The content business

In the course of learning a bit about the recent Amazon/Macmillan dustup I came across this Jim Henley post, which includes this tidbit from Teresa Nielsen Hayden:

while a fixed $10 price point would undoubtedly be good for Amazon’s ebook business, it would take a shark-sized bite out of the market for hot new bestsellers, which is trade book publishing’s single most profitable area.

That revenue source is what keeps a lot of publishing companies afloat. It provides the liquidity that enables them to buy and publish smaller and less commercially secure titles: odd books, books by unknown writers, books with limited but enthusiastic audiences, et cetera.

My honest estimate is that the result would be fewer and less diverse titles overall, published less well than they are now.

The interesting thing about this to me is, why do we see such a different attitude regarding pricing in the music business than we do in the book business? Right now we have major labels that generally pursue the following strategy for making money:

  1. Put most of your chips on your huge new releases .
  2. Scale back your niche titles available in the back catalog, or better, dump them entirely – they don’t make nearly the margins of the huge new releases.
  3. Overprice new releases and often, overprice the older stuff even more. If the nerds want to buy that stuff, make them pay through the nose for it. You aren’t running a charity here.
  4. Don’t have a whole lot of price points. You have three basic lines: full price (~$18.98), midprice ($11.98-$13.98), and budget ($7.98-$9.99). That’s it.

Don’t get me wrong, I personally hate this model. It’s tricked consumers into paying more for CDs than they ever paid for LPs, and (in the case of EMI/BMG at least) means that hundreds of historically interesting records continue to languish in the vaults. But purely from the point of view of maximizing profit, it does, intuitively, seem like the way to go.* So why haven’t booksellers followed suit, especially with (2)?  TNH’s comment implies they are more or less on board with (1), and (3) and (4) don’t seem as consequential. But altruistically printing tons of niche books for seemingly little margins does not appear to add up to big profits.

*The big counterexample is the movie business. Most back-catalog DVDs can be had for dirt cheap these days. Is it just that the sums of money in play for movies are vastly larger than most records so there’s more room to give DVD buyers a break?

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    • Ian
    • February 3rd, 2010

    re DVDs v CDs – I have a few theories for the strength of old music prices relative to movies:

    1) Music is made by artists, many of which have more than one album. People identify with artists. If I pick up an album I like by a band I haven’t listened to, it might encourage me to purchase older stuff by the same band. Movies don’t have as strong a unifying focus; there are directors people like, actors people like, etc, but in most cases you don’t watch one and then think “Oh, I should get more movies by ___.” This results in less demand for old movies.

    2) Music ages more gracefully. Most movies are set in a contemporary setting, or at least, feature contemporary dress. It does not take very long for a movie to start to look “dated.” I will admit to liking “You’ve Got Mail,” but the movie is in some ways founded on technology that doesn’t exist any more. Slang that was really hip ten years ago sounds really ridiculous now. While musical genres come in and out of fashion, there are not as many obvious cues that the thing you’re listening to is “old.”

    3) Music is consumed more casually. Depending on your job, you can listen to it at work, you can listen while you make or eat dinner, etc. Most people can start and stop at will without thinking twice about it. Movies require your sole attention, and generally require you to commit to a longer stretch of time. As a result, it is much easier to be a person that consumes a lot of music than to be a person that consumes a lot of movies. If I watch 30 movies in a year, then I’m probably watching almost entirely popular or recent stuff. If I listen to 100 albums in a year I can dig a little further back in the catalog. Granted, there probably aren’t many people who are such voracious consumers of music, but the ones that do exist are going to drive up demand more than voracious movie watchers.

    • I think theory 1) sounds plausible enough.

      I don’t buy theory 2). I disagree that older music sounds any less dated to most of the population than old movies. The older “niche” titles that I’m referring to aren’t for the most part things like a contemporary band’s back catalog that’s 10-25 years old (think U2), but 50-60 years old (think most jazz, early rock ‘n’ roll, early R&B, etc). Or classical music that’s 100-400 years old. The more obscure titles in these categories can sell fewer than 500 copies a year. I can get old movies at places like oldies.com for $3-5 a pop, and an amazing proportion of Hollywood’s output from 1925-1965 seems to be available. The music of the same vintage, on the other hand, is frequently out of print, and when it’s in print, it tends to be at least $10 and often in the $17-20 range.

      Theory 3) I think could be true up to a point. I think you’re probably overestimating the percentage of music sales coming from fanatical consumers, though. My thinking is that it’s probably almost a rounding error in comparison with the sales of megahits that come from casual music buyers.

      My hunch through all this is that prices for music and movies are only loosely correlated with actual demand. Rather, what we’re seeing is a kind of path-dependence from a time when music execs made a conscious decision not to focus on their long tail titles, while movie execs made the opposite call – they figured, hey, there may be less money to be made on this stuff, but we might as well put it out there at a price that will move and maybe we’ll be surprised once in a while by a strong seller.

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