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September 26, 2005

At What Price, Injustice?

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From the "who are you calling a thief?" files, Fred von Lohmann has the story behind the story of the record labels' push for variable (read, "increased") pricing for songs sold through Apple's iTunes:

Edgar Bronfman Jr., the CEO of Warner Music Group, recently took a moment to attack Apple's Steve Jobs for the 99-cent pricing of music downloads in the iTunes Music Store. According to Bronfman, "Not all songs are created equal -- not all time periods are created equal. We want, and will insist upon having, variable pricing."

What? Bronfman singing the praises of "variable pricing"?! Lest anyone forget, he was at the helm of Universal Music Group back when it (along with all the other major labels) was engaged in a scheme of price fixing aimed at keeping CD prices high.

Back in the good old days (about 5 years ago), the "Big Five" could force music stores to adopt "minimum advertised pricing" (MAP), meaning that no matter how rotten (sorry, "unequal") a CD, retailers had to advertise it at a pre-established minimum, else the labels withdraw millions of promotional dollars. The Federal Trade Commission no likey. It determined that MAP was a form of price-fixing and that music fans may have overspent by as much as $480 million while it was in force.

Unrepentant, a few of the labels issued statements stubbornly defending the practice -- e.g., "While we continue to believe that MAP was a legitimate and appropriate practice, BMG looks forward to moving ahead and continuing to do what we do best: deliver great music to the consumer," and "We believe MAP serves a valid business purpose for our customers and the consumer and is an appropriate and lawful practice."

So in calling for variable pricing, it would appear that these self-proclaimed experts in delivering great music have changed their tune. Or not. As Fred points out, this push seems to be about ignoring market forces, not embracing them:

[Bronfman] apparently doesn't think that "variable pricing" might include lowering the price of some tracks below 99 cents. Said Bronfman, "Some songs should be $0.99 and some songs should be more." So what he meant to say is "we should be raising our wholesale prices and preventing people from discounting."

Welcome to the new MAP, same as the old MAP.

Comments (5) + TrackBacks (0) | Category: IP Markets and Monopolies


1. Brad Hutchings on September 26, 2005 8:01 PM writes...

Too bad Fred has his facts wrong, making his conclusion kinda meaningless. From here (among many other attributions of Bronfman's comments)...

While telling the Wall Street analysts attending the conference that he'd like to avoid a public debate with Jobs, Bronfman called his insistence on a single price "not fair" to the labels, artists or consumers. "The market ought to be able to decide, not a single retailer," he said. "That's not to say we want to raise prices across the board or that we don't believe in a 99-cent price point for most music. But there are some songs for which consumers would be willing to pay more. And some we'd be willing to sell for less."

I'm not defending Bronfman or the labels, but I think the conflict is not one over raising prices, but truly over uniformity. Jobs thinks the standard 99 cent price point is a simple interface that is an important positive factor in the legal online ecosystem. Record company execs disagree. Fred's comments seem self-serving and irrelevant.

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2. Donna on September 27, 2005 1:56 PM writes...

Thanks for setting the record straight on what Bronfman actually said; obviously, Fred was responding to an article that didn't include Bronfman's full comments. I disagree that this makes Fred's commentary "hollow," "meaningless," "irrelevant," or "self-serving." Readers who didn't have context for Bronfman's claim to champion fairness now have it.

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3. Brad Hutchings on September 28, 2005 12:18 AM writes...

Donna, Fred is the Senior Intellectual Property Attorney at the EFF. The guy argued a case in front of the Ninth Circuit, neh? Given the EFF will continue to be involved in litigation against the RIAA, don't you think that in its public statements, Fred has a duty to verify facts instead of making them up? Here's what he said, which is patently false:

And Bronfman apparently doesn't think that "variable pricing" might include lowering the price of some tracks below 99 cents. Said Bronfman, "Some songs should be $0.99 and some songs should be more." So what he meant to say is "we should be raising our wholesale prices and preventing people from discounting."

The real problem I have with this is that I am simply intrigued by copyfight politics and RIAA shenanegans. It's not my job, not my raison d'etre. And when I read several stories on Bronfman's comments, just about every one of them mentioned that he saw lowering prices of some songs. When I saw this entry, I couldn't believe anyone who needs to know could just overlook that fact!
This is Fred's job, and this omission borders on willful ignorance. Still, no correction on his entry. Wouldn't someone mention to him that his premise is wrong? Wouldn't he have enough integrity to just correct it and temper his conclusion? Wouldn't he want to correct the record or is the conclusion more important than the evidence to him?

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4. Donna Wentworth on September 28, 2005 11:10 AM writes...

Fred sent me a correction yesterday when he found out that Red Herring may not have captured Bronfman's full comments; I've now put it up on the post at Deep Links:

"Correction: It turns out that the Red Herring article did not carry Bronfman's full comments. According to the Hollywood Reporter, Bronfman went on to say, 'That's not to say we want to raise prices across the board or that we don't believe in a 99-cent price point for most music. But there are some songs for which consumers would be willing to pay more. And some we'd be willing to sell for less.'

Of course, the fact remains that the guy calling for 'variable prices' today is the same one who backed MAP yesterday. It would be interesting to ask whether he continues to believe that MAP was good for consumers."

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5. Glenn on September 29, 2005 4:59 PM writes...

Fred's comparison of fixed pricing to the major labels "price fixing" works only in that both use the words price and fix. Similar phrases but not so similar issues. The FTC's decision on the majors' "price fixing" -- otherwise known as their minimum advertised price systems -- removed floors on label-funded advertised sale prices. In fact, for each price point each major had different MAPs. In other words, they all *varied* in their MAP pricing structures.

(As for the reasons behind MAP, you'll get a different answer depending on who you ask. Some say it was to hold up prices. Others say it was to offer indie retailers a level playing field.)

As I've written many times, consumers would be better off with a variable pricing structure at online stores. The number of price drops would far outnumber the number of price increases. And no, prices wouldn't not drop just for the songs nobody wants to buy in the first place.

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