Music store experiments with floating prices

09 Jan 2004 08:33

A small music site is pioneering a pricing model under which song prices start at 10 cents then alter according to demand

A little known online music store is experimenting with a new pricing system in which most songs start out costing 10 cents, and their prices fluctuate from there based on customer demand.

MusicRebellion, a site that has gone largely unnoticed in the furore surrounding larger companies such as Apple Computer's iTunes and the new Napster, is offering the promotion largely as a way to show off parent company Digonex's demand-driven pricing technology.

The 10-cent (5.5 cents) songs are a temporary phenomenon. Like every other music service, MusicRebellion has fixed costs that it must pay music labels and other rights holders, and is taking a substantial loss at that price. But the company hopes that the promotion will help show other e-commerce services the benefits of floating prices.

"We have certain amount of money allocated for this, and when that runs out, we'll go back" to higher prices, said Holly Cooper, Digonex's marketing director. "This is basically so we can gather some real world data."

The concept of demand-based pricing, in which prices rise as more people want an item, has been floating around e-commerce, and particularly online music circles, for some time. Advocates see it as particularly suited for the music business, in which low prices could help drive sales for the vast back catalogue of albums that no longer bring in revenue.

The idea has been spurred somewhat by remarks from executives at Apple and other music services such as RealNetworks' Rhapsody and Musicmatch, all of whom have said that virtually all of the hundreds of thousands of songs in their catalogues are accessed at least once over the course of several months. That shows that interest exists for even the most obscure tracks, they've said.

MusicRebellion itself has sold music online for several years. Its major label catalogue is provided by Liquid Digital Media, the successor company to Liquid Audio. Cooper said that prices will rise back up to a little above wholesale rates -- or a floor of about 50 cents to 70 cents per song -- after the company's funds for the promotion run out.

Most other big music services have experimented with lower prices near their launch date. RealNetworks announced on Wednesday that it will sell consumers their first digital download for a 10 cents, to commemorate the tenth anniversary of the company's first Net audio software.

Story URL: http://news.zdnet.co.uk/internet/0,1000000097,39118980,00.htm