My reaction to the struggle between Apple and music labels over the former's fixation on a 99-cent price was similar to Jim's. Fans of popular music like the fixed price, because labels likely would start out charging more for the latest releases. For other music, however, like backlist blues tracks from the 1950s, market demand is lower. Price-fixing is always bad, even if you think the folks doing it are wearing white hats. As P2P fans say, the Internet has revolutionized delivery of content. Once created, supply of digital music is infinite, which means the equilibrium price point will move as the demand line moves. Every song, artist, genre etc. has its own demand line, so if the lines allowed to move consumers benefit by paying the "right" price. There's a market solution at hand, it seems, because Apple has a large market share but lacks true monopoly power. In the CNET article the labels say they'd like the flexibility to charge less for some tracks. If labels started offering backlist songs with other services for, say, 50 cents per download, I'd think that might cause consumers to ask if they want to stick with their iPod. It also might make Apple wonder if they want to allow iPod to play other music formats beyond iMusic and MP3s. And thus the market moves toward interoperability.

posted by Patrick Ross @ 9:30 AM | Markets: Business, Investment & Innovation

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