During the Digital Landscape panel at the NARM convention, digital merchants sounded very much like their peers in the brick-and-mortar world as they wrestle with pricing issues, profit margins and competition from other forms of entertainment software.
“Pricing matter and it matters a lot,” said to Amazon.com VP of digital media Bill Carr. “Its one of the key things that we work with our vendors on. We see big changes in unit volume when we change prices.”
One of the ways that Amazon.com differentiates itself is to focus on variable album pricing, Carr added. But digital competition is not the only concern, pointed out eMusic CEO David Pakman.
Price is coming down, he said, because it is under attack from other forms of entertainment software. DVD and videogames are having an impact on music pricing, he added.
Besides the economic model issues, business continues to be good for digital merchandisers, according to IODA founder Kevin Arnold. Arnold noted that the industry is facing two questions: Are free streaming models going to spur CD sales, and are advertising supported model streams going to pay off?
Moving on to mobile, Napster’s Duea pointed out that compatibility issues are beginning to be resolved. “We had our music on 12,000 phones of one model and now we will be on 12 million phones,” Duea said.
That’s because with the majors now making music available in MP3s, it allows Napster through its relationship with AT&T to reach the telecommunication company’s customers. “Its about making it compatible,” Duea said.
The elimination of DRM provides huge opportunities for the digital music marketplace, he added. Now, merchandisers can sell hardware and software together, if they so choose.
In fact, eMusic’s Pakman added, “The notion of throwing it up against the wall to see if it sticks” is a great idea. Now, there should be even more experimentation to see what works, he added.
