Music label’s price increases hitting iTunes sales
From the “everybody said this was a bad idea” department comes data showing what should have been obvious from the moment this idea was proposed—increasing prices on legal music downloads has led to a decline in sales. In the midst of the worst economic downturn in generations, this move by EMI, Sony, Warner and Universal to radically increase prices is at best ill timed.
Billboard reports that the recent implementation of the four major labels’ (EMI, Warner, Universal, Sony) variable pricing on the iTunes Music Store has resulted in a small though palpable decline in sales, though the effect overall still isn’t clear. However, whereas consumers have gained iTunes Plus (256K, DRM-free) format music across the board, record companies have won a huge 30 percent price increase on the most popular songs.
However, the truly bad news is that although sales are off somewhat, the cumulative effect for the record labels will probably be higher revenue. That is for each incremental lost sale, they will enjoy a much greater revenue increase offset.
For a price increase (to $1.29 from $0.99) to result in an equal or greater amount of revenue, unit sales would to drop by no less than 23.3 percent. On the most recent track download chart, the difference [the average] was only 3.5 percent.
The record labels’ 69-cent, 99-cent and $1.29 variable pricing scheme on iTunes isn’t even a week old and it’s perhaps a bit too early to declare it either a failure or success for the beleaguered record companies, which have seen unit and revenue results plummet through a combination of changing tastes, incompetent management and piracy. For paying customers, however, the anticipated increase in prices has not been offset by a notable let alone commensurate decrease in back catalog pricing—a double whammy in these difficult times.
That is, wherever you look on the iTunes Store, you can find plenty of examples of Warner, EMI, Sony and Universal raising prices from 99-cents to $1.29, but precious few songs that cost 69-cents…
Yet another example of the record labels’ tin ear…
What’s your take?
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April 13th, 2009
That it’s the same as Apple does for hardware. The difference is hackintoshes take real work.
DRM free MP3 on P2P, not so much. It’s not the cost, it’s the perception of being ripped off. I doubt $1.69 over .99 is changing the lifestyles of anyone.
Why they want to be seen as price gouging ogres that made them so unsympathetic casual stealing was approved socially back in the Napster heyday is puzzling. If iTunes hadn’t come along, these morons would have been done. Geniuses.
April 13th, 2009
I believe you forgot to mention that the $1.29 songs are 320kbps (virtually lossless) and DRM free, which increases their value.