Social-music Web site Amie Street, which is ushering in a variable-pricing model for music sales, just received a round of financing from Amazon.com. Unlike other online music retail sites, Amie Street uses the marketplace to determine the price. The cost of a track rises as its popularity rises. The maximum cost is 99 cents. Artists keep 70% of all revenue after $5 in sales. As I said in my previous comment about Amie Street, the NY-based company has taken the price out as an abstract tool in the buying process. The price of a song is governed by a demand-based pricing system. Simply put, the price is determined by the number of times a song is purchased. On Amie Street, price becomes a quality or popularity indicator since a song that is 52 cents was obviously purchased more than a song at 34 cents. On other services where the price is a flat 99 cents, there is no useful information about the quality or popularity of a song.
Amie Street has also incorporated a recommendation system, whereby a user can recommend a song at 5 cents and once the song goes up to more than 95 cents, Amie Street gives the song to the user at 5 cents. As Joshua Boltuch explains it, this feature creates a Digg-like service for its users.
Amie Street is great example of a cleverly and holistically integrated revenue model. Watch Joshua give his pitch about Amie Street.
