Filed under: Analysis / Opinion, iTS, Odds and ends, Apple Financial, Internet, iTunes, Apple
Record companies happy with new iTunes pricing (duh)
You knew this was coming. The iTunes pricing changes announced at Macworld got groans from most of us watching (even though I'm pretty sure it's more or less agreed that it had to happen sooner or later), but the record companies are taking time to do a little bit of gloating over the fact that they've finally broken through Apple's 99 cent barrier. They told the AP that the move means that customers aren't "price sensitive" -- in other words, we're OK with paying more for music.I don't know that that's true -- iTunes has had 99 cent songs since its inception, and even with the record companies crying and whining the whole time, it's been an amazing success. But prices go up eventually, no matter what product you're talking about, and if Apple had to raise prices, they could do a lot worse than adding a tier above and a tier below. Of course the record companies will want to put anything that sells on the top tier, but I don't think they can use that as evidence that consumers don't care what price they pay for music.
And let's keep in mind that at $1.29 a song, a 10-song album at $12.99 is still cheaper than the $16 and $17 record companies used to try and charge. There's no question about it -- this latest change is one in favor of the record companies, but a system like iTunes still seems worlds better for consumers than the old Sam Goody/Tower Records retail store system.
[via MacBytes]
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Reader Comments (Page 1 of 3)
Ben Y said 10:12AM on 1-15-2009
"But prices go up eventually, no matter what product you're talking about"
What planet do you live on? Because the Apple ][+ I bought for $3k in 1980 begs to differ. Technology, competition, supply and demand -- there is a lot more going on than just inflation.
Pricing is a lot more complicated than you make it out to be. And this is price FIXING, which from an antitrust perspective is usually per se illegal. [Yes this is slightly different, but I'll be damned if I gleefully accept record company executives giving themselves a pay raise in this economy just because they all got together and pressured Apple to let them. They should be headed to jail under the Sherman Act, in my opinion.]
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KarlW said 10:55AM on 1-15-2009
Price fixing typically only applies to things that have variable pricing - either because they're floated commodities such as oil or gold, or because they are services, such as travel tickets. Songs on the iTunes store have fixed prices. There used to be one tier, now there are three, but it's still a fixed price.
"They told the AP that the move means that customers aren't "price sensitive" -- in other words, we're OK with paying more for music."
All customers are price sensitive. And the move doesn't mean that customers are OK with paying more for music, it means that the record companies want to charge them more for music. There was no vote on this - you can't use the fact that a deal took place as evidence that it will be successful or popular.
I'll only buy music that I can't find a torrent for (such as certain classical pieces). I was starting to warm to buying songs from iTunes, but now they've ruined it. I was happy with the one price model, and it was cheap enough that I thought I was getting good value.
SpinThis! said 11:15AM on 1-15-2009
Who buys full releases via iTunes anyway? That's partially is what
made iTunes so successful—you choose the 2 songs that are actually
worth listening to on the album and can the rest. I think the record
companies are finding that people are buying fewer full albums and
more singles, so simple economics tells us when demand goes up, so
does the price.
Speaking of supply and demand, part of the reason the record
companies want to raise prices is to eek that 30 cents out of you for
not waiting, say, 6 months until the price comes down on that Britney
or Lady Gaga tune you must have. Record companies know music is
impulsive—if you gotta have the new release, you gotta have the
single *now*! What's 30 extra cents when you're hot on a tune? When
the hits are hot, the price goes up; when they're after-rans, the
price goes down. This is how the industry has worked for years—the
movie industry is the same way (first run theaters -> 2nd run ->
video stores), etc.
Chris said 5:27PM on 1-15-2009
Not once has anyone mentioned that you can also get songs for $.79. Which is the price they're going to be charging for all that amazing indie music nobody's ever heard of. Am I the only one who thinks this is a good thing? When you want to buy Kanye west, sure, bad. But melpo mene? HILOtrons? Rosi Golan and Human? All 79 cents. Stop complaining and find some music other people haven't heard of.
gear said 10:18AM on 1-15-2009
I think the validity of the last paragraph would depend upon the consumer being happy with only a digital compressed copy of an album as opposed to a non compressed disc (CD) of an album.
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f00fighter said 11:17AM on 1-15-2009
I couldn't agree more. The author seems to think that the product (music) being purchased from iTunes is identical to the product being purchased on CD - which is not the case. The iTunes version of the product is inherently inferior due to digital compression, not to mention that the liner notes, full artwork, etc are not included.
If the music purchased on iTunes was lossless and also included a PDF verison of the complete liner notes (including the front & back cover of the CD case) then perhaps you could justify the price increase. But the lossy-quality and lack of liner notes makes me think that I SHOULD be paying less - not more.
Also - since when is it a rule that "prices go up eventually, no matter what product you're talking about"? Call me crazy, but the price of the MP3 player that you are using to listen to these songs has most likely dropped over time...while increasing in features and storage. Time is not the only factor here...
Ethan said 9:21PM on 1-15-2009
This is sorts true, except that iTunes files (at least from the major labels) are typically encoded from the 24-bit masters, as opposed to the 16-bit max on an audio cd. Combined with the higher bitrate of iTunes+ and it's probably close to a wash, sonically speaking.
Adam Schoales said 10:19AM on 1-15-2009
The thing is, that extra 30 cents IS game changing.
at $0.99 a song it's easier to download legally.
at $1.29 a song, and worse $12.99 I'll just grab a torrent, or if i'm feeling really crazy buy the CD. $12.99 for me is too much for some bits. In fact, most of the new albums i've bought this year have been about the same price in stores for the CD, which gets me nice packaging and a physical copy to make my own MP3s from.
The industry just doesn't get it...
Granted it's my understanding that new releases will be what costs more, and since I more or less hate all the hot-pop music of today (christ I'm getting old) I wouldn't buy it either way. Of course, new releases are also a lot easier to find on torrent sites than rarer/older/obscure stuff.
I understand why apple had to do it, but I wish they stuck to their guns. Screw the record companies back for screwing them. Oh well. I'll just buy the cheap stuff.
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Adam Schoales said 10:22AM on 1-15-2009
also, I love how the record companies think INCREASING prices are going to HELP sales. It may help to balance the books (and give them fatter pockets) but I can honestly see it driving people AWAY. Making the songs CHEAPER might actually entice people to buy MORE. I know that if songs were 30 cents CHEAPER I'd probably stop torrenting as it's simply be faster to just grab it from iTunes...
...but they'll never learn will they.
Ryan Trevisol said 10:48AM on 1-15-2009
And at .89 a song and with full song previews, it's much easier to Lala.
And for a buck, trade the cd and get it in 256k aac.
Ryan Trevisol said 10:49AM on 1-15-2009
Or whatever codec your geek heart desires.
KarlW said 11:00AM on 1-15-2009
The record companies have never understood the internet or digital distribution. iTunes was so successful because Apple really got how to make it work and the record companies didn't. When Apple was in control of the store, it was good.
Now they take iTunes revenues for granted, and think that increasing prices will minimise the effect of piracy (which typically stems from sharing MP3s ripped from CDs, not protected digital copies). The problem is that they're punishing the good customer and steering more people towards piracy (or deeper in to it). They've been doing it for years with DRM, but an iron-fisted price increase is just intolerable IMO. I simply won't buy anything from them.
Lee said 1:16PM on 1-15-2009
Totally agree. At 9.99 (and .99 per song), an album is an impulse buy. I can trust that it isn't likely to be cheaper via CD anywhere on release day, so I might as well download it via iTunes.
At 12.99, I'm telling myself that it's probably going to be 10 bucks at Wal-Mart or Best Buy. If I'm going that way, I'll stop into one of those stores and pick it up. Otherwise, I'm tempted to torrent it because of the convenience.
Sure, I could start bargain shopping with other services like Amazon, but by the time I start putting in the extra effort to being resources from outside the ecosystem in, I might as well point my browser to the Pirate Bay. iTunes works so well because it is the first place many of us see when we open up our music player on our computers and is accessible right from the iPhone/iPod.
tl;dr
I'm sure this sounds stupid to some, like I'm trying to justify torrenting. Far from it. I was a file sharer way before I used iTunes. iTunes' 1-2 punch of low prices on new releases and easy, instant accessibility has curbed my downloading quite a bit. When one of those goes away, it's time to start looking elsewhere, and it's just too damn tempting to go back to my old ways.
OlsonBW said 10:26AM on 1-15-2009
"And let's keep in mind that at $1.29 a song, a 10-song album at $12.99 is still cheaper than the $16 and $17 record companies used to try and charge."
You most likely weren't going to the lobby of the record companies to buy your music. You were going to record stores. This means that the $17 you were paying at the record store had a $100 markup giving the record companies $8.50 per CD before packaging and shipping any ...
So even if record companies were charging $8.50 per album on iTunes they would still be making a lot more money and now they will be getting probably 70% or more of the $12.99, if you only count 10 songs. It used to be that you got up to 14 songs per CD.
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Quix said 10:40AM on 1-15-2009
" they could do a lot worse than adding a tier above and a tier below"
Who wants to bet on the eventual ratio of tier above to tear below? 20 to 1? 50 to 1?
"And let's keep in mind that at $1.29 a song, a 10-song album at $12.99 is still cheaper than the $16 and $17 record companies used to try and charge."
Yet still more expensive than the $9.99 I can get new release CDs on sale for at Best Buy.
Hollywood apparently refuses to pass any of the savings of digital distribution on to us as consumers. $68 for a downloadable season of "24" in HD? $68??? Seriously?????
I'm thrilled about the new "all iTunes Plus" development, and I'll certainly be buying more songs from iTunes now (and none from Amazon, my previous go-to source), but pricing is still not at a logical level where I'll feel compelled to open my wallet.
And Big Media wonder why sales are falling...
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John T said 10:36AM on 1-15-2009
I don't know about that last statement about iTunes being better than the retail stores.
Now that music is going to be DRM free, it makes it a little better, but isn't there something more exciting about paying for the hard copy...to do whatever you want with?
I spend a lot of money on iTunes, but never usually buy my favorite artists' music from there. I like paying for the hardware. The idea of collecting music and storing the CD's on my shelf and being able to see the artwork (beyond the cover and "digital booklet") is appealing to me. This is an old way of thinking (I'm 23), I know. I would buy CD's all the time until iTunes came out. Then I realized I am paying nearly the same amount as a physical CD so why not have the best quality music, cover art, artwork, and the entire package as the artist and record label wanted it to be received?
I guess it's just a matter of what music is to you. Is it just the idea of hearing it, or is it more about investing in to the collection of what the artist has distributed?
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thinktwice said 10:38AM on 1-15-2009
Songs should be about $0.30-$0.50 each. I remember promises made of much cheaper albums when Cd's came out. "...we are going to save so much and pass it on to you the loyal music fan..."
Greed will be their downfall.
Second point. Maybe Apple also secured a higher cut on this new deal thus making more profit.
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Andrew Timson said 12:51PM on 1-16-2009
That was also twenty years ago--inflation has taken hold. That $10-12 you pay for a CD now is the equivalent of only $5-6 back when CDs first came out.
Gandalf said 10:39AM on 1-15-2009
This only means that I'll buy an album, split the cost with my 20 friends, and give them DRM-free copies of the songs. Who cares if the songs went up 30 cents.
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Galley said 10:44AM on 1-15-2009
I've been buying CDs for more than 23 years, and I have no plans on stopping. I may pick up some 69 cent tracks now that they are decent quality, and DRM-free.
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