Harvard Business School: "Delivering the Digital Goods: iTunes vs. Peer-to-Peer"

[Rasterian]

http://hbswk.hbs.edu/item/5594.html

ITunes's 99 cents per song is ultimately a compromise between Apple and the owners of content, in this case the record companies. We believe that from the point of view of Apple, 99 cents is too expensive. Because profit comes mainly from the sale of hardware, Apple is likely to prefer lower download prices. From the point of view of intellectual property owners, 99 cents is probably too low. Record companies have attempted to renegotiate with Apple to set higher prices for new, more popular content. Our analysis suggests that this may be a bad idea because it is precisely for popular content that p2p is a better substitute for iTunes. Rare content, on the other hand, is where p2p does not seem to work well as there are fewer peers offering it. With this initiative, record companies seem to be applying traditional "brick-and-mortar thinking" in their competition against p2p. But this is surely the wrong mindset to deal with p2p.