Amazon, Wal-Mart follow iTunes’ lead, raise prices | iLounge News

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Amazon, Wal-Mart follow iTunes’ lead, raise prices

Both Amazon MP3 and Wal-Mart have raised prices on select digital songs following the iTunes Store’s move to variable pricing yesterday. Select tracks on Amazon’s MP3 store are now $1.29, matching iTunes’ top-tier pricing, while Wal-Mart has raised certain songs from $.94 to $1.24. Amazon’s decision to raise prices may seem unusual given that the service actually cut the price of many top-selling songs in its UK store ahead of the iTunes Store’s price hikes, cutting the minimum price on songs from 0.59 pounds to 0.29, or from roughly $.87 to $.43. CNet writer Matt Rosoff, however, suggests it wasn’t Amazon’s choice. “I can’t imagine Amazon’s excited about raising prices in a recession—they’re probably responding to price increases by the record labels, which were made possible by Apple’s capitulation,” Rosoff writes.

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Comments

1

Well this will encourage people away from piracy…

Posted by Legoman182182 on April 8, 2009 at 8:24 AM (PDT)

2

Did iLounge purposely juxtapose this story and the one above for comedic effect? The teen survey story immediately above this one showed 49% of all teens download more music for free than they pay for compared to 33% who pay for more downloads than they get for free (with 18% just not downloading music at all).

This is your market, labels: one where nearly half of your potential customers, and 60% of your actual customers, are downloading more music for free than they are paying for, and your answer was to raise the prices on the music people are most likely to desire… Brilliant.

Posted by Code Monkey in Midstate New York on April 8, 2009 at 8:26 AM (PDT)

3

Code Monkey, I suspect that the record labels (and outlets like iTunes and Amazon) are hoping to lull those of us who do pay for their downloads into paying “just a little bit more”.  Perhaps it is felt that this is a meager increase and that any loss of customer base will be more than offset by those who will continue to pay at higher prices. I’m not defending this by any means, but history shows us that many consumers will suck up little increases for addictions such as the instant gratification of downloading music. This strategy will fail only if the consumer base as a whole finds other ways to get their music, but I tend to think that’s not going to be the case.

Posted by rockmyplimsoul on April 8, 2009 at 4:46 PM (PDT)

4

“This strategy will fail only if the consumer base as a whole finds other ways to get their music, but I tend to think that’s not going to be the case.”

It’s already the case. It’s a done deal. 49% of teens downloading more for free than they’re paying for. Teens are one of the biggest markets for music and they’re only managing to convince a third of them to pay for more than they download for free (and nothing saying those paying for more still aren’t downloading plenty for free). We don’t know what the 18% who didn’t report downloading anything are doing, but odds are a large percentage are just copying the music from the 82% who are downloading.

The culture war over whether file sharing is sharing or stealing is over, and the labels lost. If I were them I’d be more concerned how to win back paying customers instead of milking the 1/3rd of the people who didn’t get the memo.

Posted by Code Monkey in Midstate New York on April 8, 2009 at 9:46 PM (PDT)

5

Unfortunately, it also begs the question as to how many teens are downloading simply because they can’t afford to pay *anything* for music? 

Not every teenager has a job or an allowance, and in many cases they’re using the family computer to download their stuff and play it on a $20 USB memory stick or possibly even getting their tunes from their friends’ family computers because they don’t have one of their own.  While the teenage generation is a big market for music, it’s only because that music is so accessible to them within their social circles and is essentially now being treated as a freely-tradable commodity. 

The bottom line is I don’t think there’s anything the industry can do to win back any of that demographic…  Even $0.01 per track is still more expensive than “free” and those teens who have the money to pay for music are more interested in downloading their stuff for free and spending their money on clothing and dates.

I work with a teenaged youth organization and it’s getting to the point where many of these kids don’t even know what a *CD* is any more….  They download profusely without care or concern not because music is “too expensive” but because they pretty much consider it a free commodity to do with as they please.

So while I don’t disagree that the music industry is being stupid with their pricing approach, I don’t believe that *any* lower pricing approach (other than free) would win back a significant portion of the file-sharing population.  In that regard, Pandora’s box has already been opened.

Posted by Jesse Hollington in Toronto on April 9, 2009 at 11:01 AM (PDT)

6

@Jesse: I’m not sure your insight is accurate, or at least would be in the absence of labels behaving intelligently. For example, in my generation, before age 17 or so when we all got jobs, at least 90% of our music was “pirated”. One guy got the LP or cassette and made copies for all his friends. The majority of music I listened to for the majority of my teenage years was “pirated” and so wasn’t everyone else’s music in this situation. I suspect that since the advent of the cassette deck that most music in pre-job teens has been “pirated”. However, because we weren’t treated like criminals, nobody ever thought to consider not buying music some sort of political, or even smart economic, move. We just gave away tapes to one another because we were poor teens and it made sense.

Once we had jobs, though, buying music became a major way of acquiring music. It was logical. You didn’t need to wait for someone else to take the plunge, you didn’t have to suffer through second or third generation cassette syndrome, and there was a certain prestige in owning an original of a good band as opposed to a TDK C90 with the album title in blue marker :D

The problem seems to be in, one, treating the customers like criminals and turning them off the product you’d like to sell them and, two, not recognizing that the relative value of music has permanently changed. People today are exposed to and can easily consume 20X the music of someone from my generation, yet the relative incomes have not changed. If the youth are potentially going to want to buy 20X the music someone in my day would have, but their incomes aren’t any better while the music still costs the same, the result is obvious, particularly when free is a lot better quality than it was in my day.

1. Embrace the reality that young teens have been pirating most if not all of their music for several decades; it’s not a problem, it’s precisely music labels get their customers.
2. Alter pricing to recognize that for most consumers an album is simply not worth $10. You can’t stop all “piracy”, but you can certainly maximise profits through better pricing.
3. Find ways to make buying originals of bands they like prestigious again when they do have jobs.

Do those three things and they’d be fine with teens.

Posted by Code Monkey in Midstate New York on April 10, 2009 at 6:35 AM (PDT)

7

All good points Code Monkey (& Jesse).  But what you seem to be focusing on is the population who *already* steal music.

However, if you only look at the population who currently pay for downloaded music, what will this price increase do to them?  Will it push them over the edge to steal?  Or, will they suck it up and pay the extra price?

My argument was that this price increase may cause some to buy less and steal more, but the price increase may offset the loss of customer base, resulting in more net revenue (as long as they don’t lose too many paying customers as a result).

Believe me, I’m not defending what they’re doing, just trying to explain it from a marketing perspective (upsetting as it may be).  The ones who steal music will continue to do so, but I’m not so sure that this move will push enough paying customers away such that the record labels will lose money, at least in the near-term.  In the future I think we may see price tweaking to test the market to see what it will bear (somewhat similar to gas prices wink.

Posted by rockmyplimsoul on April 10, 2009 at 2:54 PM (PDT)

8

“But what you seem to be focusing on is the population who *already* steal music.”

See, my experience is that there is practically no such thing as someone who doesn’t “steal” music according to the label’s notions. At the same time, other than the handful of idjits you find online boasting about their ignorant achievements in downloading, I’ve never known someone who doesn’t also buy music. This is practically everybody I’ve ever known, including my good Christian mother(TM). The populations are, for the most part, one and the same. Basing your marketing strategies around people who always pay for music is like basing your marketing strategies around 40 year old virgins.

Literally, the only person I can name who has never “stolen” music by the label’s notions is my father. However, he has also never bought a single album either in all the years I’ve known him; if it’s not on the radio for free, he doesn’t give a damn.

Posted by Code Monkey in Midstate New York on April 10, 2009 at 6:16 PM (PDT)

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