Fred Wilson says neither artists nor fans get the maximum benefit when people buy music that they can listen to as often as they want. He compares his consumption of the Rolling Stones' Exile on Main Street and Elvis' 50 Greatest Love Songs. If he has listened to the former thousands of times and the latter hardly ever, shouldn't the record labels be compensated accordingly? At $0.01 per listen, Fred would have paid $180 for Exile (over 20 years, so day-to-day costs are negligible) and $1 for Elvis. Under this model, the music industry would generate more revenue, and consumers would pay only for the benefit they receive.
Fred's post reminded me of Salesforce.com EMEA co-president Lindsey Armstrong's talk at Data Centres Europe. Lindsey said the difference between SaaS and traditional software is, developers make a living not by convincing end users to complete one-time purchases, but through their ongoing use of each app. If buyers stop benefiting from a product, its seller stops getting paid; this keeps the two parties' interests aligned.
Amazon's new pay per PUT/LIST/GET request pricing for S3 follows the same logic. You get what you pay for; you pay for what you get. This includes storage space, bandwidth and necessary computing resources for processing your requests.
Utility pricing makes sense to me, which is why I'm excited to see that Rackspace's R&D group is "devoted to solving the issues of the future in the utility computing world" (check out their newly public blog here). The Planet, too, is looking into "running separate applications in an utility computing environment". It's about time! :)
Hmmmm.
You've got me thinking!
Does this mean we'd pay for each use of the Internet? Would a toll-road constitute an analogue?
Posted by: Matt Charron | June 14, 2007 at 08:54 PM
For you, Matt, it'd just be pay per Twitter :)
If you consider Fred's proposal ($0.01 each time you listen to a favorite album) and Amazon's S3 pay-per-request pricing ($0.01 for each 10000 GETs), it seems possible for vendors to bill for usage without creating too much of a disincentive for consumption?
If Internet access providers set today's average usage as a baseline and charged subscribers $0.01 per hour (or per GB of data transfer) for excess usage and offered a $0.01 credit for each unit under the baseline, I'm pretty sure they'd come out ahead.
A small % of customers would end up with noticeably higher bills. Some will value their excess consumption enough to pay for it. Others will save their vendors money by cutting back.
Posted by: Isabel Wang | June 16, 2007 at 02:41 PM
if you hunt around, Joel Spolsky debunked the variable pricing scheme for music fairly credibly as a means for labels to gain better leverage over artists.
pay per use is obviously not that model, but it's a step in that direction - one that the labels i'm sure would like to see happen.
definitely not a fan.
Posted by: stephen o'grady | June 21, 2007 at 10:34 PM
Music as a service is the way forward! It is good for the companies (recurring revenue) and for the users. if you stop liking it stop paying for it! I believe in a system where you can rent music.
Posted by: Wimpers | December 01, 2007 at 12:40 PM