The Homa Files

Excerpted from WSJ, “Apple’s iTunes to Change Pricing Strategy”, Jan. 6, 2009

* * * * *

Apple unveiled significant pricing and copyright changes to iTunes.

The changes include a new three-tiered pricing plan: songs will cost 69 cents, 99 cents or $1.29 …  the “vast majority” of the songs will cost 69 cents, though the most sought-after songs — which generate most of the sales on the service — will likely cost $1.29 as both Apple and the major record labels try to boost revenue growth. The wholesale prices charged by the record labels are likely to change to reflect the new price points. The new wholesale prices couldn’t be immediately learned., instead of the 99-cents fixed price Apple has used almost exclusively.

Apple’s moves appear to be a response in part to shifts in the digital-music market. Digital-music retailers in the U.S. sold more than one billion songs in 2008. Apple surpassed Wal-Mart as the world’s largest music retailer. But, growth in paid downloads slowed significantly in 2008, rising 27%, compared with a 45% increase a year earlier.  Amazon.com sells many songs at a cheaper price than iTunes and without copy protection, giving users more freedom to do what they like with the songs they have purchased.

Apple also said it is dropping digital rights management, or copy protection, from eight million songs in its catalog effective immediately. Digital cognoscenti long have railed against DRM, saying it hobbles buyers’ ability to use music the way they want.  Apple’s DRM has made it complicated for consumers to use … and made it difficult or impossible to play songs purchased from the iTunes Store on devices other than the iPod or iPhone.

Users can pay 30 cents a song to upgrade previously-purchased songs in their iTunes library to a DRM-free version.

Full article:
http://online.wsj.com/article/SB123126062001057765.html?mod=testMod 

* * * * *

KEH Take:

(1) For MSB MBAs who took AMS: an example of the “Long Tail” and  customized pricing in action — low prices on low volume products — edging up to what the market will bear on popular ones.

(2) I can’t prove it, but it’s my sense the free downloading (i.e. “piracy”) is on the rise again. If true, Apple’s move to $1.29 on popular songs may backfire. Downloaders may be comparing to “free” again — not to Wal-Mart’s or Amazon’s prices

Want more from the Homa Files?
Click link =>  The Homa Files Blog

This entry was posted on January 7, 2009 at 7:50 am and is filed under Digital Media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.