Blog Archives

Credit Crunch hits home

I got a letter from Halifax. They want to help me with my financial situation. They can lend me money to help pay off my credit cards. Payment terms can be up to 7 years, at 11.9% apr. Brilliant.

I am worried, though. My credit rating might not be up to it. They have only reserved £9 for me. Over 7 years, I guess I’d pay back £10.30. But it would help in the meantime…

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Bursary for E4 Radio

channel4.com – 4 Careers

Deadline

22 March 2008. To apply go to channel4.com/4careers and enter reference ‘4T E4’.

Channel 4 is fined £1.5m by Ofcom

Channel Four has been fined £1.5m by media watchdog Ofcom for misconduct involving phone-in competitions on Richard and Judy and Deal or No Deal.

BBC NEWS | Entertainment | Channel 4 is fined £1.5m by Ofcom

In the past, Ofcom was seen as having no teeth: this change in 2003 with the merging of the old regulatory bodies into the single umbrella communications office. This current round of fines after the 2007 scandals (by this, I mean the phone ins not the misrepresentation of Death on ITV) proves that Ofcom is a force to be reckoned with.

However, at a time when TV is dying, advertising funding is drying up and people are turning to alternative methods of entertainment, is it too little too late?

Plus, they have no control over internet broadcast material…

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BSkyB 'should sell shares in ITV'

The Competition Commission has recommended that BSkyB should be forced to sell some of its 17.9% stake in rival broadcaster ITV.

sky, virgBBC NEWS | Business | BSkyB ‘should sell shares in ITV’

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Radiohead find there's gold at the end of In Rainbows

A few weeks ago, the band Radiohead made waves by making their new album In Rainbows available online as a free download. But people could also decide how much they wanted to pay for it. This experiment was greeted with gleeful incredulity by many cynics, who opined that Radiohead had showed a touching but naive faith in human nature, and predicted that freeloaders would so outweigh the paying customers that the experiment would be a financial flop.

The band haven’t officially released any figures. But a web-monitoring outfit called Comscore released data claiming that 62 per cent of customers set their price at zero, with the remaining 38 per cent setting an average price of $6, which comes to an average $2.28 per customer – or £1.29 in UK money. This seems plausible to me. In our household, for example, I paid £8, which I reckoned to be the average retail price of a CD, but two other family members downloaded the album for free – which eant that Radiohead’s take from this particular dwelling averaged out at £2.66 per head.

Collapse of stout band, then? Not at all. Ed Felten of Princeton University published some back-of-envelope calculations on his blog. ‘Imagine,’ he writes, ‘that there are 10 customers willing to pay $10 for your album, 100 customers willing to pay only $2 and 1,000 customers who will only listen if the price is zero.’ (For simplicity, assume the cost of producing an extra copy is zero.)

If you price the album at $10, you get 10 buyers and make $100. If you price it at $2, you get 110 buyers and make $220. Lowering the price makes you more money. Or you can ask each customer to name
their own price, with a minimum of $2. If all customers pay their own valuation, then you get $10 from 10 customers and $2 from 100 customers, for a total of $300. You get perfect price discrimination – each customer pays their own valuation – which extracts the maximum possible revenue from these 110 customers.’

Felten goes on to point out that there might be some intangible value to be extracted even from those who paid nothing. The experiment might, for example, make them better disposed towards the band, or more likely to recommend
the album to their friends. Either way, Radiohead’s gambit may have been shrewder than the numbers would at first indicate.

Actually, it might be even smarter than Felten thinks. Some years ago, William Fisher of Stanford University published some interesting data on the cost structure of CDs. According to his figures, the retailer’s slice of the CD is 38 per cent, while distributors take 8 per cent and marketing another 8 per cent.

The artist, in contrast, typically
gets only 12 per cent and the music publisher 4 per cent. So the
maximum Radiohead would get from a conventionally marketed CD priced at £8 is actually £1.28 – which, coincidentally, is almost exactly what Comscore thinks they got from their online experiment.

John Naughton

The Observer, Sunday November 18 2007

Comment: Radiohead find there’s gold at the end of In Rainbows | Media | The Observer

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