An article by Wired magazine quips Steve Jobs pitching his iTunes music service versus its strongest competitor: Free P2P downloading services like Kazaa, eDonkey, Bittorrent, what-have-you… I found this great response which makes a lot of economic sense… but maybe only to those who value their time, that rules out college students…
How low should the labels go? The answer comes by examining the psychology of the music consumer. The choice facing fans is not how many songs to buy from iTunes and Rhapsody, but how many songs to buy rather than download for free from Kazaa and other peer-to-peer networks. Intuitively, consumers know that free music is not really free: Aside from any legal risks, it's a time-consuming hassle to build a collection that way. Labeling is inconsistent, quality varies, and an estimated 30 percent of tracks are defective in one way or another. As Steve Jobs put it at the iTunes Music Store launch, you may save a little money downloading from Kazaa, but "you're working for under minimum wage." And what's true for music is doubly true for movies and games, where the quality of pirated products can be even more dismal, viruses are a risk, and downloads take so much longer.
So free has a cost: the psychological value of convenience. This is the "not worth it" moment where the wallet opens. The exact amount is an impossible calculus involving the bank balance of the average college student multiplied by their available free time. But imagine that for music, at least, it's around 20 cents a track. That, in effect, is the dividing line between the commercial world of the Long Tail and the underground. Both worlds will continue to exist in parallel, but it's crucial for Long Tail thinkers to exploit the opportunities between 20 and 99 cents to maximize their share. By offering fair pricing, ease of use, and consistent quality, you can compete with free.
The Long Tail
I will be thinking a lot about the Long Tail economy this summer holiday, or rather, a market of obscure tracks and searches that reflects the true diversity of options and choices, in products and services, to the consumer. As the Internet enters perhaps its 2nd decade of mass adoption, the commercialization stage is just barely emerging out of the chasm as business models have so far failed to materialize. This is particularly evident in the first "Old Economy" industries to be hit — music, TV, radio and movies. Where NewsCorp bravely embraced what could be the singular most powerful force to revolutionize their business by promoting digitalization across all their business units, many other media juggernauts are still grappling with the harsh new economic realities by reining in innovation and relying on legislation to halt this innovative.
Point to note: the overt support of the courts of MPAA and RIAA against P2P illegal music downloading companies are not sending the right message to the prosecuting companies that their legal opponents/ defendants are the ones utlizing technology the right way (i mean channel, not the business model of free) to serve customer needs. Or the network neutrality vote in COngress that was overwhelming defeated in favor of the telecom and cable companies seeking to exert their economic power to restrict open access by users to the internet. The issue may be more complicated than it seems and I must admit I haven;t studied it at length but it appears to me that this was a political decision not based on the merits of long term policy benefits to the future of our society. It appears to be a vote by the Republicans for Big Business and their special interest groups that dominate the political arena on Capitol Hill. And that simply pisses me off if the stupid decisions of some cronies impact our future generations' rights to information.