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How Much Are You Willing To Pay?

Around 33 million Americans paid an average of $6.50 per ticket to see Ben Stiller in Night at the Museum during the last six weeks. But that’s just the beginning: from DVD to pay-per-view to television broadcasts, Fox will be hauling in the bucks for years, charging different prices for the same movie based on each consumer’s “willingness to pay.”

Around 33 million Americans paid an average of $6.50 per ticket to see Ben Stiller in Night at the Museum during the last six weeks. But that’s just the beginning: from DVD to pay-per-view to television broadcasts, Fox will be hauling in the bucks for years, charging different prices for the same movie based on each consumer’s “willingness to pay.”

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Economists call this practice “price discrimination,” and it’s a great way to make money. Price discrimination allows the movie studios to monetize a wide range of consumers, from rabid fans to channel-surfing couch potatoes. The movie business figured it out decades ago, but the music business stubbornly refuses to try it.

Movie people call it “windowing,” as in rolling out a film in stages, each distribution platform having its own window of time. If you want to talk about Ben Stiller’s escapades at the office water cooler, then you have to pay $6.50 for a movie ticket. If you don’t mind waiting a few months, you can rent it at Blockbuster and show it to the whole family for just a few bucks. And if you’re willing to wait a year or more and sit through commercials, you can watch the movie on television for free.

Meanwhile, the music business clings to the idea that all consumers should be willing to pay fifteen bucks and up for a CD. While lamenting the “Napster generation” of teens who rip, burn, and file-share, the industry has never made a bona-fide, genuine offer to these price-sensitive consumers. They may not be willing to pay $15 for a CD or even 99 cents for a download at iTunes, but could there be a price point at which free-riders would become paying customers?

Whether it’s an ad-supported download service like the soon-to-launch Spiralfrog, or a monthly allotment of downloads that are bundled into cellphone or satellite radio service, there are many possible answers to the question, if the industry is willing to experiment. If the film studios and the airlines have found ways to segment their customers and charge different prices based on convenience and willingness-to-pay, why can’t the music industry?

Greg Spotts is Creative Director of the Shortlist Music Prize, and rocks the digital media beat for Fast Company.