May 04, 2003

iTunes Music Store Once Again

Some intelligent thoughts on Apple's music store:


Matt Rolls a Hoover: ...I had the buyer's remorse moment yesterday. "Wait a minute. This uses DRM. I hate DRM." Then I got over it. Ed Felten has spoken about different copying models and the appropriate response to each. His "Napsterization" model assumes a small number of technically proficient copiers who then mass distribute the copies through a service like Napster. To prevent Napsterization, copy protection has to be perfect, with the side effect of trampling on all sorts of legitimate uses. The "casual-copying" model assumes individual copying by people who are vaguely aware that copying is wrong but do it anyway. To prevent casual copying, copy protection has to mostly just be a reminder that copying is wrong. That means that it can be weak enough to not interfere with legitimate uses.

Apple's copy protection is clearly in the second camp. Some people may still have hysterics over it (particularly if it increases readership), but the rest of us are going on with our lives and purchasing music online. There are risks of things going wrong with the DRM, but that strikes me as more a customer service issue than a DRM issue in this case. Beyond that, as I anticipate using the service, I will regularly burn purchased music to (audio) CD-R, and at that stage I will have the same usage abilities (and total lack of DRM) as if I had purchased the CD in a store.

But that's not the thing that makes this the coolest thing ever. What makes this the coolest thing ever is that Apple is taking credit card payments of less than a dollar. Historically, the big problem with selling information online is the credit card payments. As the payment gets smaller, the processing fee becomes a larger and larger part of the cost, so that it becomes impossible to sell information for what it's worth and still make money. The response of most creators has been to give it away.

Apple can sell information for 99 cents and have it still be economical. I don't know if they're pulling it off with volume, or with batch processing the orders somehow, but what I want to know is how low they can go. Scott McCloud, among others, has discussed micropayments (payments on the order of a fraction of a cent to a few cents) as a possible way content on the web could work. Can Apple get that low? And if Apple can, can someone else?...

Posted by DeLong at May 4, 2003 07:02 AM | TrackBack

Comments

Has anybody done any work on how serious a problem it has been for micropayments to be essentially impossible up to this point? Apple has managed to bring the barrier down to $1, but they seem to rely on some cleverness to do it (e.g., they bundle transactions made on the same day), and it isn't clear how much lower they could go.

I wonder, because I am assuming it will become clear to people sooner or later that the cure for spam is to make email cost a penny or two per message to send, with the bulk of the payment flowing from the sender to the recipient (at the ISP level). This will require either a clearinghouse of some kind or micropayments, and I don't know how the latter would work these days...

Posted by: Jonathan King on May 4, 2003 08:50 PM

"Has anybody done any work on how serious a problem it has been for micropayments to be essentially impossible up to this point? Apple has managed to bring the barrier down to $1, but they seem to rely on some cleverness to do it (e.g., they bundle transactions made on the same day), and it isn't clear how much lower they could go."

One solution would be to widen the period over which transactions are bundled. That'd make it more likely that the total for a week or a month would be economically large.

That might be backed up with a small deposit. The user opening an account would put down a depost of, say $5. In return they'd get something of value; maybe a coupon for a $5 discount or rebate at the end of the year if their purchases go above some value.

In the mean time, the $5 would be used as a source for purchases which are not accompanied by other transactions with which it could be bundled. If the person buys one fifteen cent item per month, and the purchases can't be bundled, then draw the money from the deposit.

Posted by: Jon H on May 5, 2003 12:51 PM

An interesting micro-payments pilot project has been functioning for quite some time with very little attention. The United States federal court system sells access to a wide variety of court files and documents for 7 cents per page. Advance registration is required and customers are billed quarterly, although a system such as Jon H describes could work as well. Bear in mind that it was the United States government -- different department -- that invented the internet.

Posted by: Ken Doran on May 5, 2003 03:37 PM

An interesting micro-payments pilot project has been functioning for quite some time with very little attention. The United States federal court system sells access to a wide variety of court files and documents for 7 cents per page. Advance registration is required and customers are billed quarterly, although a system such as Jon H describes could work as well. Bear in mind that it was the United States government -- different department -- that invented the internet.

Posted by: Ken Doran on May 5, 2003 03:39 PM

My phone company has been billing me for a lot of calls for a lot less than a dollar each for a long time now.

Posted by: Curt Wilson on May 5, 2003 04:01 PM
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