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Is this strategy screaming for change? We just took a look at the top 100 singles on the iTunes Store (for Friday afternoon), and found that 95 of them were priced at $1.29. The remaining 5 were $0.99, and none were $0.69. Meanwhile, paid downloads are flattening (up just 1% in the US in 2010 last year according to Nielsen Soundscan).
So what happens when you expand the list? Apple actually posts the top 200 singles, so we expanded the count. But even among the top 200, 93.5 percent were $1.29, with just one 69-cent track available.
This is all part of a hard-fought victory by the majors, who wrestled with Apple for years to achieve 'variable pricing.' But this obviously isn't working, and the trajectory suggests that iTunes singles will decline in 2011. "The price increase probably couldn't have come at a worse time," Warner Music Group chairman Edgar Bronfman, Jr. even admitted during a financial review at about this time last year. That implementation happened in 2008, or as Bronfman noted, in "the teeth of the worst recession since the Depression."
So, why not change the pricing strategy, and save this format? The idea as initially proposed was to hike the price on more popular tracks, while matching lower pricing tiers with catalog songs. Sounds reasonable enough, though it looks that even this game plan has changed. Sources to Digital Music News recently noted that EMI has decided to price everything at $1.29 - new, old, whatever. We called EMI about this, and they declined to answer the question, though an initial examination validates the claims.
The results of our deeper examination are ahead.
Comments Closed
Jay Frank Friday, January 28, 2011
Paid downloads actually are not flattening. Last year, downloads were up 1%, but so far this year downloads are up 6% year over year. So there's a decent increase even with prices being up across the board.
Visitor Friday, January 28, 2011
the larger issue is priacy and competing with illegally free from a google search return - pricing is not the issue here - piracy is...
there are candy bars that cost more than a song... low ticket items are the most robust during a recession.
I love you paul - but this is a non-issue.
Yves Villeneuve Friday, January 28, 2011
I agree, the issue is piracy.
Nonetheless, any lower price is better for the consumer, this is why .99 is more appealing than 1.29.
Being an independent artist, I can afford to keep songs at .99 each which helps me compete against the majors with their huge marketing budgets. If the majors reduced their price to .99 it would be harder for me to compete. I would also argue a return to the single price structure would be anti-competitive and possibly illegal.
That being said, I don't mind being in the midst of a marketing fight. I would never agree to anything lower than .99 at iTunes. My music would never be sold at a discount to .99 since I have principles and a sense of value.
www.myspace.com/yvesvilleneuve
presnikoff Friday, January 28, 2011
Jay,
I didn't know about this early-year stat, but I'm not sure if it makes sense to conclude that the format is growing strongly again based on - what, three weeks - of YOY growth?
/pr
Calysta Rose Friday, January 28, 2011
Happily, for the most part, whatever iTunes lists at $1.29 Amazon still lists at .99. Which is good since I absolutely will not pay $1.29 for any song, not even from my favorite bands. I'd rather go without than pay an elevated price. 99 cents is pushing it with most popular music as it is, seeing as it's made to be used and thrown away like fast food wrappers. But $1.29 for music made by committee? No thanks.
J Logbo Friday, January 28, 2011
"I absolutely will not pay $1.29 for any song, not even from my favorite bands." <--- I'm sure you're your favorite band's favorite fans. smh.
I understand we all want to "stick it to the man", but to say a song (a song you LIKE, no less) is worth $.99 but not $1.29 is a bit absurd. Not wanting to support the monopolistic business practices of the major labels is not a valid reason to undervalue the work of talented artists.
East Coast Music Guy Friday, January 28, 2011
$1.29 is a great deal for intellectual property. Try selling DMN for a $1.29...see what happens.
@juliomuniz Friday, January 28, 2011
Julio Muniz
NO, it's not working
Visitor Friday, January 28, 2011
The objective of the price increase is not just to increase revenue from tracks, but to improve the relative value proposition of digital albums vs. tracks - i.e. to get more people to trade up to the more profitable album instead of buying 1-2 tracks from the album. On that basis, it might be successful: digital album units were up 13% in 2010.
econ Friday, January 28, 2011
EMI notwithstanding, it would be interesting to see how many of the top 200 $1.29 songs were released in the last year at 99 cents before they became hits.
aaccardo Friday, January 28, 2011
I've looked at this in detail and I can add some informed commentary.
The most basic calculation with variable pricing involves the trade-off between volume of tracks and total revenue. Since the pricing changes, it's been pretty clear that the reductions in volume of tracks have been recouped by the additional revenue generated. Moreover, the cooling off of growth in digital sales is to be expected, as the digital consumer fills out his/her digital collection, replacing CDs with digital tracks and albums.
However, a more subtle validation for the $1.29 pricing takes into account consumption, unbundling and costs. With CDs, consumers needed to buy the whole bundle for the three or four songs they really wanted. Now they can just buy the three or four songs. That's more than half a degradation in revenue for a product that hasn't dropped half in costs. In reality, most people should be happier with this $1.29 paradigm than with CDs. They buy 3 songs for $4.00 and they listen to the same number of songs on the album than they would have when paying $16.99. They used to shell out that much money and still only listen to the best 3 songs with any frequency.
Furthermore, the money spent promoting those three singles, creating music videos, taking *ahem* radio DJs out to dinner for "non-business" purposes, flying the artist to play on Jimmy Kimmel or Jay Leno, all of these expenses make the cost of the single much higher, and the resulting commercial and social value as well. More valuable to the consumer or fan, more expensive for the label, and more likely to sell at a higher price point.
I recently completed some research on reasons for piracy, and it was clear that with television, people really felt that iTunes was charging too much. 1.99 for a 30 minute episode of something that you'll probably only watch once. But the thing about music is, when I love a song and I'm going to put it on a workout playlist where it will get listened to 400 times over the next few months, I have NO problem paying the 1.29 for a single. In fact, I'd probably pay up to 2.50 for my favorite singles, if pushed. And if it's an artist where I'd like to buy the whole album, the price is generally not more than 12.99, making the per song price equal to or lesser than $0.99 anyway.
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Yves Villeneuve Sunday, January 30, 2011
It seems the possible EMI/iTunes 1.29 arrangement would be a disadvantage to iTunes versus its other competitors. There is likely some product exclusiveness involved, in my opinion.
If all the majors started charging 1.29 for all their content this would give the appearance their music is of premium quality vis-a-vis the independent's .99 song. To be honest and possibly feeling a little less fortunate, this would be a valid strategy if the move is not seen as collusion by the majors. It looks like EMI independently made the first move and others may legitimately follow suit.
www.myspace.com/yvesvilleneuve
Yves Villeneuve Sunday, January 30, 2011
Realistically, if the RIAA wants to be effective against piracy, it has to direct its lobbying campaign toward the public against the ISPs.
Essentially, don't lobby government; lobby the public against ISPs (and possibly the government) with a clear and true reason/explanation why ISPs are the target. The ISPs have nothing to fight back with against the music industry in the public arena.
www.myspace.com/yvesvilleneuve
Yves Villeneuve Sunday, January 30, 2011
To be more clear, force the public to consider who is morally right: the music industry or ISPs (and government). Best not to make an overt call for public action. It will sort itself out with repeated messages explaining the unfair situation. Sit back and enjoy the show.
www.myspace.com/yvesvilleneuve
@thornybleeder Monday, January 31, 2011
Brian Thompson
What happened to "variable pricing"?
John Bixby Monday, January 31, 2011
Interesting article, but I don't think the fact that 93% of the top 200 songs on iTunes being $1.29 proves that variable pricing isn't working. If the old saying of "you get what you pay for" holds true when pricing decisions are made on tracks, then why would a "good" song be priced at anything other than $1.29? What you're seeing is that the higher priced songs are the more popular tracks that occupy the top of the charts.
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