iTunes Store music pricing changes raises record labels hopes for new ‘bundling’ strategy

“Although Apple Inc. announced this month that some songs sold on its market-leading iTunes online service would be available for 69 cents instead of the 99-cent tag Apple had insisted on for years, the change won’t necessarily put more money into the pockets of music lovers,” Ryan Nakashima reports for The Associated Press. “In fact, record companies are the ones that plan to come out ahead.”

“While some songs will be 30 cents cheaper, popular songs likely will be marked up to $1.29. That price breaks a psychological $1 barrier and prepares consumers for a new strategy by labels to bundle songs, videos and other exclusive content together — all in the hopes of reversing years of falling music sales,” Nakashima reports.

MacDailyNews Take: Bundle equals force which equals less choice which, music cartels, equals BitTorrent.

Nakashima continues, “According to NPD analyst Russ Crupnick, the music industry has been faced with a vexing question as fans bought more digital singles but fewer albums: ‘As the album as we know it goes away, how do we replace a $12 or $13 item with something that costs more than 99 cents?'”

MacDailyNews Take: Uh, how about making good music that people want to buy? Versus placing one or two nuggets into a shit sandwich and charging US$15.99 for it?

Nakashima continues, “If the new variable pricing can make several songs packaged together seem like a relative discount, it could finally entice some consumers to pay more… For more than a year, Amazon.com Inc. beat iTunes on price, with song downloads at 79 and 89 cents and most albums between $5.99 and $9.99. While those songs could be transferred seamlessly to iPods with a downloadable program, most consumers haven’t bothered to make the switch.”

“Recording companies noticed. While none would comment on the record for this story, privately they say that Amazon’s inability to become the dominant force in song sales indicates that consumers aren’t considered “price sensitive.” In other words, people are willing to pay more,” Nakashima reports.

Nakashima reports, “Apple has an estimated 80 percent share of the digital download market and about 71 percent of all portable music players sold in the United States.”

Full article here.

MacDailyNews Take: The only question is whether the music cartels will call this several songs packaged together artificial construct otherwise known as forced bundling an “album” or will they come up with some new name to which their marketing departments can ascribe the term “art?”

24 Comments

  1. Only the dumbest aren’t willing to pay more, to get more.

    There is so much more to buying music online, than just finding the cheapest price. User experience is right up there.

    The labels now know that the consumer isn’t just a price whore, they want value for their money. If the labels are smart they will find a way to bring more value to higher priced sales, something they haven’t had to do for about 40 years.

    They will adapt, and those that buy the ‘bundled’ packages will be happy BECAUSE they got more value, than they will with a single.

    Their experience with Amazon (vs Apple’s iTunes) is probably the last bit of evidence they require to know which direction to proceed.

  2. If record execs act like they are drunk, its probably because they are.

    Their business model was ripped apart, and they had no alternative to keep their customers happy and revenues up. That would drive me to drink.

    Its taken some time, time used testing new models, but now they seem to be focusing in on a strategy that will make everyone happy.

    Ironically, the technology that shredded their old business model has now evolved to a point where they can develop a new one. They have Apple to thank for that.

  3. This doesn’t make sense to me. We have reports that Apple caved on the tired pricing, but nothing to suggest they caved on “bundling.” They might *want* to bundle stuff, but that doesn’t mean they can. They can only do this if it’s in the agreement that Apple just signed and as of now, I don’t recall that being reported as part of it.

  4. So, how is this “bundle” supposed to work? Package one b-side song with a hot track, and charge $2.58 for the pair, and only sell it as a pair, not as a single? Take the idea far enough, and you get the album, which is still primarily capped at $9.90. So, the ability for labels to maneuver consumers into paying more is VERY, VERY limited. Thank god, Steve didn’t budge when the labels were initially trying to shove $2.49 for a hot single at us. $1.29 max is barely above the rate of inflation since the time the iTunes store opened. I think inflation would have made that original 99 cent track about $1.16 now. So, charging 13 cents more for a hot single is not going to make the labels rich. In fact, dropping the catalog tracks to 69 cents should actually drop the average price per track, I’d wager. Of course, it should also stimulate more impulse buys.

  5. “Uh, how about making good music that people want to buy? Versus placing one or two nuggets into a shit sandwich and charging US$15.99 for it?”

    Now *this* is why I read MDN. Truth and humor in one sentence.

  6. Will the record companies be able to make it album only purchase, or does Apple control that? Was that the cost of going DRM free? I know they would really like to extend that model to iTunes, but would they like it so much they’d be willing to cut Apple in on the take? Something like the first thirty days are album only, with Apple making 30%? Then, break it up to singles and let the filler fall to 69 cents, hold the release list at 1.29, and let them fall to .99 thirty days after they release the single?

    Curious to be sure, will have to monitor the situation…

  7. Considering that the record industry is in such shambles, you’d think that they’d be trying to find ways to be innovative and give consumers a reason to purchase their product rather than trying to force people to pay more for it. I’m not sure if it’s ignorance or arrogance. Probably both.

    One place they might start is embedding al tracks with lyrics and other meta info like musicians who played on the track, etc. And very few albums on iTunes include a PDF of the liner art. Things like that could go a long way toward making people feel like they’re getting something for their money.

  8. So, record companies believe Amazon’s inability to become the dominant force in song sales indicates that consumers aren’t considered “price sensitive”. More likely, consumers appreciate and prefer the consumer experience they get on iTunes – reliability, offerings, convenience, etc.

    I tried Amazon once; that first download failed. I came back to iTunes.

  9. What has R2 been telling you guys?

    The labels have Apple by the balls now.

    Whatever “agreement” they have is irrelevant. They’ll drag Apple back to the negotiating table and squeeze more and more blood out of iTunes. It’s now a very important business for both sides of the table and whenever Apple wants a change that requires an updated contract, the labels will be there with new demands in hand.

    What will it be next? When Apple wants direct ringtone downloads in the iTunes Mobile store (now that I think about it, why don’t we have this already)? Plenty of wiggle room left to go.

  10. “While those songs could be transferred seamlessly to iPods with a downloadable program, most consumers haven’t bothered to make the switch”

    What’s he talking about? You need a downloadable program to import mp3s? Oh, iTunes. Does he really think not having them automatically appear on your iPod put people off using amazon? Or what? He needed 21 more words?

  11. I will NEVER EVER again buy a full CD’s worth of songs if the songs are crap. I also won’t ever pay to ‘rent’ music.
    And I am NOT going to buy songs I don’t want. Screw the music industry. I’ll download the music I want for free.

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