Arstechnica has a story suggesting that Apple is negotiating to offer unlimited downloads to iPod owners who pay a set fee. The scheme essentially means raising the price of iPods, and “giving away” the music.
I speculate that this makes sense as the next development in how consumers spend their entertainment dollars. Each person has an amount that she is willing to spend on music. In the past, that budget went to a stereo and to the purchase of vinyl records, and later CDs. Today, more and more of that budget goes to electronics (computer, iPod, speakers, headphones, Internet service, CD burner, etc.), and less to music purchases. This suggests that people are not getting entertained today “for free.” Instead, a different industry (namely electronics/computers/internet) is collecting the money that people spend on music. This of course explains why the music industry complains that those businesses are making money on someone else’s IP.
Because electronics are private goods, they make more efficient collection points for the entertainment dollar than do music files or CDs. Perhaps Apple’s negotiations mean that Apple is getting to the point that are willing to subsidize music companies in order to spur the sales of iPods. Apple realizes that, to some extent, this strategy means buying music and giving it away in ways that will support their competitors. I imagine, however, that Apple thinks the iPod’s market share will remain sufficiently robust that it’s all worth it.
I have one more thought about this. If Apple prices the unlimited downloads correctly and gets a big enough library, will they put a dent in filesharing (not that it will ever completely disappear)?