downloadable promotion fever

It is remarkable watching so many of the mostly failed digital online stores jump on the Apple/Pepsi bandwagon before the later produces any results.

Other companies are joining online music sellers in marketing deals — although on smaller scales. RealNetworks is hooking up with Heineken. Roxio's Napster is linking with Miller Brewing. BuyMusic.com. is associating with South Beach Beverage, maker of SoBe. Sony's Connect service this summer will work with United Airlines to use frequent-flier miles for free songs.

Many have been predicting such events (I have a talk, given in 1997 to several music majors, that suggest ed music as a promotion might be viable ... it certainly wasn't a unique idea at the time). It will be interesting to see if it becomes important and if that means recorded music has become marginalized.

This type of promotion seems to make sense at this time for Apple or the other players. A 99 cent track generally sees about 70 cents going to the music company (or even musician in the case of indies who have signed with iTunes). Presumably the online store is selling the promotion at a discount (the buzz is that Pepsi is paying around 90 cents a track) ... The stores see a jump in their volume, perhaps there is some brand loyalty created for the music store and the promotion parter and the largest single cost (apart from the licensing of the music) ... the credit card transaction ... goes away. At 90 cents a track this would be profitable for Apple where as a 99 cent track purchased normally is probably close to break-even.

It should be noted that the cost of buying single tracks by credit cards is very high ... Apple's gift cards and allowances are mechanisms to get the money upfront and limit the number of credit card transactions. One would expect to see much more of this -- perhaps discounts on bundles. (selling 10 tracks at 90 cents each with one credit card transaction may net more profit for a music store than 10 tracks at 99 cents each one at a time).

Comments

[Raduu]

Ha! Interesting article . I was wandering how much money the big guys make from these sites . Now , after I've read your article I know why are so many of these sites .