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September 26, 2005
At What Price, Injustice?
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.
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