Polyphonic Hss Music Pricing

Polyphonic HMI: Hit Song Science (HSS)

Value-based (Customer-oriented) Pricing

Value of HSS per Album to record label = $0 - $219,000 for new artists and $246,000 - $737,000 for established artists. For a price of $50,000 per album or $5,000 per song (which is about 33% of value of medium estimate in the case of new artists), breakeven calculations is as follows.

Annual Fixed Costs = $500,000 (p.2, 5th paragraph)

Variable Cost per album = $300 (p.5, 2nd paragraph)

Breakeven Volume = $500,000 ÷ ($50,000 - $300) = 10 album-reports per year

Breakeven Market Share = (10 ÷ 2,500) * 100 = 0.4 % of albums with singles (p.8)

For a price of $10,000 per album or $1,000 per song, breakeven volume is 52 album-reports for a breakeven share of 2.1%

Competitor-based pricing

Price suggested would be $6,000 per song or $60,000 per album based on average of callout studies, $3,000 per song or $30,000 per album based on internet polling studies, and $10,000 per song or $100,000 per album based on focus group methods.

Target-Return Pricing

Assume a 5% market share = 2,500 * 0.5 = 125 album-reports per year. Assume we shoot for a return of 20% on the initial development cost of $600,000 (p. 5) = $120,000.

Breakeven Price to cover variable and fixed costs and target profit at 5% market share

= Variable Cost + [(Fixed Costs + Target Profit) ÷ Sales Volume]

= $300 + [($500,000 + $120,000) ÷ 125] = $5260 per album