MUSIC, AMBIENCE AND SOUND ART > Independent Music Reviews

August 2008 issue of Electroambient Space

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Kaarinen:
Hi,

Thanks for the interview (both Mike and Phil!). It's sad to hear that Ambient sales aren't doing that well in general (but I'm glad to hear Hypnos is doing fine) and it's not easy to say what could be done about it. The interview brought up an interesting question, though; pricing.

Since ambient is, for the most part, a really small genre saleswise, how much additional revenue can be gained by dropping prices/keeping them low?  I've kind of enjoyed the idea that it's fine to pay for something you really like, no matter if it's marginally pricier than the next best thing. Coming from a listening background of more mainstream stuff and, say, metal, CD prices for ambient seemed really, really low at first. So, do you (the all of you, not just Mike/other label owners :)) think pricing higher, say 16$ for a CD instead of 12 would be of any actual help or just bring the sales down proportionately? Or would you be willing to pay more for music and still buy about the same amount of stuff or are the low-ish prices actually giving you the chance to get substantially more music? I understand that hiking up prices would be difficult if done by just one label (since its releases would suddenly seem relatively expensive), but hypothetically...

I'm an old-fashioned chap who likes to have a pretty physical item to touch, so I don't know much about buying/selling downloads :).

mgriffin:
Good question, to which there is no simple answer...in fact, there isn't even a complex answer that anyone can be sure of.

Anyone who takes a Macro-economics class learns that higher prices for any product or service causes demand to drop, and conversely a decrease in prices leads to higher demand.  A great example of this is what's been happening with gas prices, people changing their driving habits or getting more efficient cars, so they use less gas.

If it were clear that decreasing the price of CDs would increase the number I sold substantially, I would probably sell Hypnos CDs for even less than they sell for now.  The thing is, independent music CDs are a very limited market, not a commodity like gasoline or steel or corn with a very liquid market.  A good argument could be made that most of the people who guy Hypnos CDs would buy them whether they were $10 or $16, and that many would still buy them if they were $20.  Certainly the number of people who would say "I would definitely buy Message from a Subatomic World for $12 but I will definitely not buy it for $13" is a small number... a very small number, like maybe a few people, or at most 20 or something.  It's not like with gasoline, where a gas station will lose 50% of its business if its price is .10 per gallon more than the station across the street.

Having said that, if I'm unsure where the optimal price is for Hypnos CD sales to "maximize profits" I'd rather err on the side of "too cheap, more accessible" because I'm a little uncomfortable with keeping "maximize profits" as my highest priority.  I prefer to get the CDs into the hands of more people even if I could bring in more money, hypothetically, by selling 10% fewer CDs for $3 more per copy.

In fact, I've given some consideration to the idea of lowering prices even more.  I think the music business has passed a threshold from which it will never return, concerning the free (as in, without paying) exchange of music via internet downloads.  The number of people listening to ambient and electronic music is actually much, much higher than the number of people paying for it.  Sometimes I wonder if many of those downloading unofficial (sounds nicer than saying "illegal") copies might buy the CD if it were just a lot cheaper, like maybe $10 or even less.  In the abstract, I like the idea of selling 1,000 CDs for $6 each better than I like the idea of selling 200 CDs for $16 each, even though in the latter case, the return on investment is better (if you take into account that in the latter case you still have a lot of CDs left to gradually sell).

I'm not willing to just say "screw it, all Hypnos CD prices are cut by half" but I've considered releasing a less expensive CD or two and seeing what happens.  If we put out another "various artists" Hypnos compilation and sold it for $7.99 for the CD, or $5.99 for the download, I wonder how many more we might sell?

I really don't have the answers, just expressing some thoughts.  I don't feel inclined personally, though, to decrease the number of CDs sold even more, just to squeeze out another $2 or $3 from each copy sold.  Also, the recording artists don't like that, because it means fewer people are hearing their work.

 

deepspace:

--- Quote from: mgriffin on August 06, 2008, 10:28:42 AM ---Good question, to which there is no simple answer...in fact, there isn't even a complex answer that anyone can be sure of.

Anyone who takes a Macro-economics class learns that higher prices for any product or service causes demand to drop, and conversely a decrease in prices leads to higher demand.  A great example of this is what's been happening with gas prices, people changing their driving habits or getting more efficient cars, so they use less gas.

If it were clear that decreasing the price of CDs would increase the number I sold substantially, I would probably sell Hypnos CDs for even less than they sell for now.  The thing is, independent music CDs are a very limited market, not a commodity like gasoline or steel or corn with a very liquid market.  A good argument could be made that most of the people who guy Hypnos CDs would buy them whether they were $10 or $16, and that many would still buy them if they were $20.  Certainly the number of people who would say "I would definitely buy Message from a Subatomic World for $12 but I will definitely not buy it for $13" is a small number... a very small number, like maybe a few people, or at most 20 or something.  It's not like with gasoline, where a gas station will lose 50% of its business if its price is .10 per gallon more than the station across the street.

Having said that, if I'm unsure where the optimal price is for Hypnos CD sales to "maximize profits" I'd rather err on the side of "too cheap, more accessible" because I'm a little uncomfortable with keeping "maximize profits" as my highest priority.  I prefer to get the CDs into the hands of more people even if I could bring in more money, hypothetically, by selling 10% fewer CDs for $3 more per copy.

In fact, I've given some consideration to the idea of lowering prices even more.  I think the music business has passed a threshold from which it will never return, concerning the free (as in, without paying) exchange of music via internet downloads.  The number of people listening to ambient and electronic music is actually much, much higher than the number of people paying for it.  Sometimes I wonder if many of those downloading unofficial (sounds nicer than saying "illegal") copies might buy the CD if it were just a lot cheaper, like maybe $10 or even less.  In the abstract, I like the idea of selling 1,000 CDs for $6 each better than I like the idea of selling 200 CDs for $16 each, even though in the latter case, the return on investment is better (if you take into account that in the latter case you still have a lot of CDs left to gradually sell).

I'm not willing to just say "screw it, all Hypnos CD prices are cut by half" but I've considered releasing a less expensive CD or two and seeing what happens.  If we put out another "various artists" Hypnos compilation and sold it for $7.99 for the CD, or $5.99 for the download, I wonder how many more we might sell?

I really don't have the answers, just expressing some thoughts.  I don't feel inclined personally, though, to decrease the number of CDs sold even more, just to squeeze out another $2 or $3 from each copy sold.  Also, the recording artists don't like that, because it means fewer people are hearing their work.

 

--- End quote ---

It's such a difficult situation isn't it.  I agree with Mike about music passing a certain threshold from which it won't return.  We're in a post-Napster musical society, which is both liberating and frustrating.  Liberating mainly for the listener, who has experienced a worldwide musical diversification effect:  Much like food did in the 90's.  An odd comparison, but more people eat more exotic foods today than 20 years ago.  The same goes with music.

And the situation is frustrating of course for anyone trying to make a career from it.  And this was covered very well in the Electroambient Space interview. 

So here's what I've observed:  I have noticed a change in my own buying habits when faced with much cheaper music (I'm talking mainly about emusic here btw), and I've noticed different musical habits emerging-  when music is cheaper, I feel less pressure trying out new albums, and I don't think I'm alone in this.  Thus, I discover more music, more artists, and become drawn more into that particular genre-  I start focussing more on these artists, their websites, their older works etc.  So there is something positive to be gained from cheaper music-  Getting rid of 'Buyer's remorse' is obviously something very powerful, which was maybe a catalyst for what has happened over the past 10 years or so. 

When I pay the classic full price for an album, say $30 (here in Australia), I can't say that I enjoy the experience more.  In fact, there is more pressure on me to enjoy the music, and I feel disappointed if I don't, and discouraged from buying more of that artist's work.  I wish I could say that I enjoy the product more when I pay more for it, as you might if you splash out extra money for a better product, but I don't think I do. 

Somewhere in the middle is good for now I think- Paying say, $10-$15 for a cd is much more realistic, and isn't the same kind of risk- getting the physical cd is a nice extra bonus.  I still take some risks at that price.  And I get a little kick from giving my money to someone who is passionate about music. 

The music industry is a strange, wild and daunting place right now: Who knows what the future holds in terms of pricings/delivery.  I guess it's something that we will create for ourselves, and we won't really get clarity until we've travelled down that path.   

Left or right or straight ahead....?   :)

mgriffin:
I think it's possible that if the music industry as a whole shifted to selling CDs for something like $8-9 it would result in a lot more people buying them, rather than scouring bittorrent to find them.

But with the music industry in general stuck at a price of $16-18 for a new CD, and as low as $14 or so on sale, if a small independent label tries to price their CDs at the same $8-9 price point, then rather than customers saying "hot dog, now I can buy twice as many discs for the same money, what a deal!" many people would think (or maybe not think consciously, but they would have this reaction), "this music is cheaper so it's amateurish stuff -- it costs less because it's not worth as much."

I think it's human nature to gauge the "value" of something roughly in correlation to its price.  Most people will be predisposed to think a $30 bottle of wine is better than a $7 bottle of wine, and experiments have proven this.  People are more likely to give a higher rating to something they believe to be worth more money.

So, if that small label decided to charge $8 for new CDs, rather than selling a lot more CDs, they might sell the same number, and at a much lower profit per unit.

One way around this may be to work around people's perceptions about price/value, for example by including something extra with a new CD.  I would say that a $13 CD that included an extra CD-single for free, might be considered "a good deal" as opposed to just discounting the CD (without the free single) to $9 which might be considered cheaper but not necessarily a better value.

I think labels may need to start including extras, like video DVDs, extra CD singles or EPs, special packaging, or other materials to make the CD buying experience stand out in terms of "value" from the mp3 download experience.  As things stand now, more and more music listeners seem to feel that buying a CD for $13-16 is an experience not so much greater in "value" as compared to a free download, to justify the price.

Kaarinen:
Thanks for the thoughtful replies, the both of you! I agree that the best way to go is the one through which as many people as possible get their hands (or iPods!) on the music, even if it means losing a buck or two. And I'm sure that's the driving force behind all - or at least the smaller - labels :). And even thought I said I don't mind paying for something that's good, money still limits the amount of purchases I can make. Especially, like in the example given by Deepspace, if it's an album you haven't listened to before making the purchase. A real-life example: a great, respected record store near me that specialises in jazz and world music/ethic stuff. It's got all sorts of cool stuff, ranging from Tuvinian throat-singing to ancient finnish (sung) oral poetry. The problem is, that the price for a CD's around 22€ so there's no chance of picking up too many new CDs just out of impulse... Getting rich would help, though :P.

I agree, that extras give people the feeling of getting more for their money and would help the sales with higher pricing. The problem, in my experience, with extras (in addition to increasing the 'material junk to musical experience' -ratio) is their qualitative inferiority to the actual product your buying. This obviously depends on one's expectations, but often all you get is some crappy additional DVDr where a few of the album's songs are playing alongside some mediocre image slideshow :). Live shows and the like might be nice, IF well videoed/recored and produced (e.g. not the unedited 'reel' from some show attendees handheld videocamera). Extras close to the actual thing, like additional CD singles etc. might, of course, generally be better if made by the artist in question. Or why not by another artist, like a semi-split :).

Just some thought and ramblings here too, no answers ;).

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