On digital content pricing

It is the end of the year 2007. We use computers for everything, including listening to music and watching movies. Why then, are we still stuck in the last decade trying to price all digital content like we were still buying physical media? Why do we have to buy the same content multiple times for playing it on different devices? Why does it cost more to make a ringtone out of a song than to actually buy the complete song?

I think the record companies as well as the movie industry is full of the most non-technical people possible. And, I bet they hire management that thinks learning stopped at the business school. I don’t need to cite various studies that have shown that more people now get their entertainment over the Internet than at the retail brick and mortar store (including legitimate and pirated content). We have TB’s of data storage at our home, and we want to have entertainment available on demand. Even after so much technological progress, the one thing killing this futuristic scenario is DRM. Everyone hates it. Even the musical bands and singers are starting to hate it now. The only entity still in love with DRM is the industry. The worst part is that the term ‘industry’ now fails to represent the mindset of majority of the content creators (singers, ind. movie makers etc.), yet, the latter is held hostage.

I believe that time has come for the entertainment industry to adopt a new pricing structure. It is obvious that copy protection and DRM is not going to stop piracy. What we need to do is to create a pricing system where the consumer does not feel compelled to pay for something, rather wants to pay for it. Not everyone who pirates something would necessarily pay for it if piracy did not exist. Yet, even though he/she is actively pirating the content, he/she is also indulging in various kinds of ‘word of mouth’ advertising for the intellectual work. When companies calculate the money lost due to piracy, they conveniently ignore these two important points.

There have been several pricing models proposed. I like the commodity market approach to buying music.  It has its flaws, though. Music cannot be traded in a stock market like fashion simply because the supply is not limited. The demand is also inelastic to a certain extent. It’s a good idea, nevertheless. The gist is that value should be dictated by the end consumer rather than the middleman who tends to value all content equally, without consideration to demand, popularity, quality, etc. To that respect, something like an auction would be a good idea. The problem is in micro-managing the bids placed by millions of consumers.

So, what about a donation/charity model! You, as a consumer, get the liberty to give back whatever amount you deem fit for the content. Sure, a lot of people would not pay a dime, but they were not paying anything earlier, anyway. It’s a no loss situation, in my opinion. Also, people enjoy having the freedom to value a commodity/service in their own terms. Philanthropy is one such ‘industry’. Today, people take pride in donating a certain portion of their income to various charitable organizations. Imagine their anger if these donations were made mandatory in the form of a tax. More people would try to evade this tax, even though it might very well be lesser than what they were donating earlier.
It’s time to re-think pricing before the ‘Radioheads’ of the music industry kill the very association that claims to be watching out for them.

Leave a Reply

Your email address will not be published. Required fields are marked *