk, over-budgeted films is simply no longer viable in a globe overtaken by DVD revenues.
Box office sales have come to a screeching halt for several reasons, like the ubiquity of home theatres.
But it still doesn't lead us to the pot of gold answer on why DVDs reign supreme.
We know DVDs can't compete on price, since they cost twice what you pay to sit inside a theatre and make as much as a mess as you want.
It's not piracy, either.
What about convenience?
Not really.
Consumers still have to trek out to retailers like Walmart to buy DVDs, not to mention wait up to 6 months before a release date (I should know; I waited 2 years for Scorcese's "Casino" to hit the shelves).
Nope, the real reason DVDs are squadering movie theatre revenues is because of something we at Catablast! Media have talking about for months.
Long tail.
Long tail is the term Wired Magazine's Chris Anderson coined in 2004 to describe the economic model best suited for our times.
Because today, it's not about the hits --it's about the misses.
Long tail basically says that products that are in low demand or have low sales volume can "collectively make up a market share that rivals or even exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough."
The long tail equation spells that the total volume of low popularity items is greater the volume of high popularity items.
When you take a hard look at what people but at Amazon or rent at Netflix, the Long Tail theory makes perfect sense.
Today's consumer clicks his or her way to exactly what it is they want, whether itbe downloading eccentric MP3s or bidding several hundred dollars on a pez dispenser.
In a time of declining mainstream output, where fragmented media -- like blogs and podcasts - are more rich in content than their consolidated, bloated counterparts, long tail captures the increasing evanescence of mass customization.
Long Tail is also useful for understanding the relationship between sales distributions and storage costs.
Look at it this way.
If the cost of storage is too high, long tail is absent.
Brick and mortar shops, who have much less shelf space to allocate than their wired up, online storfront rivals (most of which follow a hub-and-spoke distribution system) cannot afford to hold assets that they may or may not sell.
On the other hand, because of low opportunity costs, the online business has the luxury of catering to minority tastes and shelving whatever they damn please.
eBay and Google, which show us that micro-markets can be profitable, are other businesses thriving off of long tail.
eBay and Google are built to please both mainstreamer and specializer alike.
Longtail, which screams "One size does NOT fit all," kills categories.
To return back home after a long digression: Long tail is what's killing the box office and juicing up the $15 billion dollar a year DVD market.
While DVD sales of movies that did well at the Box office are falling, smaller movies are filling the gap. The New Yorker believes that "the new DVD audience is so diverse that companies can target niche markets and still sell millions of disks. Because specialized markets are more predictable, the risk of failure is much lower, and so small-to-mid-budget movies can be very profitable indeed..."
As far as the company's who produce DVDs, the economics are on their side.
Unlike the now obsolete videotape, the DVD is an incredibly high margin business --cheap to make and high in demand.
So while Hollywood icon Jack Valenti can pronounce that offering consumers "an epic viewing experience and alluring social adventure " is something that cannot be duplicated at home, it won't be until Hollywood learns how to micromarket that we'll see any sort of mass pilgrimage back to the theatres.
Posted by: Danny @ Catablast! Media | Aug 5, 2005 2:06:41 AM
I really do not see why anyone who is even the slightest bit technically savvy would pay for a CD anymore. Downloading is just sooo much better. I finally realized that's where its at after watching Robert Randolph and the Family Band on Austin City Limts, and just falling in love with their amazing down-home smokin' guitar funk. The music was so good that I simply could not wait to go to the store to buy the CD, so I went to www.buy.com's music store and downloaded 2 entire almbums right then and there. Then I could arrange the songs in my favorite order, mix and match songs fromboth albums onto one CD, etc. Downloading is just so far superior to CD's, its not even a contest.
Of Course, there is benefit for the retailer and distributor too: no inventory cost, no transportation, no logistics, no one to stock shelves, no cover art, etc, etc. From their perspective, it should be a no-brainer.
Posted by: dude | Aug 5, 2005 12:06:17 PM
pretty nice list...
Posted by: admin | Jul 20, 2007 7:16:43 AM
