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News

iTunes Price Hikes Hurting Track Sales

The price hike to US$1.29 for certain tracks at the iTunes Store seems to have had an immediate effect: Many of the higher priced tracks aren't selling as well as they were before the increase.

After only two days with higher prices, Billboard noted that higher priced tracks were losing chart positions to $0.99 tracks.

Wednesday, the day after the price increase went into effect, songs priced at $1.29 lost an average of 5.3 places on the chart, and songs priced at $0.99 gained an average of 2.5 places. Seven of the songs priced at $1.29 had been $0.99 on Tuesday, and they lost an average of 1.9 chart positions.

Moving into Thursday, the trend continued with 53 $0.99 songs climbing on average 1.66 places on the chart, and 47 songs costing $1.29 losing two chart positions.

While two days worth of data doesn't necessarily indicate a trend, it does show that, at least for now, customers prefer the $0.99 per track price point. If the sales pattern continues, the resistance to $1.29 tracks could start impacting already dropping record label profits -- which is exactly what the labels don't want.

10 comments from the community.

You can post your own below.

Lee Dronick said:

We have gotten quite used to paying $0.99 per track. I can understand a price increase for commodities such as food stuffs due to weather conditions, transportation cost and such. However, music tracks are not subject to such conditions, or only slightly influenced by bandwidth costs or other costs associated with selling them.

I don’t see the value in $1.29 most of the tracks. Of course my taste in music is a factor, I am not so much into Pop where I see most of the higher prices.

Sidebar: A few days ago I searched for an “Oldie” to see if it was available at $0.69, it was. However, they also had a re-recorded one at $0.99 that to my ears had better quality and that is the one I purchased.

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mactoid said:

WOW…a price/demand curve.  Who woulda thunk it?!?!?  Maybe the record labels need to consider hiring at least on econ major!

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OS11 said:

There are lots of angles on this, but perhaps $1.29 is simply too high and pushes the price point out of the comfort zone of many buyers. A better approach would have been to charge, .89 / .99 / 1.09 but a 30% premium for a “popular” song will just push people back to P2P for the free versions.

Another affect is now we won’t know what is truly popular and what is not. Inserting a monetary element into individual song pricing will skew the “hits” all over the place… so the greatest song ever may never be heard on a mass scale since it was priced “out of the market”.

My solution has always been find the actual “market price” of a song and stick to it. The record companies would be rich if each song was “10 cents” for example… since around that amount is the inflection point of where stealing music isn’t worth the “expense”, so money would flow to the record companies instead of P2P. oh well.

Lastly, I wonder if any of this would have happened if Steve wasn’t out of the picture? Hard to say, but it looks like the record companies are hastening their demise with such a huge price increase.

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vasic said:

Steve was the one who negotiated these prices. The deal was sealed last year and announced at MWSF in early January.

P2P companies aren’t getting any money from the illegal sharing of tracks. At this point, there aren’t even any companies; it’s all open-source peer-to-peer networking, without any one entity making profit (or even generating revenue) on that traffic.

In this whole tiered-price debate, many seem to imply that Apple caved in to the labels’ demands. We keep forgetting the biggest prize here: mobile downloads. Steve didn’t want to budge, while labels wanted desperately to withhold the privilege of negotiating separate deals with cellular carriers for selling music through phones (iTunes on iPhone), at $3 per track (like Verizon does). In the end, Steve got DRM-free and no limits on mobile iTunes, so in January, new iTunes for iPhone was announced, which now can downloads songs directly over the 3G/EDGE network, at same prices as on the desktop OS. Apple stood firm, labels caved.

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WaltFrench said:

Really? People buy fewer items if the price is higher? You mean just like Lexus vs Toyota or the French Laundry vs McDonalds or (need I ask) Macs vs Dells?

Assuming they don’t train people to use alternative ways of getting tracks, it’s in the companies’ interest to KEEP raising prices until volume drops enough that their total revenues decline. I certainly have no idea whether any given track will generate more total revenue at 99? or $1.29, but I’m sure they will keep tweaking prices to find the ever-changing sweet spot.

I think Apple has established their dominant position with the iPod and is less concerned about championing listeners’ price interest, versus availability of special bundles, video etc that taking the hardline “99? or nothing!” position may have locked them out of.

And some more context: somebody who buys a track every single day sees a price increase of $9/month. If the tunes matter that much to you, but you can’t afford an extra hour of a low-wage job extra to get it, it’s time to seriously consider therapy for addiction. There’s life outside the earbuds.

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vasic said:

Many of us seems to have got carried away with this uni-price fixation ($0.99, one-size-fits-all). There was a very strong argument for its existence in the first six years of iTunes Store. The argument went that in order to motivate ordinary people to buy music, rather than find shared tracks, only an extremely simple, straightforward system, with a single price point and a one-click buying process would stand a chance to succeed. Apple has over the six years successfully proven that. And now that large percentage of US population owns an iPod and is familiar with iTunes Store, the public is ready for a tiered (i.e. market-driven) pricing. Labels now get to decide how best to sell their content online. As for the consumer, we now have DRM-free files which can be downloaded via any possible networked device—mobile or otherwise.

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disappointed said:

I think many people, like myself, are just mad at Apple for making us pay more money to buy the exact same tracks we already have if we don’t want DRM.  I for one have stopped using iTunes completely (except for using those old tracks) and all my purchasing now will be done through www.amazonmp3.com.  Amazon led the way on no DRM and Apple followed in a way that just serves to piss off customers.

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vasic said:

Disappointed:

I think you got that wrong. When the DRM removal was announced, the press release also stated that users would be able to upgrade their existing DRM-protected tracks to DRM-free, 256Mbps versions by paying just the price difference ($0.30).

Make no mistake, though; Apple led the battle for DRM-free. Labels fought it tooth-and-nail, and were trying extremely hard to dislodge Apple from the top spot by offering DRM-free to Amazon and denying it to Apple.

Also, Apple’s AAC is far superior in quality from Amazon’s MP3. Since the prices are more-or-less the same, it is somewhat questionable why anyone would really want to buy from Amazon, now that you can put iTunes tracks on pretty much any portable device or phone.

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OS11 said:

@ disappointed

Apple doesn’t set pricing or control DRM, the recording companies do. Apple is just a distributor, they don’t own the content.

Actually, Apple has always been against DRM so it sounds like you have other issues not related to Apple or the music industry.

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James said:

@disappointed (one more)

You may have noticed Amazon’s prices are beginning to match Apple’s now. It’s already been pointed out that the labels control the DRM, not Apple or Amazon, and many believe (I think correctly) that the labels gave Amazon DRM free tracks first to leverage business away from iTunes which was rapidly overtaking all other venues for music purchases. This was all crass greedy nonsense on the part of the labels (and believe me, they know exactly what they’re doing and who they’re screwing), not brilliant strokes of genius by Amazon, Apple, or any other distributor. And yeah, AAC is better.

Just so you don’t think I’m biased, there’s no way I’m paying upwards of $12.00 for a 192 or 256 kbps downloaded album. For the moment, Amazon does have better prices than the iTunes store for a lot of things, get ‘em before their new pricing structure is fully implemented.

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