Friday, April 29, 2005

Current music model is too expensive

The Dutch are passing a law to add $4.30 to tax every gig of data in iPods, and I guess other mp3 players. This means a $400 60G iPod will now cost $658.

Clearly this is ridiculous, but the notion of a per unit tax applied to mp3 players, and then paid back to artists based on download popularity has some benefits to it. The $4.30 per gig works out to around 0.4 cents a song (or 4 cents per 10 songs), a rate which is far lower than Apple's price of $1/song, but still way too high. Given how mp3s seem to be such poor substitutes for CDs, such a rate on downloaded songs will greatly increase overall music industry revenue (and profit, since the margins are close to 100%).

mp3s seem to make up the "long tail" of music -- it's stuff that people would never have bought but are willing to download. I understand the industry wanting to capture some of the surplus thrown off by this long tail, but the Dutch tax will simply kill the product (or encourage ppl to buy it elsewhere).


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