The Music Phone Dilemma

David Card | October 26, 2005, 01:28 PM

If anyone's still puzzling over why Jupiter remains lukewarm on music phones, Wired has a really solid story detailing the supply-side challenges. Carriers, handsets, labels, and Apple. Goodness knows, I usually try to defend the music industry, but this quote is almost incredible:

And now that file-sharing appears to be leveling off, the music labels have been chafing at Apple's 99-cent US price cap anyway. For mobile downloads, they figure, the ability to make an impulse purchase should command a real premium. "The price associated with iTunes' launch was really about establishing some traction with consumers where there had been complete failure to show that people would pay any price," says Michael Nash, a digital strategy executive at Warner Music. "Where you don't have that artificial price depression, people are willing to pay more to get what they want, when they want."

"Artificial price depression"!?! Hey, I'm a believer in price discrimination -- for early access, for big stars, maybe -- but come on, the labels and publishers are keeping 65 cents of the 99 already...darn good margins. Consumers have been telling us consistently during three years' worth of surveys that 99 cents is the sweet spot.