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Sunday, September 02, 2007

I'm not buying it

Given the competition among record companies, the subscription model is bound to be tricky to organize and implement. One problem with iTunes is that, with some exceptions, all the songs are priced equally — a Justin Timberlake smash costs the same as an Al Jolson classic. Since a listener would, ideally, pay more for a Top 10 hit, that egalitarian system costs record companies potential millions of dollars. - New York Times Magazine, September 2, 2007
I guess the correctness of this claim depends on whose perspective "ideally" is coming from. Anheuser-Busch would find it ideal to charge Krug prices for its popular swill, but there are good reasons why that doesn't happen. The price inelasticity of demand is sure to be higher for Jolson than for Timberlake. Jolson is a luxury good that can be sold for a premium price to the few idiosyncratic consumers for whom it has no substitute.


posted at 2:22 PM

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