Why variable music download prices would suck

Adam Penenberg has an interesting piece over at Slate about online music sales models. He's right to criticize the record-industry plan of arbitrarily charging more for hits than less popular songs (sure, cell phone users may be willing to pay $3 for a ring-tone, but they don't really buy a whole lot of those, and cell phone users are not a good representative sample of the population). The proposed song stock market approach has some serious issues, though.

Firstly, operating a market that has only demand (as the supply of downloadable songs is effectively infinite, there being no physical good changing hands) is a bit of an unprecedented oddity, and might be unpredictable. Before any grand experiment is undertaken in such a huge industry, there ought to be real study of fictitious markets like those in Everquest and other online gaming communities.

Penenberg touches on the more critical problem in his last paragraph - legal online music sales are only one component of a larger music economy, one that includes peer-to-peer file sharing. Consumers have shown themselves to be not entirely adverse to resorting to such methods of acquiring music in the face of prices deemed to be too high, and so would likely return to whatever network they used before if the fledgling legal music sources started charging even higher prices. Hits are, after all, of a fairly peculiar nature. Some social phenomenon brings a song to the forefront, and many sales are generated by a must-have-it-now attitude within some population. If, under the market model, the cost of a song takes off, these people will not wait for the price to retreat - they'll find the song somewhere else. That's a sale of the song that will be lost forever. In the long run, it seems that it would be preferable to be less immediately greedy and get everyone to buy the song.

The final question I have about the proposal is how anyone makes money off of less popular songs with this model. Under the current iTunes system, with all songs priced the same, success in the music business would be tied directly and linearly to total sales volume. The market approach would seem to punish small-time artists for whom the impact on profit per song is proportionately much higher than for the superstars, who'd seem to make even more money. The genious of the iTunes way is that it supports a long-tail content paradigm, whereas the variable-price method undermines its effectiveness in supporting small fish.

I see a solution to this last bit, though - if there are to be variable market-driven prices, the only component that should vary should be the proportion that goes to the record labels. They're the ones who expend the extra costs and risks of promoting musicians to superstardom, and I'd be satisfied if they reaped their bloody rewards for that. Musicians, meanwhile, should get paid per song, such that while popularity does benefit a musician, the marketing failures don't doom an artist to a pittance compared with better-marketed crap. As far as I can see, this would satisfy everyone on the content-providers' side. As to customers, I'm not big into pop, so I'll be happy to pay less for my eclectic songs, especially with the knowledge that I'm not getting a deal by screwing the artist. Pop fans will end up stealing a lot of music, though, which will lead to more industry hand-wringing and ill-informed attempts to control content, and the whole thing will fall apart. That would suck, since it actually works now. What was that about "if it ain't broke....?" Oh, right.