back to article Amazon throws cash at MySpace-ified music startup

What will Amazon's upcoming digital music store look like? Here's a hint: The world's most popular e-tailer just threw some cash at AmieStreet, the fledgling music site that prices songs according to their popularity. Today, AmieStreet announced the completion of its first round of financing, and it looks like Amazon was the …

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Backwards Economics

Hmm, wonderfully backwards economics here. It costs a known amount of money to produce a piece of music (known once it's done, that is - each piece takes a different amount). The claim that people have for being paid for music is that they need to cover their costs (including a reasonable pay cheque for the musicians as well as the costs of hiring the studio, paying the engineers and for any consumable resources - not as many as there used to be since hard disks are vastly reusable whereas multi-track tapes had a more limited shelf life). So, when the first few people listen to something, their enjoyment of the music costs the most. If it never takes off and becomes popular, then the music has a very high cost-per-listener. As it becomes more popular, the cost-per-listener goes down, and so the price should go down. Now, there's also the aspect of loss-leader, but the increase to a cap and staying there when something is popular goes against all standard rules of economics. A more sensible model would be that the initial loss-leader is recognised with the first few downloads being free, the cost then rising to cover the cost of production, but then diminishing again once a reasonable payment has been made. That way, there'd be more money left in the system for repaying the risk-taking of spending the money to record, instead of popular but greedy acts taking the lion's share of the money. If what we're interested in is a FAIR reward for creative endeavour AND a wide variety of material available, this would be the sensible model to adopt.

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Anonymous Coward

silly

**But, as with all of Apple's music, these EMI tunes aren't compatible with handheld media players other than an iPod or iPhone. **

This is silly. Is Apple using any special "version" of the AAC format with EMI tunes? If they are, they're stupid. If they don't, then the comment is silly. The AAC is a standard format, that can be used by anyone. So stop blaming Apple, and blame the other manufacturers for not using AAC. It's not like WMA, which is a proprietary format.

PS: no, I'm not a fanboy, it just gets boring of hearing the same complains about the AAC all the time. But, as I said, if they are using some special (proprietary) feature on EMI's songs, then Apple is being stupid. Well, wait, they are being stupid anyway, they shouldn't being charging more for those songs. The "higher quality" is a stupid excuse. Then, when they look at the numbers and see that nobody bought DRM-free songs, they will blame it on the DRM-free, instead of thinking that EMI's music is crap, or that nobody wants to pay more for those extra kbps, or that nobody wants to have their email and name attached to each song thy buy...

This whole EMI things was so disappointing... compared to how inspired was apple's open letter in january. bah.

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Anonymous Coward

Backward Economics ... Forward Thinking

I'd be the first to agree with the "Backwards Economics" poster that this is contrary to what's held to be the accepted sales model.

On the other hand, I'd hesitantly suggest that maybe there is room for new ways of thinking when what you're selling doesn't have a real physical presence. Furthermore, the AmieSt folks should probably be applauded for trying to get a merit-based spin on their sales. In which case (hopefully) proper, innovative music content will do well at the expense of the (seemingly) endless supply of poor manufactured bands* and low-quality rehashes of songs from 20-30 years ago.

Unfortunately I can't see any of the major labels being happy to sign up to the AmieSt model - they, as far as I can see, need that huge initial revenue spike that comes with the "usual" model. Nevertheless the small labels, with fringe bands, should do very, very well out of AmieSt as word of mouth has proven in the past to be a very effective sales channel and this'd help to reduce their promotion costs (imho).

(* I'm very wary of any band who's third - or in some cases second(!!) - album is a "Greatest Hits"!)

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Rob

turned to the dark side already..

"we flew out to Seattle, where we met with Jeff Bezos and the Amazon team and talked about the music business"

"We spent a good amount of time on the peer-to-peer networks growing up, when you could steal music from AOL chat rooms"

sounds like it's too late for them allready.

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Anonymous Coward

definitely different!

All of the markets i can think of work on a supply and demand basis or have a niche and charge a premium.

But this works on the principle as demand increases price goes up... i guess the selling point is it's capped cheaper than the competetion.

As i write this its sounds good, all those peeps wanting to get in the next big thing whilst it's still cheap and relatively un-heard of - pushing it up the charts were it starts to sell at a normal, but cheaper than the competetion, price.

I predict a riot.

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Anonymous Coward

the major labels?

i can't honestly see the major labels going for this.

they take exception to the way iTunes allows listeners the choice to download individual tracks instead of a whole album, and want iTunes to increase the cost of the popular tracks like singles, surely they'll never agree to allowing songs to begin selling for free. as the esteemed Dr AAA above says, it's reverse economics and totally goes against the greedy nature of the major labels trying to fund their big yearly bonuses.

that said, i think it could be a very good opportunately for the independant artists and smaller labels. the only downside is that popular does not always equal qaulity. so we may end up with some very rich but generic and boring-appeal-to-the-masses independant artists.

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New Talent?

This is a great idea!

It will encourage more people to explore new music because it will be cheaper than choosing the popular choice and will bring more new artists into the lime light...

Excellent!

I think i'll be up loading some stuff there....

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Re: Backwards economics

Not sure I'd describe it as backwards economics - this is the same model used by people like Ryanair and Easyjet, and they seem to have done alright in recent years....

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Not backwards at all

The interesting thing is that cost is totally irrelevant to the value perceived by the customer. Being pack animals, we perceive something popular to have a higher value than average and so normally are willing to pay more for it. There are some important disclaimers to made when saying this (going against the grain is also believed to be valuable) but the production cost never figures into any consumer decision. Anyone building a business around balancing price against cost is going to have a short career. AmieStreet is brilliant. Harnessing human psychology for fun and profit... :-)

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Re: Backwards economics

Dr. A.Adams

You are naive in your assumptions, do not forget that to assume is to make an ass of u and me. Your classical economics lecture is based on industry where the product is designed created and distributed in a physical and costly way.

This enterprise is not about production of commercial pop rubbish for 14 year old girls that are easy to exploit. This is about passing the power of distribution and the ability to self sustain directly into the artists hands. They don't need expensive studios these days. Electronic music can and is created entirely on computers, albeit with some sampling being done conventionally. Other artists may still require studio time, but this is a venture that they will fund themselves, hoping to profit directly when they become popular.

This business actually follows the expectations of the market and producers. The producers, in this case the artists themselves expect to earn more as their popularity increases. For example madonna won't come and play a 500 seat venue for £10 a ticket nowadays will she??? Whereas a less known band would be thrilled. Consumers also tend to follow trends when it comes to music, especially pop. and as we have seen with the likes of festivals and other events, if the concert is sold out, they expect to pay massive amounts MORE not less to get there enjoyment.

Anyway enough. I hope you get the point. This is a work of genius, and I expect this model will become very successful. You are too old to understand I guess. Change is good. flip the old upside down.

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Anonymous Coward

Re Seagal's Post

That's not true about EasyJet and Ryanair and all those other carriers ... it's not done on popularity of the flight totally ... it's also done on time ... how close you get the flight the price always rises. Which I find annoying because I'm unorganised and usually book only a few weeks in advance and end up paying a premium on half empty flights sometime ... I just wish that they would do a turn up and fill a seat for peanuts system at some point

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Backwards? Depends on where you are standing.

Only if you are seeing the 98 cent song not as the standard price but as higher than the standard/average/median/whatever price of, I guess, 49 cents. But you could also see the 98 cent price as the standard price - that's where it levels off, after all - and anything lower than that is discounting poorer-selling, less popular content. With brand new songs starting at zero being promotional giveaways.

But even if the majors are all going to go DRM free sooner rather than later, why would they let other people price their products? Would you be happy if ebay set your starting and buyout prices for you?

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Anonymous Coward

Not backwards

Fixed supply, Increased demand -> Increased price

Fixed supply, Decreased demand -> Decreased price.

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Anonymous Coward

Re: silly

"Then, when they look at the numbers and see that nobody bought DRM-free songs, they will blame it on the DRM-free, instead of thinking that EMI's music is crap, or that nobody wants to pay more for those extra kbps, or that nobody wants to have their email and name attached to each song thy buy..."

I'm not a fanboy either, it just gets boring hearing the same complaints about iTunes+ all the time: albums cost the same, DRM-free or not. It's a really smart move - the record companies are looking for a way to encourage album sales over singles, and they're doing this by selling a better product at the same price so it isn't even evil.

As for the stupid argument about having you name attached: a) that's in all iTunes store purchases, so it won't stop people buying one versus the other; b) you can trivially take it out, c) is that honestly the worst thing you can say about it? Why do you care? You only want DRM-free so you can play on more devices and future-proof your purchases, so it's not like you'll be sharing the file with a few million of your closest friends on bittorrent, is it? Is it?

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It's the Price, Stoopid!

I think they're on the right track; no DRM and some kind of alternate pricing scheme.

However, won't this model take money from low and mid popularity bands and re-allocate it to high pop bands, just like the major do?

Hopefully the big record lables will boycott this site, and it will help launch the *real* online music revolution; Many more independent artists making a living wage, instead of a tiny number of super-rich megastars and a majority of paupers / contract wage slaves.

It could be like the old MP3.com's independent artist community, before they started dabbling in CD ripping/hosting and got sued to death.

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