The RIAA and the Sam's Club Weenie

When the RIAA trots out figures showing how much money they've lost to illegal downloads, there's an unspoken assumption folded into those figures that make them far bigger than they should be.

It's the driving force behind the RIAA's war on consumers that's hauling computer-ignorant grandmas and even dead people into court as vicious intellectual pirates. It's behind Universal's one dollar tariff on every Zune player Microsoft sells, and the current efforts of the SoundExchange to hobble webcasters. It's the reason why record companies continue to force copy protection on consumers that do little more than punish legitimate customers.

And it's an assumption Sam's Club never makes.

The assumption: Every free sample represents another lost sale.

Go to the food section of any Sam's Club and you're likely to find one or two employees offering free samples. Usually, the freebies are some kind of impulse item, such as cocktail weenies.

Sam's Club, and its parent company WalMart, are famous for being ruthless about the bottom line. They operate on very thin margins, so if something's not working -- and working well -- then out it goes.

Free food samples at Sam's Club have been a fixture for years, so obviously they work well. And why not? Take one bag of 100 cocktail weenies out of stock (wholesale price, $4.50) and cook 'em up. One hundred shoppers receive one sample each. If just one in five people picked up a bag, that's $179.80 in sales (at $8.99 a bag).

And those 100 weenies generate other sales as well. The smell of cooking weenies will make some shoppers hungry, and cause them to purchase some food items when they were just planning on picking up some toilet paper in bulk. Further, of those who sampled a weenie but didn't purchase at that time, some will go back to Sam's Club at a later time for a bag or two when they're hosting a party (I have).

From Sam's Club viewpoint, giving out 100 cocktail weenies generates more than enough revenue to justify the loss. After all, giving up $4.50 to net 40 times that amount is a good deal just about anywhere.

But that's not how the RIAA would see it. If 100 people each ate a free weenie and only 20 bags were sold, then 80 people didn't purchase bags and therefore the RIAA suffered $719.20 in lost revenue.
As Sam's Club knows, not everyone who accepts a free weenie will purchase. If they charged a nickel a weenie, there would be fewer takers. If it's something that's not important to you, you might be willing to try it no risk (that is, for free) but certainly not if there's any money or effort involved.

If the RIAA would recognize that free samples are an important part of their business, we'd all be a lot better off. A good portion of the stuff being downloaded for free is only of interest because it is free. I'm willing to bet a lot of Top 40 MP3's wind up deleted once the novelty wears off.

Sam's Club uses free samples effectively to generate sales. The RIAA's maniac drive to lock down every possible usage of its material only hurts itself. Free weenies are good for business.

The RIAA should realize that -- and quit being such a weenie.

- Ralph

The RIAA and Wimpy WiFi - Part 1

I've talked before about the fundamental disconnect between the RIAA and music consumers. Instead of responding to market demands and profiting from providing customers with what they want, the major labels keep trying to push customers back into buying patterns they've long since abandoned.

For many consumers, WiFi capability is the next logical step for MP3 players. The expectation was that a WiFi-enabled MP3 player would have similar capabilities to a cellphone, or a laptop. That is, access through hotspots, the ability to send files back and forth to other WiFi-enabled devices, perhaps the ability to sync wirelessly.

Enter the Microsoft Zune -- a digital music player with wireless capability. But the major labels had something to say about that. The result was a device crippled almost to uselessness by Digital Rights Management (DRM) -- and a system that rigorously protects the property of the major labels while trampling the rights of others.

Is the Zune wireless? Technically, but Zunes can only communicate wirelessly with other Zunes (that's what "Welcome to the social" refers to -- we'll save the discussion about referencing early 2oth century church ice cream socials in a misguided attempt at hipster coolness for another day). A far cry from true WiFi.

And while you can transfer songs from one Zune to another, the process adds DRM to the file. Send a song to a friend and they can listen to the track three times before it automatically disables itself -- and they better listen promptly, because the track self-destructs after three days whether its played or not.

This was about the only way the major labels would let Microsoft have any kind of wireless capability. But the problem is that this DRM is added to everything transferred from one Zune another. DRM-free songs bands post on their website for fans to share gets this DRM added, even though the bands are against DRM. Podcasts issued with creative commons licenses get this DRM added -- in violation of the terms of use of the creative commons license.

The RIAA has been happy to sue anyone and everyone who crosses their path. Wouldn't it be interesting if creative commons licensors collectively brought suit against the Zune's violation of their rights?

- Ralph

In whose best interest?

Did you miss it?

There was a second product announcement this week. One for Microsoft's Zune MP3 player. Somehow, it lacked the intensity of interest Apple's announcement generated. While several tech sites had live text-messaged updates of Steve Job's speech as it happened, I didn't see any real coverage of the Zune rollout until after it was over.

Lots of virtual ink will be devoted to this new "iPod killer." As you read, consider this: at the core of the Apple vs. Everyone Else there's been a fundamental philosophical difference. Apple started with what the consumer wanted, and worked around what the media companies demanded. Microsoft, et al started with what the media companies wanted, and worked around what the consumers needed.

Has that changed? I don't think so. Consider the Zune's coolest feature, the ability to share songs with other Zune players wirelessly. If I want you to check out a new band, I can squirt some tracks to your player. That serves the consumer.

However, you have three days to play the tracks, and you can only play them three times before the files are disabled. The media companies' needs trumps the consumer's desires. Think about it – when friends loan you movies or music to check out, do you do so right away, or when you can get to it? In my case I’d just end up with a lot of disabled files cluttering up my Zune.

IMHO, until other manufacturers make the focus the consumer, not the media companies, we'll never have more than an iPod wounder.

- Ralph