Apple relents; iTunes leads move into tiered pricing
For years, Apple resisted the desire of the music companies to move into tiered pricing of music by popularity, but it has now given in and the tiered model is set to sweep the industry.
The end result is that the record labels are going to make more money from music, and that music buyers are going to pay the price for increased industry revenues. In the new tiered system, the most popular music tracks cost more than less popular tracks. Specifically, at iTunes, the most popular tracks will now sell for $1.29 each and the least popular for $0.69, while tracks with “average” popularity will sell for $0.99, the price Apple used to charge for all songs.
Popularity, of course, is determined by the number of times a track is sold. It is not hard to see that if the songs that sell the most are sold at $1.29 and the songs that are sold the least are sold for $0.69, the average song price is going to be much closer to $1.29 than $0.69. Thus, the average price per track, for the average consumer, will rise, as will the average revenue per track collected by the record labels. That’s a good deal for the record labels, to be sure. But for consumers? Not so much.
This change is not going to be limited to the iTunes music site. Apple is the leader of the industry. Where iTunes goes, all of the other music sites will follow, according to an article in Information Week. One competitor to iTunes, La La Media, said the following on its blog: “You will see much more variable pricing by all music retailers, with the price moving higher on some tracks and lower on others.”
Apple’s acceptance of the variable pricing scheme was paid for when the record labels decided to allow tracks to be sold without Digital Rights Management (DRM). Consumers were very unhappy about the limitations of DRM on the rights. Apple was afraid that dis-satisfaction with DRM would lead to consumers buying less music, reducing iTunes revenues. So they traded the death of DRM for the birth of tiered music pricing.
Apple thereby had its fears assuaged via the loss of digital rights management. The record labels got what they wanted, which as always was more money. The consumer? Well, the consumer got music without digital right management, but they are paying a price for that privilege. Whether the loss of DRM was worth that higher average track price is something that every consumer will have to decide for themselves.
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