Nin for Free, $5, $10, $75, or $300: That’s Price Discrimination! Or Bundling. Whatever; It’s Value-creating!

Lynne Kiesling

I haven’t heard as much discussion as there was over Radiohead of Trent Reznor announcing the new Nine Inch Nails album on his website, and offering a variety of versions of it at a variety of price points:

The album itself is 36 songs, nearly two and a half hours of music — but he’s only offering the first nine songs for free. However, he is offering a variety of choices for people who do want to pay — starting with $5 for a complete download (in a choice of high-quality, DRM-free formats) of all songs plus a 40-page PDF of additional content and a “digital extras pack” with graphics that can be used as wallpaper, icons and anything else.

There are other options as well, reminiscent of other musicians who try to offer reasons why you should spend more. For Reznor, those options include a $10 2-disc CD with 16-page booklet (and all the downloads), a $75 Deluxe Edition which includes the CD, a data DVD with all of the content and a Blu-ray high definition DVD with an accompanying slideshow, and finally, a $300 “Ultra-Deluxe Limited Edition Package” that includes everything in the Deluxe Edition plus a vinyl version of the album, limited edition Giclee prints packaged in a “luxurious package” which will be numbered and signed by Trent (only 2,500 of those are available).

I hope that this works out better for him than the previous experimentation that TechDirt mentions, because I think it’s a very clever form of price discrimination. Remember that price discrimination is a way for suppliers to increase the profits they earn by engaging in product differentiation to appeal to different segments of the demand curve with different price elasticities of demand. The casual NIN fan will download the nine songs for free, sure, that’s cool. But the hardcore fan can go all out for the Deluxe Edition. And there are three intermediate options.

Technology and the reduction in distribution costs makes it easier and cheaper to engage in price discrimination of this granularity, which benefits both producer and consumer.

UPDATE: in the comments my friend Barry correctly notes the technical definition of price discrimination, which holds the actual nature of the good constant while different consumers are charged different prices. Thus my calling it price discrimination is not precisely correct, and it’s more correct to say that NIN is selling different bundles. Whatever. You get the point!

4 thoughts on “Nin for Free, $5, $10, $75, or $300: That’s Price Discrimination! Or Bundling. Whatever; It’s Value-creating!

  1. Isn’t this really more of an example of bundling, rather than price discrimination? I always thought of price discrimination as charging different people different amounts for identical goods.

  2. Interesting . . . what, have NIN been reading the lit on how mixed bundling dominates pure bundling? Life on the road these days must be kinda dull.

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