Filed under: Analysis / Opinion, iTS, Multimedia, iTunes
Billboard: iTunes prices up, sales down
I coulda told you this, though I am a little surprised that we've seen the results so fast. Despite iTunes having put the new tiered pricing into effect just last week, Billboard is reporting that they've already seen sales drop on the higher-priced tunes. The iTunes Top 100 chart has 40 different songs with a new price of $1.29, and one day after the changes, those songs dropped an average of 5.3 places on the chart, while cheaper songs moved up on average. And on the second day of the price change, ten of the tracks that saw their prices rise within 24 hours dropped a huge 12.4 chart positions on average.Of course, we're talking only a matter of days here, and there are all kinds of things that could have affected this average drop -- lots of the tracks that became expensive were from a Rascal Flatts album, and it could be just that the album has lost popularity, bringing the average down. And don't forget that even though these sales figures may be dropping, they haven't dropped nearly enough to show a loss of revenue (though fewer songs may be selling, they're still making more money).
But for those convinced that higher prices mean lower sales numbers, these first few days of figures will seem to connect all of the right dots. We'll have to wait and see if the long-term effects match up to the figures Billboard has seen so far.
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Reader Comments (Page 1 of 2)
jigme said 5:47PM on 4-13-2009
what a surprise! who'd a thunk it??
i still say i could significantly increase everybody's profits if all the major labels, tv companies and film studios would just get their heads out of their and listen to me (or any one of thousands of voices on the interwebs) for 5 minutes...
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jollyllama said 5:52PM on 4-13-2009
Wow, iTunes sales data would be such a wonderful data set for price elasticity experiments (that have to do with digital downloads of music, of course). But still, it's like the calculations are already done for you...
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James Donevan said 6:00PM on 4-13-2009
Interesting. Normally if prices go up, so do sales. And normally there isn't an immediate sales backlash because people are happy to pay the higher prices.
Oh wait, that's in the bizarro world. In this world who would have possibly expected anything other than an immediate drop in sales? But give it three months and, bizarro or not, sales will be back to within spitting distance of pre-increase levels.
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Moose said 6:39PM on 4-13-2009
As long as people can buy the same tracks for less on Amazon, or even jump straight from iTunes to Amazon for the exact track they want, this trend is an inevitability.
Its as if the label heads still haven't learned their lesson. And if Amazon is forced to adopt the same pricing schema, its just going to push more and more people back into the sweet loving arms of illegal downloads.
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Galley said 6:41PM on 4-13-2009
Amazon and other online sellers were forced to raise their prices the following day.
Ryan Trevisol said 6:44PM on 4-13-2009
lala's still at a max of .99 from what I can tell . . ..
Moose said 6:46PM on 4-13-2009
@Galley: that's not what I read, and what a quick glance at the two stores reveals:
Boom Boom Pow Pow: Amazon - .99, iTunes 1.29
Poker Face: Amazon - .99, iTunes 1.29
Right Round: Amazon - .99, iTunes 1.29
This is as of right now.
Tony said 12:02AM on 4-14-2009
@Moose - Amazon, Wal-Mart, Rhapsody, and Lala all announced tiered pricing the day after iTunes implemented theirs. Ars Technica article: http://tr.im/iLOY
(For an example on Amazon, see: Beyonce, Single Ladies)
ASte said 6:43PM on 4-13-2009
I don't know about in the US, but in the UK Amazon MP3 has started selling their top 10 tracks in various genres at £0.29 each - they're £0.99 on iTunes! If this doesn't make people switch to Amazon, I don't know what will.
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ASte said 6:48PM on 4-13-2009
n.b. from my count, 44 of the top 50 tracks are at £0.29 the rest at £0.59 - no more expensive, if not cheaper than iTunes.
Mark Kawakami said 6:50PM on 4-13-2009
But it's not about number of sales, it's about profits, right? If you sell 10 at 99 cents, you've made 9.90. If you sell 8 at $1.29, you've made $10.32. So as long as you don't lose more than about 22% of your sales (quite a drop, by the way), you're actually making more money.
I don't know how much of a cut the labels get from the various tiers, but to be honest, variable pricing -- and its predictable effects -- sound like plain old supply and demand to me.
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Charles said 6:04AM on 4-14-2009
Only there is an unlimited supply. And decreasing demand. There is no reason for a price increase other than pure greed on the part of the recording industry. They got away with selling overpriced plastic discs for years and got addicted to their own flawed and unsustainable business model. They are just unhappy that digital downloads aren't making up for the revenue losses on physical media. What they don't understand is no matter how much you try and gouge the music buyer, 1999 is over. The major label era's days are numbered.
Ian said 7:02PM on 4-13-2009
This is Economics 101; a increase in price, yields a decrease in demand.
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Taylor said 9:33PM on 4-13-2009
Greedy management fails to realize this, though.
I work at a small shop, and rather than reducing profit margins slightly to have a large increase in demand/customers, they prefer to increase margins and have a severely low demand.
Record companies are the same way. Now that they're finally embracing DRM-free music, they think that the demand will remain the same if they have a higher margin.
Oh, how wrong they were...
Gregory Pierce said 10:53PM on 4-13-2009
Exactly.... this is the most obvious and predictable response possible...
Virtuous said 7:21PM on 4-13-2009
Variable pricing was clearly the music industry's fault, not Apple's. Apple had to compromise to guarantee 100% DRM-free music. Before Apple announced variable pricing the music industry is on record as to whining about standard 99 cent pricing. Amazon's and Walmart's adoption of variable pricing should leave no doubt as to who the guilty parties are.
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Stan said 8:48PM on 4-13-2009
The price I prefer to pay now after this increase is $0.0
Stupid record companies will suffer. As it was 99c was too high, 50c was more reasonable, but I was willing to pay 99c for the convenience. Stupid record companies will find out the hard way that it will be impossible to shut down rapidshare et al.
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Johnny Thrash said 10:40PM on 4-13-2009
I, personally, will do my little part to protest the price increase. I will still buy anything that's 99 cents, but anything that's $1.29, I simply won't purchase.
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Gregory Pierce said 10:52PM on 4-13-2009
Market response like economics tells us it would - if the studio business folks didn't realize this, they need to be removed from the shareholders...
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Phil J Leitch said 11:06PM on 4-13-2009
I agree. I'll continue buying songs .99 and below.
Another thought that is maybe stupid but I'll throw it out. Since some people base their buying off of chart position as these 1.29 songs slide down will there be a sort of death spiral effect?
Honestly I doubt I buy much top 100 music, but for those that do isn't chart position their biggest deciding factor? Oh that song is top-10 so I like it cuz I heard it on that station I listen to.
Like I said, proabably a stupid observation (now that I've typed it out it seems more stupid).
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