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iTunes price hike fallout: labels making less money
According to several recording industry sources, the recent price hikes on iTunes haven't been much of a benefit to the people that wanted them the most - the record labels. Despite their Mr. Crab's like shouts of "Where's me money?!" the increase has had the exact opposite effect.
Digital Music News reports that labels have seen a drop in both sales and profits from iTunes since the new pricing structure went into effect. The 30-cent jump could have yielded more profit even with a small drop in sales. A couple weeks in, and that hasn't happened yet - the reduction in sales has more than neutralized the increased profit margin.
So what happened to all the buyers? Chances are good that they've turned to free alternatives - streaming services like Last.Fm and Blip.Fm, or even (shudder!) more nefarious sources like torrent sites and Limewire.
What will the next step be? Reduced pricing? Possibly. One source stated "various price-points are probably going to be adjusted in an attempt to increase and optimize results."
Results? Gee, thanks. That makes me feel all warm and fuzzy about the monetary support I provide.
[via AfterDawn and Digital Music News]
Comments
9
Subscribe to commentsr3loadedMay 7th 2009 11:37AM
Economics 101:
* Demand curves are downward sloping, increase the price and quantity demanded WILL fall.
* The trick of raising prices to increase total revenue only works when the good in question is price-inelastic i.e. a 10% increase in price gives a < 10% fall in quantity demanded. Clearly this isn't the case for digital music, so they've clearly not done their market research properly.
r3loadedMay 7th 2009 11:41AM
Economics 101:
* Demand curves are downward sloping, increase the price and quantity demanded WILL fall.
* The trick of raising prices to increase total revenue only works when the good in question is price-inelastic i.e. a 10% increase in price gives a < 10% fall in quantity demanded. Clearly this isn't the case for digital music, so they've clearly not done their market research properly.
tlarkin79May 7th 2009 12:48PM
If you don't like it, don't buy it.
Funny, but that's exactly what's happenned.
CurtisMay 7th 2009 3:42PM
I can honestly say I have stopped buying from iTunes since the new rates have been put in place... it's simply not worth the extra 30 cents a song in this economy.
D,May 7th 2009 4:22PM
I stopped buying music from iTunes as well. It's kind of funny actually. I was using iTunes to purchase music, even though I have been using a Zune, and have not touched either of my iPods in months. Now I simply use iTunes to organize my music and videos. After buying songs for .99 for so long, it feels like a ripoff to have to pay more just because of the record labels.
KevinMay 7th 2009 5:27PM
Hahahahhahahahahhahahahahahahahahaha
KonchuMay 7th 2009 6:55PM
On new albulms i will get them cheaper on Amazon.
QuikboyMay 7th 2009 7:03PM
Zune Marketplace still does 99 cent DRM-free MP3s.
Michael K PateMay 8th 2009 10:11AM
I have no doubt that after driving people to other alternatives just returning the price back won't help that much. People who left are not going to be eager to return.