Amie Street: A glimpse of user-driven pricing

Amie Street follows a very innovative demand-driven pricing model which is determined by its popularity among the consumers. While companies are struggling with how to maximize revenue with minimum pricing, this startup has come up with a DRM-free model for promoting and selling music harnessing the advantages of a social network.

All songs start at a price of 0. The price of a song rises with its popularity which is determined by two network-driven attributes: number of downloads and number of recommendations. The demand-price relationship is modeled on a pricing calculator available on the site. Prices can rise to a maximum of 98 cents, which seems to highlight that a song on Amie Street will always be cheaper than an itune.

Users get a recommendation token (REC) for every dollar spent in purchasing music on the site. Users recommend (REC) songs they like and believe will be hits. If the song price increases after the REC, the user is awarded based on the price increase, an incentive which effectively helps drive the demand-based pricing. Internally, this is a measure of the credibility of the user as well. RECs are given out judiciously to prevent song inflation.

The model offers a great deal of flexibility to both artists and consumers. Artists keep 70 percent of proceeds after the first $5 in sales and are not required to sell their music exclusively through Amie Street. The consumer downloads DRM-free music at a cheap price and can search, browse or listen over streaming for free. The Amie Street model combining a social network with a recommendation system fosters niche music communities and helps people discover new music by exploring what similar users like.

The model does have its shortcomings. Focusing on independent bands alone will never let it reach the neutral, casual consumer. The users of a social network-driven music store end up being other artists or people really interested in a narrow genre of independent music. This ‘social retail’ makes user acquisition circular and does little to attract a wider, more mature buying audience. Amie Street currently doesn’t have mujch to offer to the bigger artists who can reach a much wider audience through the iTunes’s of the world.

Despite its shortcomings, Amie Street is an indication of things to come as music distribution and pricing moves from being a record-label-directed-push to a demand-driven-pull structure.