

Pricing as Signal - raganwald
http://www.joelonsoftware.com/items/2005/11/18.html

======
knarf
I love those old Joel posts. It's a pitty he stopped writing about anything
interesting once he sold enough copies of FogBugz..

~~~
wayne
If I remember correctly, Joel mentioned in one of the podcasts that he likes
to just tell stories in his blog posts now and let audiences draw their own
conclusions. When he tried to make arguments before he was often
misinterpreted (e.g. his stance on exceptions) and now he feels he has to pre-
respond to the multitude of ways people might respond to his argument, and
that doesn't make for fun reading. As he's gotten older and more experienced
he also said the world has become less black-and-white so he doesn't like to
make absolute statements as much anymore.

The podcast is linked off from here: <http://blog.stackoverflow.com/>

He also writes a column in Inc, which isn't bad:
<http://www.google.com/search?q=joel+spolsky+site%3Ainc.com>

------
briansmith
Many (most? the vast majority?) of people who go to the movie theater will see
a movie even if the movie they intended to see is sold out. Plus, they are not
price-conscious. So, it makes sense to keep all the movies at a high price so
that the customers end up paying high prices for movies they didn't go to the
theater to see. "A rising tide lifts all boats." If they went to the theater
to see a particular movie, and it was sold out, they will pay for some other
movie this weekend and then try again next weekend (and the next next weekend
if necessary) until eventually they see the movie they originally intended to
see. LoTR is sold out three weeks in a row = many customers bought three or
four movie tickets, instead of just one.

If they were price conscious, they would rent it for a dollar from RedBox when
it comes out on DVD. Or, they would go to the discount movie theater to see it
for $4. Or, they would download it for free off the internet.

On iTunes, there is no such thing as "sold out." And, everybody is price-
conscious because everybody under 30 knows you can just get the songs for free
off the internet if you are willing to put up with the hassle. Apple has
recognized that people value that hassle at approximately $0.99. If people
were willing to pay $2.49 for a song, it wouldn't mean that the song was
better than a $0.99 song. It means that they would probably pay $2.49 for
every song, since they value the convenience at about $2.49.

------
tdavis
I'll say the same thing I said last time I read this: _Brandy_ isn't a bad
song, dammit!

~~~
SwellJoe
Note to self: Never accept a mixtape from tdavis, or attend any function where
tdavis has selected the music.

How do you feel about _MacArthur Park_?

~~~
LogicHoleFlaw
Great tune. Too bad about the lyrics.

Hint: Find the jazz arrangement of it with the lead trumpet performance by
Maynard Ferguson :)

~~~
SwellJoe
_Hint: Find the jazz arrangement of it with the lead trumpet performance by
Maynard Ferguson_

Not my scene. It's too much easy listening. Certainly, it's a tight
performance by a great bunch of musicians...but, really, I hope he has better
tracks.

And, I don't share your opinion of the tune being great. The intro is nice, as
an intro, but past that the song is saccharine, repetitive, and predictable.
We agree on the lyrics, of course.

------
jad
Is this even an accurate comparison, considering that movie theaters only show
new movies, and iTunes sells both old and new music?

Wouldn't it be more accurate to compare the pricing strategies of iTunes to,
say, Blockbuster Video?

------
bestes
Can you put "(old)" or something in the title if the article isn't new? I
almost always like these articles, but then feel silly when I realized that
it's 2-3 years old and that I've read it before.

~~~
mixmax
There's nothing wrong with old - as a matter of fact I would argue that if a
2-3 years old tech related article is stille interesting it is truly worth
your time.

Hwo many of the recent articles on Google chrome will be reread in 3 years
time?

~~~
SwellJoe
I refer to this effect as "The Filter of Time" (or just "the filter" in
conversation). It applies to music most obviously, but it can be applied to
any work with an artistic component, I think. Oldies stations play a higher
ratio of good to bad music than modern pop or rock stations, because the
filter has been at work on their playlist.

It's probably worth thinking about the filter when doing anything online,
since there are so many places one can get sucked in without actually gaining
anything, learning anything, or improving the world in any way. Your example
of articles about Chrome is an excellent choice...do we learn anything from
the second through the fiftieth article about Chrome? Probably not. So, skip
it. If you're writing another "me too", skip it. If you're reading something
and can't imagine it applying immediately to your life _or_ being useful for
the rest of your life, maybe you should skip it.

Of course, since I'm just agreeing with you in a somewhat verbose manner,
maybe I should have skipped it.

------
pmorici
Is he really selling DVD's about the companies summer internship program?

~~~
jrockway
He was, yes.

------
coliveira
There is another reason movie theaters don't use the basic strategy of raising
prices: they can just increase the number of rooms for a movie. This pretty
much takes care of any demand pressure (unless everyone in the country decides
to see the same movie in the same day).

With old music, in CD format, someone could say that there is a physical media
that needed to be sold, so prices could fluctuate. With digital music, however
there is a theoretically infinite number of copies that can be sold, so there
is not reasonable explanation for raising prices.

In other words: the price of selling the latest J.Lo album is exactly the same
price of selling any other crap you can think of.

~~~
parenthesis
Except it costs money to make recordings. Lavish recording, small market:
explanation for higher price.

Of course, this kind of reasoning is irrelevant if a recording is essentially
just advertising for a tour, movie, fashion-label or whatever.

------
mhb
Nonsense. How often would someone need to buy expensive, crappy music before
they realized that the price is not an accurate signal of whether they will
like it? Particularly in the case of music in which it is not difficult to
hear it before buying it.

~~~
nonrecursive
The thing is, I don't think people always work like you're describing. Some
people might actually look to the price of the song, if only unconsciously, to
help decide whether they should like it. Especially if the song is popular,
and price indicates popularity. Then it's not just a matter of liking a song,
but of fitting in and being hip.

~~~
petercooper
And if by buying overpriced music, the person feels like they're "fitting in"
and are "hip" then what's the problem? They're not being ripped off. They're
getting $2.50 (or whatever) of smugness / well-being / hipness.

------
umangjaipuria
I disagree. What if you make something free? Does that make it seem crappy?

I don't think pricing is a signal. It is a barrier - how high a barrier would
you like to set for you customers.

~~~
hopeless
If something is expensive, you ask yourself "what justifies this price", with
the expectation of greater quality, features, stability, support or whatever.

If something is free, you also ask "what justifies this price", but this time
you expect things to be missing, flawed, incomplete, contains viruses, etc.
You're instantly looking for whats wrong, not whats great.

So, yeah, pricing is a signal.

------
dejb
I don't think the analogue with movies was a good one. The time investment of
several hours involved in going to see a movie is more than the actual money
cost for most people. There are many movies that wouldn't be worth seeing if
they paid you. Music has this as less of a factor because the time investment
is so much less. Usually when you are going to buy a song you have already
heard it.

------
petercooper
Joel's argument makes sense in theory, but in practice it doesn't add up at
all. You can preview music, get a feel for what it's like, regardless of the
price. On a movie, you're relying on other people's opinions, but from 30
seconds of preview you can _usually_ establish if you like it or not (and if
it's a band you always buy the music from - you don't care anyway).

~~~
MrRage
In makes sense in practice too. I'll never touch a bargain bin of CDs at a
store.

~~~
petercooper
Ah, but if that were generally true of public perception, bargain bins
wouldn't exist.

~~~
LogicHoleFlaw
I love hitting the bargain bins at video game stores. There are many many
games which don't merit spending $40-$60, but have some redeeming quality at
$1-$5. I've found some of my favorite games that way, and the junkers are easy
to trade back in for credit. The great ones generally were just obscure and
deserved better market attention than they actually got.

