Friday, October 05, 2007

Mark Your Calendars!

Over the next ten days, two events will occur which may signal potential changes in the music and publishing industries:

  • October 10 - Radiohead's seventh studio album, In Rainbows, makes its debut without a record label and with flexible pricing
  • October 15 - The rumored release of Amazon's new Kindle e-reading device

On September 30, the British rock band Radiohead posted a message on its website here.

The message said:

Radiohead have made a record. So far, it is only available from this website. You can pre-order it in these formats: Discbox and download.

The band is offering the download on October 10th. The ground-breaking part of their announcement is that they are not establishing a price for the download. Fans can determine what price they will pay for access to In Rainbows.

By contrast, the discbox has a fixed (expensive) price of Ł40 or about $82 including shipping.

According to The New York Times, "'It could change the feelings about free downloading,' said George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, in Pittsburgh. 'If the band is willing to trust you to pay what's fair, all of a sudden, for the people who have been saying it's not stealing to download the song for free, it's much more difficult to rationalize that. I think it may be a brilliant move in that dimension'."

The Wall Street Journal (WSJ) reported on Wednesday that the average fan appears to be willing to spend $10 for the digital version, the going price on Apple's iTunes.

The WSJ took a look at "the economics of the average CD. It retails for about $16 and costs about $6.40 to manufacture, distribute and sell . . . These costs are essentially zero when music is sold online. That's why iTunes can charge roughly $10 for a downloaded album."

Radiohead's approach "slices out even more cost." The band dumped their record label EMI, one of the Big Four of the music industry [the others are Sony BMG, Universal and Warner]"so it doesn't have to share profits or help pay the label's overhead. As a well-known band, it's also able to take the knives out on marketing and promotion costs, cutting these by as much as two-thirds. Subtract these expenses and Radiohead may be able to distribute an album for as little as $3.40 a copy." (WSJ)

The New York Times cautions, "Though some musicians have already begun to ponder a future of alternative payment plans, experts inside and out of the music industry say they do not believe that Radiohead's model can work for everyone. For one thing, only established acts with an extremely dedicated fan base could prosper that way . . . For another, the novelty would wear off quickly."

Let's move from music to publishing. I last wrote about Amazon's Kindle e-reading device on September 7th here. At that time, rumor had it that Amazon would release the Kindle in October.

Since then, Engadget reported that the Kindle's likely release date is October 15th. Engadget says: "an Amazon search of "Kindle Edition" responds with 631 books of which a couple dozen can be 'auto-delivered wirelessly to Kindle'."

The question remains whether the Kindle is the e-reading device that will capture the public's interest. Since September 13th a year ago, I've written about the Kindle a half dozen times. I've also repeatedly said that I thought the electronic book market would explode when a viable e-reader finally appeared on the market. Despite Sony's best efforts, its Reader does not seem to be that e-reader.

One of the key issues will be how user-friendly the Kindle is in terms of the e-book formats it can handle. Amazon purchased in 2005. Mobipocket produces the Mobipocket Reader, a universal reader for PDAs and Smartphone devices like Blackberry.

The New York Times reported the retail price for the Kindle would be between $400 and $500. While that price sounds exorbitant, if the Kindle can wirelessly download magazines, newspapers and books in a variety of formats, it may attract attention.

Also, remember Amazon's willingness to provide price supports for loss leader items. They sold Harry Potter and the Deathly Hallows at such a discounted rate that Jeff Bezos, Amazon's CEO, told shareholders the company didn't expect to make a profit on the book. If Amazon offers a deeply discounted special introductory price on the Kindle, they may entice customers to buy the new e-reader.

It remains to be seen whether Radiohead and the Kindle have a lasting impact on the music and publishing industry.

No comments: