Early Results On iTunes Price Increase: Sales Down... But Revenue Up

from the interesting... dept

Wed, Apr 15th 2009 2:12pm — Mike Masnick

It's still early, but the initial estimates on the impact on iTunes of higher priced songs on iTunes is that songs that got tagged with the $1.29 price saw their overall sales rankings drop. However, the indications were that the sales drop didn't outweigh the higher price. In other words, fewer units, but more overall revenue. It'll certainly be worth watching to see if the trend continues. Of course, the report only looked at the top 100 songs, doesn't factor in other things that may have caused sales to change, and seems to be lacking certain important data. But... still... as an early snapshot of what's happening, it's good to know. In the meantime, if you're a smart up-and-coming musician who recognizes that digital music sales are a tiny fraction of what you can be earning overall in the business, you should be doing everything possible to get your songs out there at the lower price, knowing that it'll help you stand out against the higher priced options, and you'll be able to recoup the difference through the other parts of your business model.

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Filed Under: itunes, sales

26 Comments

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SteveD, 15 Apr 2009 @ 2:32pm

So what sort of models would this promote? You start of small to build up the base, then jack up the price once its big enough?

It runs the risk of alienating fans.
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TomB, 15 Apr 2009 @ 2:50pm

Milking the Demand Curve
Looks to me that the Music labels have got their math correct in terms of the demand curve. I don't like it, but it looks like they did their research in terms of concluding there's less of us disgruntled types and more than enough sheep to justify the price increase. I thought that .99 was the magical price point, in that a track of music was under a dollar. To me, DRM free music and higher bit-rate encodings do not increase the value of the music. But as I said, the labels figured there is enough people to buy at $1.29 to justify alienating the rest of us. Here's hoping that "the rest of us" grow in numbers.
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Anonymous Coward, 15 Apr 2009 @ 3:02pm

Nice to know basic economics still work...
...even in the "free" age.
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Brad, 15 Apr 2009 @ 3:28pm

Too bad for the Artists
So sales are down but revenue is up in an area where labels make money. But having fewer people owning the music means that fewer people for the concerts, which is where the artists make money.

So yeah, this looks like a win for the labels, who negotiated the variable pricing model. Not for the artists though.
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Joel Coehoorn, 15 Apr 2009 @ 4:24pm

Not everything is price
> you should be doing everything possible to get your
> songs out there at the lower price, knowing that it'll
> help you stand out against the higher priced options

See, that's probably a really bad idea. Price also sends a signal. If your music is only $.69 on iTunes instead of $1.29 it tells the consumer that your music might not be as good. You want your music listed higher on iTunes, especially if it does turn out to be more profitable.

Now, that doesn't mean you shouldn't have your music available for less elsewhere, or that you shouldn't be trying to get iTunes to lower prices overall. Just that _in the context of the iTunes store_ you want to send a message that you have a better product.
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Tony Mali, 15 Apr 2009 @ 4:42pm

Re: Not everything is price
"If your music is only $.69 on iTunes instead of $1.29 it tells the consumer that your music might not be as good."

I if price was the only factor, you may be correct, but in the real world where people have different likes and dislikes, higher vs lower pricing may not be relevant - when it comes to serving people what they want.

If we put your example to "bottled water", you are basically saying that the FREE tap-water from the city tastes much better than store purchased bottled water. I'm sure there are many city-dwellers who will disagree with that. Although, Tap water from Copper vs. PVC vs. Galvanized each has a different flavor - Similar could be said about DRM-free music vs DRM-laden music.
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MaidelehFagele, 15 Apr 2009 @ 4:50pm

Does anyone have any suggestions for other legal music sites, such as the subscription site Emusic? I looked at their website but none of the musicians I like have songs available for download, so I didn't even bother signing up for the free 25 song promo.

I like Amazon's MP3 service. The selection's similar to Itunes, although Amazon just jacked up the price of some of their music to $1.29 to keep up with Apple.
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SteveD, 15 Apr 2009 @ 4:58pm

Re: Not everything is price
I'd agree with you if consumers were merely shopping based on price, but given that most people will sample a track or two of what they want to buy via radio or net streaming its unlikely to be that influential.
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Grady, 15 Apr 2009 @ 4:59pm

Re: Re: Not everything is price
@ Tony Mali

"If we put your example to "bottled water", you are basically saying that the FREE tap-water from the city tastes much better than store purchased bottled water"
Um, don't you have that backwards? He was saying that because it is a lower price one may think it is worse (free water will taste horribly compared to bottled water)
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Tony Mali, 15 Apr 2009 @ 5:07pm

Re: Re: Re: Not everything is price
@Grady, "free water will taste horribly compared to bottled water"

I absolutely agree. SteveD did say better, what I was attempting to point say, "if consumers were merely shopping based on price, but given that most people will sample a track or two of what they want to buy via radio or net streaming its unlikely to be that influential." Thanks!
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Gabriel, 15 Apr 2009 @ 6:43pm

Re: Too bad for the Artists
Why am I not surprised that the labels negotiated this deal for their own benefit alone, at the expense of the artist's income? Just in case the artists had forgotten who it is the labels *really* care about.
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PRMan, 15 Apr 2009 @ 8:37pm

That's good...
By selling less units, they don't have to hold as much inventory...

Oh, wait, they're just greedy...
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cram, 15 Apr 2009 @ 9:57pm

Wonder how long iTunes can stay in business. Don't these guys know basic economics?

As more musicians start giving away more music for free, making more money by selling more stuff to more people than ever before in the history of mankind...phew, Apple will start realizing the true nature of infinite goods.

Perhaps then they will start applying the correct model, leverage infinite goods and start selling scarce goods - it's so simple, really! The world will finally be a better place!
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Andrew Fitzgerald, 16 Apr 2009 @ 2:47am

Re:
Well if you're talking about a hypothetical new band you'd definitely start with the low price to build a base, and by the time you have a base to alienate there would be plenty of examples from other bands on which pricing models work once popular.
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W4RM4N, 16 Apr 2009 @ 7:42am

Higher = Better?
Maybe I am getting too old, but in my opinion, the music isn't getting better. So how can the price of music, especially in the top 100, go up? As people's wallets are geting tighter in the current economy, how can music go up? Maybe I am wrong to bring that up since supply/demand doesn't apply. I would go as far to say the songs that are $1.29 are willing to try to make more money, than spread and promote their music. Am I too old(36)?
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MattP, 16 Apr 2009 @ 8:22am

Re: Milking the Demand Curve
This only takes into account online music sales. Sure they're making more money selling less music at a higher price. The part that's missing is that the music is now going to a smaller audience limiting the chances that they'll purchase secondary market items like concert tickets, t-shirts, car window stickers, etc.
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Ben, 21 Apr 2009 @ 11:30am

iTunes sales records
How did you obtain the data that the iTunes sales went down? Out of curiousity, who/what is your source?
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Anonymous Coward, 22 Apr 2009 @ 3:34pm

I have to say that this whole thing is hogwash now its not even worth buying the song and frankly I am now done with apple... they make good products but they should not screw over its consumers
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Seb, 1 May 2009 @ 3:06am

Greedy. They will eventually be like oil compaines.., up down.. Etc. What doesn't make sense is that the .99 cent songs will become more popular and the prices will constantly be changing. Also... Don't these companies realize they are competing with free... They should be lucky to sell a song for 10 cents. But I guess if sales are up they don't give a .....
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Shankar Iyer, 10 May 2009 @ 4:39pm

WILL PROMOTE NAPSTER ERA
BAD BUSINESS MODEL. The 30% increase is steep. I used to bur 2-3 songs a week without thinking much.. now I just wait for it to play on the radio eventhough $1 a week is not much.. just the thought of paying the extra.. in these times
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The King, 25 May 2009 @ 10:31am

The future
Once a long time ago, people actually had to venture out to what's called a store and you had to buy something called a CD that contained music. CDs are still pretty valid for a number of reasons:

1)Since the price change, new releases on CD are generally cheaper than the iTunes version.

2)Chances are likely that even if you're the type of person that just likes the current single of _______ artist, you'll probably end up downloading their next big single, and so on. So you're better off just buying the album anyway.

3)CDs can be encoded in multiple formats on iTunes. If you want a higher quality version of a song or album than what Apple sells on iTunes, you can do this encoding a Lossless File. There is a big difference when you want to listen to your music on a high quality sound system. 128 and 256 sound like shit on a stereo or an iPod dock IMO.
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Jill, 7 Jun 2009 @ 2:40pm

iTunes Price Increase
Personally, I feel like the iTunes price change has hurt the company and independent artists as well. I now refrain from purchasing the $1.29 music with the "better sound quality" available from iTunes. Nobody wants to pay thirty cents more for this music that you can't even tell the difference in sound quality. I am definitely disappointed with iTunes at this point.
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wynn Burr, 23 Jul 2009 @ 4:06am

itunes price increase
It's unfortunate that itunes has felt the need to increase their popular songs to $1.29. The sound quality is not that much better and to me it seems that it's just a way for them to increase their revenue not better their product. With the cost of apple products it would seem to me that they could keep these prices down for the sake of their fan base.
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Anonymous Coward, 5 Aug 2009 @ 3:09pm

BULLSHIT
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J Leach, 25 Aug 2009 @ 1:58am

Itunes price change
Only found out about price changes today- means that I will not buying anywhere near the number of songs I was.
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michael, 23 Sep 2009 @ 12:38pm

My grocery store just raised the price of apples.

I don't like this, so I will steal them from now on.

Wahhh, I'm a big baby.
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