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Arnold Kling has a Ph.D. in economics from MIT; founded, one of the very first commercial websites, in 1994; separated from Homefair in January 2000 after it was sold to Homestore; is author of Under the Radar: Starting Your Internet Business without Venture Capital, and is an essayist. Send comments to us at

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March 10, 2004

99-cent rip-off

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Posted by Arnold

Brother Ernie wonders how Apple can convince people that an iPod that can store thousands of songs should be filled at a cost of 99 cents per song.,

Something's got to give. I don't think that it will be digital storage in which advances continue to outpace Moore's Law. I don't think it will be people's expectations. Thus, it is going to have to be the ala carte pricing point. However, I think the only realistic ala carte pricing point is going to be in the micropayments realm, which is unlikely to work. Thus, a subscription-based model will be the only likely, voluntary solution.

That's the conclusion I reached a couple years ago. The other model I predicted back then would correspond to selling an iPod pre-stocked with 5000 popular songs.

Comments (2) + TrackBacks (0) | Category: Moore's Law | business models | economics of content


1. Foolish Jordan on March 14, 2004 11:33 AM writes...

I don't know about other people, but perhaps my example will shed some ligt on the subject.

In my case, I am ripping my approximately 300 CDs worth of music (which I already own, so it's a sunk cost) accumulated over the years into MP3s and putting them on my giant 40 GB iPod. At roughly 60 MB per CD, that means I'll end up with about half the iPod full. I don't plan to rush to Apple's store to fill up the remainder with 99 cent songs; instead I'll just add new CDs as I acquire them a bit at a time.

I paid roughly $15 for each CD, which have about 15 songs each. It's not clear to me how this is so different from the iTunes model.

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2. robin on March 14, 2004 01:43 PM writes...

Foolish Jordan ...

The problem is, as my good friend* reminds me, that record companies spread a band's good tracks across more than one album to sell the rubbish tracks.

The only exception to this that I know of was Stevie Ray Vaughan. When Stevie died they discovered so much unrealeased quality recordings that they had a row on their hands deciding which tracks were the worst ones and therefore shouldn't be put on the last release.

* A bass player for a global metal band

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