Wednesday, February 25, 2015

How the long tail is being priced out of the market

Mode Records is a New York label specialising in contemporary music. Their distributor in the UK is Harmonia Mundi, who. like several other distributors, sells direct via Amazon marketplace. When the Mode CD of John Luther Adams' Strange and Sacred Noise reaches Harmonia Mundi in the UK they sell it direct to the public for £16.25 (£14.99 + £1.26 delivery) - see screen grab below - and must be making an acceptable margin in the process. But when the CD makes the short journey to one of Amazon UK's distribution centres, the price increases to £23.18 as in the screen grab above. (Both prices applied on Feb 22, 2015). This represents a 43% (£6.93) price hike by Amazon. This inflated pricing by Amazon is an increasingly common occurrence on long tail titles, and is, presumably, a function of the online retailer's increasingly dominant market position as independent retailers are forced out of business. The large differential between the CD at £23.18 and the MP3 download at £8.99 should also be noted. Yes, this reflects a difference in distribution and stockholding costs. (Although as I write Amazon only holds two copies of Strange and Sacred Noise in stock). But as independent retailers cannot offer the download version, it conveniently hastens the collapse of long tail distribution by independent retailers. Amazon's strategy of using digital content as a route to not only control distribution but also become the owners of intellectual property - more than 500,000 books are available only on the Kindle eBook platform - is a disruptive development that is receiving too little attention. Apple's ambition "to be the music business", which may mean iTunes owning as well as distributing content also has major ramifications for the long tail.

It is unlikely that other UK music writers will be covering Amazon's pricing policies, because don't buy their CDs. But there may be an additional reason: several writers have monetised relationships with Universal Music's Sinfini website, which has now spread its tentacles into Holland and Australia. And Sinfini Music has a monetised relationship with Amazon via a range of Universal Classics compilation albums which are sold as downloads via Amazon, but not released on CD and therefore unavailable to independent retailers. Which should be read in conjunction with the news that Apple is currently looking for a music journalist to manage a team of freelancers writing about iTunes content. The next time someone tells you that classical music's biggest problem is the lack of a designer concert hall in London, please correct them.

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