Music labels losing money on iTunes Store variable pricing

“When iTunes introduced variable pricing a month ago, we discovered most of the catalog remained unchanged, with price increases for the most popular songs. Fair enough, you might think, that reflects real-world supply and demand,” Andrew Orlowski reports for The Register. “But has it, as expected, brought home more cash for the beleaguered labels?”

Orlowski reports, “Billboard and Digital Music News both carry reports suggesting otherwise. 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.”

Full article here.

Glen Peoples reports for Billboard, “Of the 67 tracks that remained at $0.99, they sold a total of 29% fewer units than they sold in the week before the price increase. Because their prices remained unchanged, that 29% drop in unit sales resulted in a 29% decline in revenue last week. The 33 tracks raised to $1.29 dropped, in aggregate, 34.5% in unit sales from the week before the price increase. Because their price was raised to $1.29, the 34.5% drop in unit sales resulted in only a 14.7% decline in revenue.”

Full article here.

Paul Resnikoff reports for Digital Music News, “Major labels are seeing sales decreases following a shift towards variable pricing on iTunes, according to numerous sources to Digital Music News. The sources include executives within the majors, all of whom requested anonymity. “

“In the initial weeks following the pricing changes, including a move towards top-end, $1.29 downloads, overall revenues are moving downward,” Resnikoff reports. “Lower unit sales can still result in greater revenues given the higher pricing tiers. But according to the figures shared, unit sales are dipping far enough to produce aggregated revenue declines compared to the pre-variable position.”

Full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

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