Apple’s up to $18!

So Apple has once again “shocked” the industry by doing what was obvious but that no one else seemed able to get done, and their stock has risen from the $14 range to over $18 in a week. It now seems inevitable that other outlets will soon be established under the same rules. From here, it looks like the beginning of the next phase of the media industry: deflation due to real competition. On 8/30/02, my crystal ball predicted what now looks likely:

Announcenent: The media companies are more afraid of each other than they are of teen pirates.

Is that why they really don’t want to offer comprehensive libraries for download on demand? The smart people in the business must know there’s no future for entertainment intermediaries unless they can use copyright laws to fix prices online the way they have in meatspace. Even that’s a long shot.

Here’s how it’s likely to play out:

  1. Eventually the producers will offer legal digital content on line, just as it became available on VHS and cassette, despite their initial effort to kill the technology. Initially, download fees will reflect the price-fixed levels we’re used to paying. if that’s true, then…
  2. As the delivery means are refined, each company will eventually expose its entire inventory and then the competition will start in earnest. if that’s true, then…
  3. Without the retail channel and physical production as a counterweight, content prices will plummet. There’s no cost for a download, and no barrier to specials, discounts or site memberships at decreasing prices. Like an airline seat near departure time, the risk to a content site in a competitive environment is to see a sale not made as midnight approaches. Unlike an airliner, there’s no shortage of seats on a digital site. if that’s true, then…
  4. With real competition, the price of a download will approach the marginal cost of delivering it: $0.00. if that’s true, then…
  5. As someone pointed out, that’s the end of the money, the parties, the girls, the drugs and the prestige. It all gets exposed as the bubble it really is. No wonder they’re freaked.

The only force that could prevent that price pressure would be OPEC-style price fixing. And that’s where the illusion of cost-related non-fixed pricing breaks down.

More bad news for the RIAA now and the MPAA later: when we decide it’s time to stream legal digital entertainment, we’re not as brand-aware as the labels and studios would like. We don’t have a clue what label or studio produces what. If Paramount or Columbia has a lousy download site or higher pricing, we’ll be just as happy with something over at Sony or Virgin. And God forbid we re-discover classical or jazz! We’d get in the habit of comparing new content to stuff that’s stood the test time.

As we learn how to rate tracks and films, nothing keeps an artist from self-producing and self-serving. For the first time in history, artists could be as self-serving as their producers!

12:24:40 AM    

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