Today saw the announcement that Amazon has completed a financing deal with up and coming music store amiestreet.com. The deal is significant because amiestreet.com use a demand based pricing model, where music download prices start at $0 and rise as the downloads get more popular.
amiestreet.com with its unique pricing structure is a very interesting acquisition for Amazon. The price model is based upon the simple fact that MP3 download sales enjoy astronomic economies of scale - past the initial outlay for the song in question, the cost per sale is negligible. This is a great step forward for online music pricing and is a much fairer reflection of the real cost of distributing these songs.
The pricing system will be a pure demand driven market and may also cause some interesting side effects. Will you be able to re-sell your MP3 once you have bought it? If so then why not buy low on an unknown new release, gamble on it becoming popular and then sell it on at a much higher price. We may even see an MP3 trading futures market – well maybe…
More likely this new pricing structure will provide another jolt to the ailing music industry to start to embrace online sales instead of fighting it with digital rights management. It may also be a sensible way to encourage users not to steal MP3s, who knows.
Only time will tell, if and when Amazon add this pricing system to their main MP3 business model.
amiestreet.com with its unique pricing structure is a very interesting acquisition for Amazon. The price model is based upon the simple fact that MP3 download sales enjoy astronomic economies of scale - past the initial outlay for the song in question, the cost per sale is negligible. This is a great step forward for online music pricing and is a much fairer reflection of the real cost of distributing these songs.
The pricing system will be a pure demand driven market and may also cause some interesting side effects. Will you be able to re-sell your MP3 once you have bought it? If so then why not buy low on an unknown new release, gamble on it becoming popular and then sell it on at a much higher price. We may even see an MP3 trading futures market – well maybe…
More likely this new pricing structure will provide another jolt to the ailing music industry to start to embrace online sales instead of fighting it with digital rights management. It may also be a sensible way to encourage users not to steal MP3s, who knows.
Only time will tell, if and when Amazon add this pricing system to their main MP3 business model.
