A meeting yesterday got me thinking about the feasibility of an iTunes for the Philippines (or, for that matter, the third-world). I already wrote about the Mozcom effort Fliptunes (which generally sucked) a couple weeks ago, so I thought I’d take some time to write down some ideas for a local digital music initiative.
The big challenge here is that you are marketing to an audience that has thoroughly embraced piracy, and are effectively asking them to pay for something that they could otherwise be getting for free. That may sound like an impossibly skewed view, but I believe there is a way to make your service more appealing, such that it becomes a viable alternative for a large enough portion of the market. Because you are essentially trying to convert freeloaders, it becomes important to realize that virtually any amount is going to be "too much," unless your services offers something that piracy doesn’t.
My dream service would function as a kind of digital locker for the songs I purchased. It would retain these songs for as long as I was a member of the site, and would allow me to download them at any point in the future. For something like this, I’d say the average person would be willing to spend no more than PhP18/song. The reason why I pick the 18-peso price point is because you can represent that in your mind as three 5-peso coins and three 1-peso coins, i.e., a trivial amount. PhP20 per song, on the other hand, would be represented by an actual paper bill, which crosses over the line from being a "trivial amount" to being an "actual expense."
I would also be willing to pay a small amount per month to keep these songs in a digital locker. For a service like this, I would be willing to pay in the region of PhP1,000 per year (or roughly PhP100 per month). The digital locker concept is what makes this service profitable, because "keeping" the songs requires no actual action on the part of the music provider. All they have to do is keep a list of the songs that a particular user has purchased, and make these available to him whenever he logs on. What the user is buying is the convenience of having a place online where he knows his songs are safe (and could possibly even listen to via a browser-based radio).
The digital locker also has the added benefit of being a point of stickiness for your service, as you could further extend the idea to make each user’s digital locker publicly-viewable. You could conceivably open the whole thing up and build a social network ala last.fm or mog.com, except that the songs and artists mentioned are all purchase-able instantly. The idea really is to stop focusing on making a profit from selling songs, but to make your money on peripherals like the locker service (which can be priced in tiers of "storage"), or selling targeted merchandise.
Going forward, you could allow young bands to upload their songs as well and charge their own prices on top of a base price of say, PhP10, which is the minimum amount the service can charge (ala CafePress). Now suddenly you’ve got a network that grows organically over time and reflects whatever is popular in the local scene. But it all starts with locating that perfect price point at which you can start converting the piracy-powered masses.