Shock! Disbelief! Week 4: Big Music Price Hike STILL Makes Tunes Less Popular!

iPhone vs. Big Media

We posted last month about how initial reports showed the then new $1.29 price point Big Music had convinced iTunes, Amazon, and other digital music retailers to adopt had caused pricier tunes to fall down the charts, how do things look now, some 4 weeks later?

The same if not worse-ish, according to the Register:

Billboard notes that after four weeks, both $1.29 and $0.99 songs have, as expected, experienced a decline in revenue, down 34.5 per cent and 29 per cent. But since $1.29 songs have a higher margin, the hike has raised more income than if the price had remained at 99 cents. How much? Billboard reckons $14,000 a week net. DMN confirms the trend but wonders if the net effect isn't negative overall.

Has the long-tail truly come off the online music business? Will the record labels continue to try and squeeze more and more out of the bestselling hits? Do we care? I know I barely thought twice about hitting the buy-button on $0.99 DRM-free, 256-bit iTunes music. At $1.29, however, psychological barrier or not, I think more than twice.

Maybe Steve Jobs was right?

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Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, Vector, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Shock! Disbelief! Week 4: Big Music Price Hike STILL Makes Tunes Less Popular!

13 Comments

I know that there have been at least 3 popular songs that I haven't paid $1.29 for. I know it is silly because it is only .30, but I just can't do it...

For some reason I can NOT bring myself to buy a song that's priced at $1.29... I will download it on aimini.net for free and fix the tags myself before I pay $1.29 for it on iTunes.

I know it's only .30c extra, but its the principle of it...it just feels like a money grab so I don't buy them. Still a lot of the time I buy the physical CD with little regard for how much less or more I'm paying vs getting them on iTunes....so what the hell do I know.

I don't really get why 99 cent songs saw the decline. I know many people who have jumped into buying from iTunes only now that it is DRM free.
I'm having a hard time finding those 69 cent songs though.

I must say, I don't buy my music through iTunes anymore. I am not sure why, but the $0.29 price hike has made me think differently. Now I stick to free music & radio show podcasts, like Above & Beyond and TWIT.

We saw a $0.60 price hike here, I've not bought any of the more expensive songs - and don't plan to. It makes the "free" alternatives more attractive.

@Forrest Gump
ick don't use Limewire.
Find a reputable BitTorrent site ;) A+ quality and you're almost guaranteed to find some unreleased/rare tracks by your favorite artist

Anyone who took even a basic microeconomics course knows that wants (as opposed to needs) usually have a fairly elastic demand curve. In English, demand is fairly sensitive to price. Economic theory would predict then, that a lower price would maximize profit. Indeed this is easy to illustrate: 1000 songs at .99 = $990, whereas 600 songs at 1.29 = $774, or a net loss. This price sensitivity is especially true in a recession. Makes you wonder what the heck Big Music was thinking. If anything, they should have lowered prices. ie: 1200 songs @ .89 = $1068 Do they not have any economists on staff?

@Pinny: hasn't big music, indeed all of big media, proven over and over again that they have no concept of economics other than cut-off-your-nose-to-spite-your-face curves?

@Pinny -- You tell them, mr. microeconmics. Let's talk about profit margins. Hm...Apple doesn't make $0.99 for a song, because their profit margin was around 30% at $0.99, meaning their cost per song is around 70 cents.
(.99 - .70) * 1000 = $290
(1.29 - .70) * 600 = $354
An that's at 60% sales, not 65% as the article mentions.
I assure you, with $29 billion in cash on hand, Apple knows something about economics. Or do you think they just won a $100 million lottery...290 times!!!?
Of course, you would have known this, if you had actually read the article.
"But since $1.29 songs have a higher margin, the hike has raised more income than if the price had remained at 99 cents. How much? Billboard reckons $14,000 a week net."