JURY STILL OUT ON APPLE PRICING
When Apple gave in to the Big Four’s demand for variable pricing in early April, raising the cost of current hits and other selected tracks in the iTunes Store from 99 cents to $1.29, insiders offered divergent opinions about the effect the new pricing system would have on sales and revenues.
A month into the program, there’s disagreement on both the preliminary results and what can be extrapolated from them.
According to observers, whatever evidence has been gathered to date is “completely anecdotal” and unable to support any hypotheses, one way or the other.
One major music group source points to “double-digit” gains in total revenue and profits since the move went into effect, though acknowledging an overall drop in individual sales.
WMG’s Edgar Bronfman was similarly upbeat in his conversation with financial analysts during last week’s announcement of the company’s financial results. “Although we priced down a far greater number of tracks than we priced up, early results show a net positive result on our digital [sales]. Variable pricing will be even more positive for us as we shift more to digital.”
In the case of LaFace/JLG artist Pink’s “Please Don’t Leave Me,” sales actually increased by more than 40% after the price was raised to $1.29 last week.
And total digital sales, of which iTunes represents the vast majority, were virtually flat between the last week of 99-cent pricing and two weeks later at just over 23 million paid downloads each week. (Easter week is discounted in this measurement because it’s atypical of general sales patterns.)
But Digital Music News asserted early this week that overall unit sales “are dipping far enough to produce aggregated revenue declines compared to the pre-variable position.”
Even DMN’s sources stressed that the early results offer no final verdict on variable pricing, speculating that “various price-points are probably going to be adjusted in an attempt to increase and optimize results.” The report cites one such company, Indianapolis-based Digonex, which offers a demand-based, real-time plan that takes into account demand to adjust pricing, though most major labels prefer the control of preset prices.
Another insider reflects the view of the majority of industry watchers when he claims, “There’s not nearly enough data to come to any conclusions just yet.”
For those wondering how the reduced pricing on deep, so-called “long tail” catalog is affecting sales, U.K. tech site The Register’s Andrew Orlowski concludes it’s still the hits that make the most money. A study last year found, of 12 million songs carried by an unnamed digital music retailer—which may or may not be iTunes—fully three-quarters of them were never downloaded, not even once.
