Unlimited Music with your iPod?

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)?

2 thoughts on “Unlimited Music with your iPod?

  1. Reminds me a bit of this interesting piece by the Long Tail author:

    http://www.wired.com/techbiz/it/magazine/16-03/ff_free

    Here’s a long quote:

    “Enabled by the miracle of abundance, digital economics has turned traditional economics upside down. Read your college textbook and it’s likely to define economics as “the social science of choice under scarcity.” The entire field is built on studying trade-offs and how they’re made. Milton Friedman himself reminded us time and time again that “there’s no such thing as a free lunch.

    “But Friedman was wrong in two ways. First, a free lunch doesn’t necessarily mean the food is being given away or that you’ll pay for it later — it could just mean someone else is picking up the tab. Second, in the digital realm, as we’ve seen, the main feedstocks of the information economy — storage, processing power, and bandwidth — are getting cheaper by the day. Two of the main scarcity functions of traditional economics — the marginal costs of manufacturing and distribution — are rushing headlong to zip. It’s as if the restaurant suddenly didn’t have to pay any food or labor costs for that lunch.

    “Surely economics has something to say about that?

    “It does. The word is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we’ve always known about but have only recently been able to measure properly. The “attention economy” and “reputation economy” are too fuzzy to merit an academic department, but there’s something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.

    “There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. “

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