More muddling over music

We may finally be figuring out how to pay for music in the digital age.

Actually, the likely answer has been clear for a while now. The news is that the major players seem to be warming to it: Buyers pay per song. Some of them cheat. Many of them don't. Musicians may sell directly, or they may go through a label.

Probably the strongest evidence is iTunes dropping DRM, or rather, the labels agreeing to drop DRM. The flip side of the deal is that iTunes will no longer charge a flat $0.99 per song. New songs by popular artists will cost more. Older pop songs will cost less. Other genres will follow their own traditions and customs.

It's an interesting question which of several factors have had how much influence in making all this happen. In no particular order:

• Labels may be getting comfortable with the idea that while there's going to be "leakage", enough people will be willing to pay for them to keep the wheels turning. It probably helps that the marginal cost of selling songs online is near zero, but probably not as much as one might think. Pressing CDs is pretty cheap, too. I forget how cheap, but it's a small portion of the retail price. Some of the additional costs -- storefront costs for a brick-and-mortar music shop, for example -- go away online, but many of them, particularly marketing costs, don't. Someone has to pay for all those award shows and after-parties.

• Labels may be getting scared by sales of physical media going through the floor. One might be tempted to gloat over yet another example of physical copy-protection yielding to the Mighty Web, except that CDs don't really offer any copy protection either.

• Apple seems to have figured out that a flat pricing scheme looks completely screwy to labels, who have been selling music for a lot longer than it has. Charge the same price for the Billboard #1 as for a Johann Kropfgans lute concerto? You're kidding, right? Labels understand that different groups are willing to pay diffrent prices for different music. Before any classical music fans out there pummel me, let me hasten to add that the Kropfgans recording I found costs a bit more than the current #1, Lady Gaga. If classical listeners weren't willing to pay more, there'd be no market.

Further, people will pay different amounts for the exact same music depending on whether they buy it while it's hot and all the cool kids are listening to it, or whether it's sitting in the virtual remainder bin with Herb Alpert (Before any Herb Alpert fans out there pummel me, let me hasten to admit that I own at least one Tijuana Brass album. Now the cool kids can pummel me instead.) It's called "walking down the demand curve," a concept I vividly and bitterly remember learning as an economics guinea pig in college when the Trader Joe's money I'd been counting on failed to materialise.

All of this leads me to inaugurate a new tag (which I'll backfill at some point, as I've been beating this drum for a while now): not-so-disruptive technology. After a bumpy start, and a few false starts, we seem to be converging on a model that looks a lot like the old one.

Did online music Change Everything? No. It's changed some things, but so did the 45, the LP, the boombox, the walkman, the CD, the MP3 player and its cousins, heck, even 8-track. Did iTunes Change Everything? No. In the end the studios have lived to fight another day.

Probably.

Postscript: Some have argued that albums are going to fade away as the iTunes generation picks and chooses the songs it likes, but this may just as well be a pendulum swinging. One could argue whether albums are an artifact of the LP and CD, or whether people will continue to like their songs in that form, but the Billboard hot 100 has been going since 1958, when 45rpm singles were the only real game in town.

Post postscript: There's a whole other interesting discussion to be had over whether file sharing Changed Everything. It should be no surprise that I don't think it did. The more interesting question is how much of that has to do with the labels breathing legal fire about it, and how much of it has to do with the economics of the free-rider problem.