Thanks to an announcement by Yahoo!, our Tuesday Tunesfest spills over into Wednesday:

Back in February, we looked at what the actual losses were to the Recording Industry in "The False Mathematics of the RIAA."

It turned out that the claims were greatly exaggerated. Using the concept of substitution, a consumer could replace the free P2P music sourcing by paying Napster $180 per year, or Rhapsody (Real Networks) only $120 per year.

Now Yahoo steps into the fray, and lowers the cost of annual "all-you-can-eat" music consumption to $60 per year. Over the course of a decade, that amounts to $1,800 $1,200 $600.

Kinda makes it hard to argue that losses per P2P user are in the 10s of
thousands of dollars annually when $600 per 10 years is what it costs for
a comparable substitute.

Today’s WSJ has the details:

"In an aggressive attempt to broaden the online-music business, Yahoo Inc. today plans to roll out a new low-priced service that allows listeners to rent songs rather than buy them outright.

The biggest seller of music downloads is Apple Computer Inc.’s iTunes, which jumpstarted the legal downloading business in 2003. Since then Apple has sold 400 million songs and its overall music business has propelled the company’s earnings and stock price. Apple doesn’t offer subscriptions, instead charging users by the song or album, and then letting them keep the music. An Apple spokeswoman declined to comment on Yahoo’s new service, but during the past the company has been critical of the subscription model.

Yahoo’s $6.99-a-month service has the potential to change the music-buying calculus for consumers. "It’s a hugely aggressive move, a shot in the arm to the subscription notion," says David Card, an analyst at Jupiter Research. The online-music business is fast-growing, but still accounts for only about 2% or less of total music sales, according to analyst estimates."

At a certain point, Apple may consider rolling out a similar annual fee structre. They make little on the sale of individual tunes (although a few cents on a billion+ downloads annually can be significant). 

To them, the razor is the sale of iPods, and by locking in consumers to their proprietary format they maintain demand for both their ITMS downloads and ripped CDs. Their foot print is large enough that whatever they do, there’s a hardcore audience of loyal pod owners ready to follow almost anywhere Steve Jobs leads . . .

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Who Is Offering What

A look at some of the biggest players

COMPANY On-demand Subscription* Per-song Prices Size of Library
Yahoo $60/year 99 cents; 79 cents for subscribers over 1 million
Apple No 99 cents  over 1.5 million
RealNetworks $179/year 99 cents; 89 cents for subscribers over 1 million
Napster $179/year 99 cents over 1 million


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Source:
Yahoo’s Big Play In Online Music
Internet Giant Aims to Shake Up Nascent Industry With Subscription Rates Well Below Rivals’
Kevin J. Delaney
The Wall Street Journal, May 11, 2005; Page D1
http://online.wsj.com/article/0,,SB111575587704729540,00.html

Yahoo to launch new flagship music service
John Borland
C/Net, Tue May 10 12:34:00 PDT 2005
http://news.com.com/Yahoo+to+launch+new+flagship+music+service/2100-1027_3-5701661.html

Category: Finance, Music

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “The Math Gets Even Worse for the RIAA”

  1. Rajesh says:

    Barry,

    Your exclusion begs the question: does MSN music even register in the digital music sales radar? Of course everything pales in comparison with iTMS.

    How long before Google gets into the act. Maybe a purchase in the offing?

  2. arkady says:

    allofmp3.com charges $0.02/1M (2 cents for 1Mbyte) of lossless encoding, no DRM, no encryption. all formats are available for any file – OGG Vorbis, MPEG-4 AAC, MPEG+, etc.
    after you downloaded the file you can store the file, copy the file, do whatever you want. (one can also google allofmp3 english)

    When people talk about $6/month (~80 tracks from allofmp3) i ask myself why should i rent when i can buy and choose any format i want.

    …or why should one bother to pay at all. After paying $40-60/month for Internet connection i personally would expect to get content for free.

  3. Jon H says:

    “When people talk about $6/month (~80 tracks from allofmp3) i ask myself why should i rent when i can buy and choose any format i want.”

    I have no particular interest in giving my money to Russian mobsters, who are probably also involved in human trafficking.

  4. Poor RIAA

    Barry Ritholtz keeps us his tradition of pounding the RIAA with logic.Kinda makes it hard to argue that losses per P2P user are in the 10s of thousands of dollars annually when $600 per 10 years is what it costs…

  5. Poor RIAA

    Barry Ritholtz keeps up his tradition of pounding the RIAA with logic.Kinda makes it hard to argue that losses per P2P user are in the 10s of thousands of dollars annually when $600 per 10 years is what it costs…

  6. Webs says:

    On the other hand, you could argue that file-sharers who are sued have cost the RIAA this amount in damages for every person to whom they uploaded a file.

    To phrase it more simply, that’s $60 per year per P2Per.

    This estimates 100 million file-sharers worldwide: http://www.itworld.com/Net/4087/050105oecdfilesharing/

    That’s $6 billion lost per year – at the low and unsustainable Yahoo Music rate.

  7. Marc says:

    One problem with this math. For downloaders, it’s certainly true that the maximum damage is $5/mo.

    But for those that share files (dealing as opposed to possession)- the damages would be $5/mo/person that downloaded files, right?

  8. will says:

    “That’s $6 billion lost per year”

    That assumes that all of those p2p users would buy $60 of music a year, i would guess a substantial percentage of them would not.

  9. RIAA damages $5 per month?

    The RIAA has sued over 10,000 people in the US for music downloading. They claim thousands of dollars in damages, and apparently typically settle for a payment of around $3,000 to end the suits. With legitimate paid music downloading sites…

  10. Cuban makes the “5 buck” argument

    Although I obviously dont think it would work, the debate over IP and copyright in this digital world is an interesting one. I love when people try to stick it to the RIAA since i think they have done a good job of ripping off both the artists and the …

  11. The market price is set for MP3s

    The Big Picture and Mark Cuban argue that Yahoo’s new music service has effectively set the market price for unlimited downloading at $5 per month. Hey, that’s a great deal! The Big Picture: The Math Gets Even Worse for the…

  12. Get back, RIAA! You don’t know me like that.

    If you follow online music, then I’m sure you’ve heard about Yahoo’s entry into the music subscription fray with Yahoo! Music Unlimited. It’s a deal where you pay $5 a month and get unlimited access to music online and for…

  13. Good writings about the music biz

    There’s a terrific article by James Surowiecki in last week’s New Yorker (May 16 issue) titled Hello Cleveland, where he describes the ways in which musicians are making more money from playing live than they are from selling recorded music. Well worth…

  14. tom says:

    I figerd out way protest radio bribery that the riaa is into simply devaule radio avertising you hear a radio advert avoid the pruduct in qustion at all costs this way radio staions are presherd to change thare way s and that then simply dont turn on the radio and use internet radio simply put people dont listen they have no power the riaa can restrict thair content but not what they dont repesant so internet radio stations dont play riaa content mor e artist are leaving riaa contracts as they are non profitable and other recerd groups do exsit and are gaining suport the riaa wants to hide the truth behind a wall of complexity so reserch speak up and break it down