AllOfMP3: the right service, a challenging price

After seeing a bit of press about it, I decided to check out the Russian ALLOFMP3 music service. AllOfMP3 is run by a Russian company called, generically enough, MediaServices.

If you’re not familiar with it, AllOfMP3 is notable for having pretty much any current hit I could find (unlike any other service I’ve seen). It’s also notable for offering downloads in basically whatever format you choose (MP3, AAC, WMA, lossless FLAC, etc.). That’s a really cool feature. And, no DRM! By the music and use it as you would any music you bought on CD.

There are a couple UI nits I would have: it’s too hard to download a bunch of songs. It would be nice to zip a bunch of songs up together, so I can download one bundle.

Otherwise, AllOfMP3 is a great service, and it’s a shame that the RIAA doesn’t let American companies do things similarly. Someday, they may learn that DRM is more annoying than useful.

AllOfMP3 can’t be mentioned without mentioning the price. They charge per GB of download. $10 will buy you 1GB of transfer. Since a typical decent MP3 file is 5MB, that’s about $0.05 per song!

How can they offer a price like that?

There are a couple reasons, I believe… First of all, there’s the ruble. They can’t charge $15 for an album in Russia, because no one would be able to afford it. Apparently, albums typically cost $3 there. It’s not uncommon for certain types of goods to be sold for different prices in different countries. Clearly, goods like that are not being sold at prices relative to distribution costs. They’re being sold at prices that the creators hope will pay for their costs of development (“sunk costs”). The creators of these things expect Americans, Europeans and Japanese to foot the bill for the rest of the world.

The internet, of course, knows no boundaries. A Russian song file sounds just as good as an American one. This certainly makes global pricing a challenge.

The other reason that AllOfMP3 is able to sell so cheaply is that the rights organization in Russia allows them to. Good for them! At least they’re not holding back progress, as the RIAA and MPAA do here at home.

What makes 5 cents a song “challenging” is that this kind price completely changes the dynamics of the music business. At 5 cents a song, people can afford to (and probably would) buy a lot of music. I hear a lot of music on the radio that I certainly wouldn’t cough up $17 to buy on CD, and wouldn’t even pay $0.99 for a download. However, at 5 cents I may very well purchase it.

This type of service is global in scope. You could have a song sell 100 million copies, producing $5 million in revenue. I’m sure that the RIAA would say “$5 million for 100 million copies??? No way!” But, the fact of the matter is that they would never have sold 100 million copies at current going prices.

In a global market, you might find lesser known artists selling a million copies of a song. That’s only $50,000, though, so you need to be sure you didn’t spend $100,000 producing the song (and yes, people can spend that much or more) and another $100,000 in promotion.

I’m sure five cents a song scares the bejeezus out of most record labels, but it’s really uncharted territory. It would be exceedingly difficult to predict what exactly would happen if a lot of music was conveniently, globally available at such a price. We may start finding out, though… all thanks to a company in Russia.