Music Labels See Slower iTunes Sales Growth in Wake of Price Increases

[CFreymarc]

Cartel bust

And I'm sure the record companies are all smiling over it. They wanted Apple to lose market share. They all think Apple has too much influence in the music business.

You have that right. This is a classic distribution line breakaway move. Increase prices so a distributors market share decreases while you low ball price another distributor so it gets close to parity and the distributors can start to compete against each other.

This is done all the time with retailers. Amazon and others have been wanting to get into Apple iTunes market share since the whole down-loadable music scene has been proven to be a profitable market.

 

[Shasterball]

You have that right. This is a classic distribution line breakaway move. Increase prices so a distributors market share decreases while you low ball price another distributor so it gets close to parity and the distributors can start to compete against each other.

Ummm, I think this would be an antitrust violation -- along the lines of a group boycott. So, I don't think they are being that explicit... But, who knows.

 

[tomesi]

I really hate these 1,29 Euro songs

 

[macduke]

I called this when variable pricing was announced! But then again, so did a lot of people. Not shocking. I know that personally, I've bought a lot less music since then.

 

[Mr_Ed]

Hahahahahahahahahahah!

This headline falls into the "Duh!" bin for me. Dumb@$$ record co. executives still think the public will pay whatever amount they like.

 

[kresh]

You have that right. This is a classic distribution line breakaway move. Increase prices so a distributors market share decreases while you low ball price another distributor so it gets close to parity and the distributors can start to compete against each other.

You can't do that in the US anymore. You have to have a single price list for all distributors. You can play games with co-op money but even then those programs have to be offered to all. You can have distributors buying at different price points based on volume discounts.

I went through this with several of our distributors when the law first changed.

You can offer a specific model only to one distributor and set that price point. Black & Decker sells the same DeWalt drill to both Lowe's and Home Depot but with different model numbers. This way they can control the price per retailer. The retailers love this because when they guarantee pricing and a customers says I can get that same drill at Lowe's, Home Depot says "nope" it is not the same model number. You can't do this with music.

Wow I went on a tangent. Sorry

 

[SpaceKitty]

This headline falls into the "Duh!" bin for me. Dumb@$$ record co. executives still think the public will pay whatever amount they like.

The title mentions iTunes but as I said in another post, it's not just iTunes. Amazon has all the same songs for $1.29 as iTunes does. It's hurting iTunes as well as Amazon.

When I see both of them have the same song I want for $1.29, a simple search can get me the song for $0.00. Piracy is still alive and doing extremely well.

 

[a.gomez]

I buy my music from Amazon now, most prices are still 0.99 and they never had DRM. Next up Apple and the book industry with their 14.99 e-books

 

[Max_Walker]

SJ Knows best.

If these greedy B'stards had had their way early on the market would not be where it is today. SJ knew a single price point makes the decisions for punters easy. They see the price ion the music stores and already know what the cost o a number of track on iTunes would be. Variable pricing introduces doubt - and then you start hunting alternatives.

Max

 

[ipedro]

I highly doubt that there are many people out there who were readily buying songs on iTunes for $0.99 and now scoff at the idea with prices of $1.29. It is still a throw away amount.

In my group of friends, I'm not alone in now hesitating before I buy. I've been on the iTunes Store bandwagon since the start, even when all my friends didn't know why I was buying music while they downloaded it off Napster/Morpheus/bittorrent. Most eventually saw the advantage of convenience and good karma to paying the artists we love.

However, the psychological limit of $1.00 was broken so many people now think twice before spending the money.

The music industry needs to put the prices back to a flat 99¢ for any song and find their increased profits somewhere else: exclusive tracks on albums, concert ticket sales, all you can eat memberships, etc.

 

[notjustjay]

I've curbed my spending on iTunes over recent months and have turned to Amazon.

Unfortunately Canada doesn't seem to have quite so many options. HMV Digital was looking pretty good for a while but having tried their interface to buy two albums, I won't be back. Their interface is nowhere near as nice (or self-contained) as iTunes. E.g. I bought an album and had to click to download each track individually. It's also buggy, e.g. I entered a coupon code, cancelled the transaction, tried again later and the coupon code registered as "already used".

 

[LagunaSol]

Exactly. iPad fail.

You need to read up on the details of the eBook pricing shift. eBooks under the Kindle model were already $15 - with the twist that Amazon was just taking a $5 hit to sell them to you for $10. Sounds good, right? Cheaper is better! But does anyone really think Amazon would keep taking a $5 loss on every eBook sold in perpetuity? Of course not. Eventually either the publishers would have to cave to Amazon's pricing structure and lower the wholesale cost or Amazon would have to raise its prices to $15 just to break even on their sales, hoping to make it up in hardware sales (I assume).

What the publishers are demanding is a traditional approach to sales that breaks Amazon's pricing scheme. The publishers decide on their own prices, the retailer takes a cut. Just like pretty much everything else you buy. Companies don't like to have the perceived value of their products manipulated, and Amazon's plan did exactly that.

If people don't buy eBooks at $15 because they think that's too expensive (as I do), publishers will be forced to lower their prices (and the retailer's cut decreases as well). Good old fashioned supply and demand. Not this artificial pricing scheme that Amazon conjured up.

We're seeing something similar but different with Apple an iTunes. Apple suggested (mandated) a $.99 price point but retained the typical retail model (30% cut of the retail price). The record companies agreed initially, but later decided they wanted more pricing control. A battle ensued, and the record companies won (or, as it turns out, lost) with variable pricing and the now-shunned $1.29 song.

 

[Maleficent]

I never use iTunes in the UK now either.

Play or Amazon UK offer it cheaper and it may only be 20-40p but what pocket is it better in; yours or theres?

 

[LagunaSol]

The music industry needs to put the prices back to a flat 99¢ for any song and find their increased profits somewhere else: exclusive tracks on albums, concert ticket sales, all you can eat memberships, etc.

Agreed. Why not try to upsell the customer with a couple of pricing options, like $.99 songs and $1.49 songs that also includes the music video (as a separate file)? Seriously, who pays $1.99 for a music video that you're only going to watch a couple of times - which you can easily do for free on YouTube? I thought music videos were created as a marketing tool to sell music, not as a sellable product themselves?

Music videos are just commercials for songs. Yet they want to sell us those commercials???

Bizarre.

 

[AlphaBob]

A fantastically bad idea...

I never purchase music from iTunes because the Amazon.com prices are generally cheaper by 30% or so. The rare exception is when I am using a iTunes gift card balance.

Apple was screwed over by the music industry who forced higher prices on them despite the fact that other sources offered the same product at lower prices. Then again, Apple had gotten a death grip on the music industry due to their market share and the industry wanted to break that grip at any price.

But the bottom line is that consumer taste has changed -- People no longer buy albums at $10 to $18 a pop, and instead want to cherry-pick a few songs. And it is also very clear that people were willing to pay $0.99 each for those few tracks, and not nearly as willing to pay $1.29.

Even my 12 year old daughter understands that music at $0.99 is worth a few seconds more time than music at $1.29 -- her music budget stretches further at the lower price. But her music budget did not go up just because the music industry decided they needed more profit (while at the same time providing fewer tangible benefits).

 

[tkermit]

charge more = sell less

not always true.

 

[rkdiddy]

I know I've personally curved my iTunes purchases because of this. I think $.99 is a fair price point - $1.29 or a 33% increase is excessive.

 

[MrCrowbar]

My lil indie record label works works alright. Interestingly, ALL sales are either CDs, E-Junkie (320kbps Lame MP3) or iTunes although the stuff is available on pretty much every online store there is.

Amazon MP3 is better quality and cheaper than iTunes, yet people seem to prefer the ease of use you get on iTunes: click "buy", connect iPod, done. As geeks we often forget how "normal people" need things to be simple.

Most record labels are still very greedy, they want you to pay for everything, preferably multiple times (buy the album, then buy it again remastered and with bonus tracks) instead of being nice to the customers (or artists). You gotta give stuff away for free, let people put it on their youTube videos, etc. and bypass DRM as much as you can. E-Junkie is great for that (see http://www.e-junkie.com/hamachingo/).

 

[roebeet]

I wasn't even aware that the prices had jumped to $1.29 (shows you how often I'm in the iTunes Store).

I also prefer CD's, usually used ones to keep the prices down. It's the only way to get mainstream music in lossless format, right now. AAC 256 is wonderful, but I prefer a lossless source so I can future-proof my digital media as best as I can.

 

[chaseerry]

So out of touch with their customers. Wow.

 

[djchuckc27]

.

 

[D-Man18360]

Whatever happened to all the older songs hitting the .69 cent price? Didn't Apple tout that while many songs would be priced higher at 1.29, many prices would be reduced?

It's amazing when looking at older non-popular songs how they still remain at .99.

Why would companies settle for .30 cents less?

 

[Maserati7200]

Remember when they said more songs will be $0.69 than $1.29? I have yet to find a $0.69 track, and I've only seen a $0.99 track on occasion.

They went to a variable pricing structure, with some older titles at 79 cents, then 99 cents, and most new releases at 1.29

you mean 69 cents.

 

[GSMiller]

Did the WMG executives spend all their time in high school smoking in the bathroom? That's the first thing they teach you in economics!

 

[yg17]

In other breaking news, bears **** in the woods. More at 11.