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Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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May 16, 2005

How Much Profit Is In Downloadable Music?

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Posted by Alan Wexelblat

Cringely's column looks at inflection points, including Microsoft's new game box (which is, predictably, a home digital media center), the Google Accelerator (which is going to push all sorts of buttons around fair use and restricting access - I may try to do a Big Think about that later), and finally he gets back to what he thinks Apple's plans are.

Along the way he lays out his view of the strategy for Yahoo's Music Service, pointing out that their USD7 pricepoint is probably the zero-margin point. This means that the subscription services that are charging more are probably pocketing that extra $7-8/month as profit. Not bad on a per-customer basis; too bad there are so few customers.

Cringely notes that this a Yahoo! trying to displace the per-song pricing model that has made Apple dominant. However, Cringely seems to agree with me that the major market (for both music and movies) is and will remain in the download-and-play arena, not streaming.

Comments (9) + TrackBacks (0) | Category: IP Markets and Monopolies


1. brian on May 17, 2005 2:05 PM writes...

I doubt the services like Rhapsody and Naspter are clearing $7-8 dollars in monthly profit per subcriber. If you looked at their financials (10-Ks) you would see that most are breakeven or losing money. Yahoo's price point is an introductory one and I am sure they will raise it after it gets out of beta.

Permalink to Comment

2. Brad Hill on May 18, 2005 9:43 AM writes...

>> However, Cringely seems to agree with me that the major market (for both music and movies) is and will remain in the download-and-play arena, not streaming.

Cringely says no such thing about the music market--he was talking exclusively about movies, and seemed to be speaking of the present moment only.

You are also being way too gullible about the economics of subscription music services. Just because Cringely supposes a break-even point, that doesn't make it so.

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3. Branko Collin on May 18, 2005 12:50 PM writes...

Dr. Wex, are you a lawyer? I was under the impression that especially with registered works it is possible in the US to claim statutory damages and fines for copyright infringement that way surpass the actual value of the work.

If it is not, that would indeed be news to me. (IANAL)

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4. Dr. wex on May 18, 2005 3:37 PM writes...

No, I'm not a lawyer and I don't understand what your reference to statutory damage is about.

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5. Branko Collin on May 18, 2005 7:29 PM writes...


§ 504. Remedies for infringement: Damages and profits

(a) In General. - Except as otherwise provided by this title, an infringer of copyright is liable for either -

(1) the copyright owner's actual damages and any additional profits of the infringer, as provided by subsection (b); or

(2) statutory damages, as provided by subsection (c).


(c) Statutory Damages. -

(1) Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.

(2) In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.


From what I understand, wilfull infringement is easy to prove. IANAL.

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6. Branko Collin on May 18, 2005 7:45 PM writes...

Er, I am no longer sure that I have responded to the correct entry or even at the correct site. My apologies for any confusion I may have caused. Arghl!

I thought I saw somebody mention that, since 5 US$ is what it costs to pay a music download levy in the US through Yahoo, 5 US$ is the maximum a judge should award for infringement.

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7. Copyrighter on May 18, 2005 8:58 PM writes...

Whoever said that Cringely was correct in his assertion that Yahoo!'s price is break-even for distribution? It might be +20% profit level. It might be -20% profit level. I believe its the latter, but I digress.
Just because Cringely assumed it doesn't make it so.

Permalink to Comment

8. Dr. wex on May 19, 2005 8:08 AM writes...

I thought this would be obvious but perhaps I'm being too subtle. I blog about Cringely's columns because I think he's interesting and thoughtful. I don't necessarily agree with him on an specific or even general points. Whether or not Yahoo! are making the specific margin he quotes isn't the issue - the issue is whether an ultra-low subscription price can displace the pure pay-to-download model that has made iTunes dominant.

Branko if you want me to delete your comments (which I do think are attached to the wrong post) drop me an email and I'll dump 'em.

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9. Branko Collin on May 19, 2005 4:54 PM writes...

I have a right to make a yahoo of myself in public! Or something like that. :-\ No need to delete anything, unless you want it deleted.

In the meantime I figured out that I was probably responding to Ernest Miller's entry (on his own blog) Mark Cuban Forsees the (Almost) End of the RIAA, except of course that he doesn't claim that statutory damages do not exist; rather, he argues that perhaps it would be wiser for the RIAA to settle by letting the downloaders get one of those Yahoo subscriptions.

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