Variable pricing on iTunes: Day One
Yesterday saw Apple’s iTunes Store finally go entirely DRM-free, but that also meant the introduction of variable pricing – which in the US, means three price points for iTunes downloads: $0.69, existing price $0.99 and $1.29.
Introduced due to pressure from the major labels, variable iTunes pricing has launched at an awkward time. Only 5% of music downloads are legal according to the IFPI, and there’s a global recession, so reward that minority of digital music purchasers by… whacking 30% on the price of the most popular songs? Strange logic.
However, the labels are putting a different spin on it, with Billboard reporting that “for every one song they raise to $1.29, they will be reducing 10 songs to 69 cents”.
Which sounds great, although The Register spent a bit of time digging yesterday, and found that despite claims like this from the labels and Apple, “those bargain-basement tunes seem to be few and far between”. Even Vanilla Ice has hung onto his 99-cent track price.
Back to Billboard, though, and a label exec who makes another claim for why consumers should welcome variable pricing: “We’re thinking outside of the disc to reach a new generation of consumers who are able to consume music on any device, it’s not just the track any more.”
If ‘thinking outside the disc’ ever becomes a buzz-phrase, we might just have to kill ourselves. But the exec’s point is that labels might use the $1.29 price point to sell bundles – a song and a video, for example, or a song and a ringtone.
So have they done that at launch? Er, no. Hypebot doesn’t mince its words: “Instead of delivering more value in the form of additional content along with the higher price, the major labels upped the price of their most popular titles almost 30% just as many consumers began getting comfortable with paying for downloads and in the middle of the worst economic downturn in decades.”
The introduction of DRM-free music should be a good thing, although existing iTunes customers will have to pay to upgrade their previous purchases. That’s if they can – Ars Technica reports that at least one album – New Kids On The Block’s ‘Super Hits’ – isn’t now available DRM-free, even though it was available before in a DRM’d version.
The piece goes on to point out that there’s no uniformity across different digital stores. Tracks that now cost $1.29 on iTunes are still available for $0.99 on Amazon’s MP3 Store, and so on. Which brings us to the popular conspiracy theory doing the rounds:
“The only thing that might happen as a result of the highest tier is that Apple will lose market share, which would no doubt gladden the dark hearts of record executives concerned that Apple wields too much power in the music industry,” suggests Ars’ writer Jacqui Cheng.
The competition are certainly seeking to take advantage – Amazon is selling 29p downloads in its UK MP3 Store, while eMusic has launched a ‘You Think $1.29 A Song Sucks? So Do We’ advertising campaign, while boss Danny Stein says “While I am CEO, I promise that eMusic will never sell single MP3 downloads for more than 99 cents”.
However, it’s not as clean-cut as that from Amazon’s point of view. CNET is reporting that actually, Amazon is selling tracks for $1.29 now too on its US MP3 Store. “I can’t imagine Amazon’s excited about raising prices in a recession – they’re probably responding to price increases by the record labels, which were made possible by Apple’s capitulation,” says writer Matt Rosoff. “Good luck with that!”
It all seems like a rather big gamble for the labels. Variable pricing might mean better margins, it might eat into Apple’s market share, it might stimulate back catalogue sales, and it might enable innovative new bundling offers.
But equally, it might just annoy the small percentage of consumers who ARE buying digital music already. And those arguments about back catalogue sales and innovative bundles would be more convincing if they’d been more in evidence on launch day.
Tags: Amazon, apple, eMusic, iTunes, variable pricing
April 8th, 2009 at 10:14 am
This beggars belief. I’ve been buying music online for years, and I spend a lot of money on iTunes. I don’t use BitTorrent or pirate sites to get music illegally. I’m a good guy! I thought the music industry liked people like me.
So the way you reward me is to charge me MORE? When people are worrying about their jobs and money, you charge MORE? You want people to stop pirating music, so you charge MORE?
Who the HELL thought this was a good idea? And did they also suggest lying about cheaper old songs or bundled ringtones to try and pacify music fans?
You might think squeezing every last cent out of your customers to make up for your failure to deal with piracy is a sensible strategy. But you’re utterly wrong. Can’t anyone in the music industry see this?
Oh, and before eMusic get too smug, $1.29 downloads might suck, but not being able to buy music from my favourite bands because you don’t stock them sucks more.
April 8th, 2009 at 10:20 am
Am I missing something here? This is just normal retail isnt it? Charge more for new releases and less for back catalog? Ok so the number of higher priced tracks has to be matched or bettered by the number of discount / back catalog tracks but why is it the labels fault? Fixed rate pricing isn’t normal retail practice.
April 8th, 2009 at 10:25 am
The very last thing the a la carte business needs right now is to raise prices. But cutting prices by a few pence on individual tracks is not going to make so much of a difference either. What really needs to happen is to cut prices on digital albums. Consumers don’t value digital albums anywhere near as much as CDs and yet the pricing is still fairly similar. If prices don’t drop substantially on albums then consumers will simply continue to cherry pick and the a la carte business will continue to fail to grow enough to make up for the continued decline in CD album sales.
April 8th, 2009 at 12:30 pm