] It may be instructive to look at the pricing model of
] DVDs for insight into what has happened in the CD market.
] In case you were unaware, the film/TV industry uses a
] very different pricing strategy than the music biz.
]
] Studios release far less product each year then the
] labels, with major film releases numbering in the 100s
] versus 25,000 or so annual CD releases.
]
] Films have a model where they typically are released from
] the highest revenue generator down to the lowest. Another
] way to describe that progression is a dynamic pricing
] structure going from highest paying users to lowest.
] Starting with theatrical release (movie theatres), moving
] next to pay-per-view, and than premium cable (i.e, HBO).
] After the premium cable run has begun (or ends) is when
] typically DVDs get released for sale (or rental) to the
] public. Eventually, movies make their way to basic cable,
] and lastly, to broadcast TV. (Somewhere in the middle is
] overseas release, but for our purposes, that's more of a
] parallel track).
]
] DVD sales do not rely on a static pricing model. They are
] initially released at a price point consistent with
] expected demand. After a short period of time, prices
] drop, and in some cases, significantly.
] ...
] Pricing is a combination of popularity (demand) and age
] (supply). The older a release is, the more its available
] on the secondary markets. Let's look at a few recent
] animated films: Older movies, such as Shrek, Ice Age and
] Antz are all $10 today. More recent films, such as
] Finding Nemo or Shrek2 are $14.99 and $15.99
] respectively. Films fresh out of the theatres, such as
] The Incredibles, are $20.
]...
] Ironically, many of the films mentiooned here now sell
] for less than their soundtracks. Two hours (or longer) of
] a movie, plus additional audio commentary, a documentary
] of the making of the film, outtakes, special features
] etc., all cost less than a mere 45 minute audio only
] songs from the film.

Barry L. Ritholtz, a good numbers analyst, posts a draft of a DVD vs CD paper he is working one. I am interested to see where he is going with this, and how he incorporates some of the comments.

For example, DVDs are watched less -- do they represent less value? But DVDs involve the efforts of far more... etc.

Is the proposal that those involved in the record industry should look to the whole process of a record: initial investment of time and talent, then studio time, post-production, release, the tour in support, junkets -- like movie releases, and price accordingly? I suspect that given the cashflows for the artists themselves, they already do.

The Big Picture: Dynamic Pricing: DVD versus CD Strategies