Act surprised: Higher iTunes prices mean slower sales
The cause of decelerating sales can be attributed the associated price hike in new or premium content, which received an unpopular 30% cost of living increase from $.99 to a more salty $1.29 price point. It turns out that people are reluctant to pay thirty cents more today for something that cost a buck yesterday. What is it with you crazy people and your fickle spending habits?
This decline in spending is beginning to eat into Warner's bottom line, where iTunes makes up the majority of its digital revenues. The company saw a 50% decline in revenue in their December quarter, at just 5% growth -- down from 10% in the previous quarter. Ouch! Note to businesses everywhere: This is what happens when you issue a price increase in the middle of a recession. We'll have to see if the record companies take a hint and reconsider their pricing at all.
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Reader Comments (Page 1 of 2)
Matthew said 9:13AM on 2-10-2010
"The company saw a 50% decline in revenue in their December quarter, at just 5% growth -- down from 10% in the previous quarter."
Incorrect. The rate of increase in digital revenue decreased, not the revenue itself. So the revenue of the December quarter still exceeded that of the September quarter.
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papichulo said 9:29AM on 2-10-2010
Record Cartel Suit #1: "Revenues are down since we raised prices."
Record Cartel Suit #2: "Raise prices again to cover the difference."
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Nick said 9:36AM on 2-10-2010
They really don't "get" a business case in the digital economy, do they?
Make it easy and cheap enough, and people buy legitimately. Make it difficult (DRM) and expensive, and people will go elsewhere.
I've bought two mp3 albums from Amazon in the last week because itunes is considerably more for the same thing...
The other point worth mentioning is that this isn't straight cause and effect correlation: there's the small matter of spotify which might have an impact on year-on-year figures!
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andy said 12:13PM on 2-10-2010
in many ways its not even paying more for the same thing - when i buy something from Amazon, I get the nice and simple, high bitrate mp3 that I can do whatever the hell I like with it.
If I were stupid enough to visit the bloated piece of crap that is iTunes, I'd pay more for an .aac file that is, typical of Apple, locked down and useless to me not owning an iPod.
and as for Spotify - I've discovered more new music (and also bought more new music - mostly CDs and Amazon downloads) in the past year of listening to Spotify than I have in the previous 2-3 years.
And I don't even have a premium account.
IF I were to get a smartphone, it would be a Nexus One, and I would get Spotify on it, for £9.99 a month and have all the music I want.
Spotify is awesome!!
Craig said 12:46PM on 2-10-2010
This is actually @andy :
Buying a music track from iTunes no longer locks you into owning an iPod. Anything that plays a .m4a file will play what you buy from iTunes.
Where were you last year when iTunes went DRM-free on their music?
andy said 1:02PM on 2-10-2010
haha - i was listening to Spotify where it's just, plain old free.
I did own an iPod Touch for a month or so but I couldn't stand having to go thru iTunes for everything so got rid of it.
samu said 4:22PM on 2-10-2010
You don't have to go through iTunes; you can use Spotify …
Dan said 9:59PM on 2-10-2010
@andy:
"I did own an iPod Touch for a month or so but I couldn't stand having to go thru iTunes for everything so got rid of it."
Yeah, I would love to go back to MP3 players that require your to copy your tunes manually to them only to find only 1 or 2 of the 30 tracks are working. (If you are lucky) Putting music on MP3 players was hit or miss before iTunes. Why do people keep wanting to go back to the dark ages of music players. It is par easier to use Itunes to put music on a player than drag and drop and maybe it will work.
"from Amazon, I get the nice and simple, high bitrate mp3 that I can do whatever the hell I like with it.
... iTunes, I'd pay more for an .aac file that is, typical of Apple, locked down and useless to me not owning an iPod."
Actually, the AAC (Advanced Audio Coding) has the file extension of "m4a" and was designed by Dr. Karlheinz Brandenburg (the creator of the MP3) to replace it. Dr. Brandenburg used the knowledge learned from the mistakes in the MP3 and corrected them in the AAC achieving better sound quality than MP3 at similar bit rates.
So this means that a lower bit rate AAC file is just as good if not better than a higher bit rate MP3 file.
As for not being able to use it with something other than the iPod. That was due to the DRM technology Apple was using while the recording industry was forcing them to use DRM.
This was no different than the WMA files other services required you to by that would only work on players that supported the version of DRM that was applied to that file. The reason I say version is that there is more than one and not all players support all of them.
There are many players out there that support AAC files, they just don't support Fairplay DRM. Just like there were many players out there that supported WMA files, supported PlaysForSure, but not the Windows Media DRM digital rights management system.
Microsoft's own player the Zune supports AAC, MP3 but not PlaysForSure WMA files.
gtc360 said 9:37AM on 2-10-2010
Maybe it's just because the economy sucks all over and not necessarily due to the price increase.
How do you establish a causative link?
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punkassjim said 1:30PM on 2-10-2010
Thank you. I was hoping someone would pipe in with the voice of reason. Does no one think anymore?
DrWho said 1:50PM on 2-10-2010
You mean the link between a the cost of a discretionary purchase going up and the number of said purchases going down? I'm sure thats never been seen before.
itool said 10:04AM on 2-10-2010
Don't usually post comments but i've gotta that itunes pricing (app store aside) is a joke.
The last song i bought was 99pence on itunes, i ended up buying it for 29pence on Amazon. How can Apple justify this??? I can buy DVDs cheaper than movies on itunes. Where is the savings for manufacturing and shipping??
I've stopped buying movies and now rent on-line. I buy the odd song but not much now. There are so many radio stations and movie channels, people like Apple and Warner have to get real. Stop blaming piracy (which i do not do) and start pricing things in the real world!!!
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Dale said 11:52AM on 2-10-2010
On the flipside, Amazon often charges more for the MP3 version of an album than they do the CD. I buy the CD, and can rip it to whatever bitrate I want. ;)
Howie said 10:03AM on 2-10-2010
Any moron could have told these greedy execs that revenue would go down when they raise their prices. People change their spending habits when prices go up. It's Economics 101. What a pity that Congress and the president don't understand this either.
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willyu34 said 10:13AM on 2-10-2010
the opening picture... Oink Oink? XD
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Although they say it's revenue neutral/gain although sales is down, that trend will probably continue and thus they'll have a net loss in due time.
On a related news, the CEO seems to be lamenting how digital publishing will have more wiggle room to charge people more money. It may be news to the CEO, but most people who would read digital book also knows how much money it saves the publishing industry, thus will NOT pay a gouging price for eBooks. We'll have to wait and see how the new >9.99 ebooks will hurt the publishers. (I know I am not buying ebooks > 9.99)
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oboewan said 10:29AM on 2-10-2010
If I can buy an iPhone game for the same price as one song, the system is broken.
Heck, I can buy TWO songs in TTR3 for less than the cost of one iTunes song. Someone explain that to me.
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oboewan said 10:31AM on 2-10-2010
Besides, I was under the impression that some songs would be less than a buck and others would be more.
I challenge you to go on iTunes and look for a song that's not $1.29.
Montana Leet said 11:53AM on 2-10-2010
Being that most songs on iTunes still are $0.99, if I accept your challenge and find one, what do I get? :-)
DrWho said 1:45PM on 2-10-2010
I found one yesterday and bought it. What's my prize?
David V. said 11:16AM on 2-10-2010
There are lots, but they're not particularly popular. E.g.:
http://itunes.apple.com/us/album/chant/id158043498?i=158044007
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