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Warner sees slower sales growth after pricing change

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By Charles Starrett

Contributing Editor
Published: Tuesday, February 9, 2010
News Categories: Digital Media, iTunes

Warner Music Group has revealed that unit sales growth on the iTunes Store has decelerated since the move to a variable pricing scheme. AllThingsD reports that industry-wide, year-over-year “digital track equivalent album unit growth” was 5% in the December quarter, down from 10% in the September quarter and 11% in the June quarter. As iTunes makes up the majority of Warner’s digital revenue, growth is slowing in that metric, as well, with digital revenue up 8% year-over-year in the December quarter, compared with a 20% growth rate in December 2008. Warner CEO Edgar Bronfman Jr. said that music downloads are a “mature” business, and that the pricing change has been a “net positive” for the label, but also suggested that, looking back, the move to raise prices wasn’t the best idea during a time of recession. Apple announced the move to a variable pricing scheme, under which individual tracks are sold for $.69, $.99, or $1.29, in January 2009, although the changes didn’t take hold until April 2009.

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Comments

1

It’s nice to see something approaching candor from an executive in his position, but, still, the story is easily summed up as, “No <insert colloquial term for dung> Sherlock!” wink

A majority of people have been saying for years that the $0.99 price point was too high and their response was to go even higher, what did they think was going to happen?

Posted by Code Monkey in Midstate New York on February 9, 2010 at 12:39 PM (PDT)

2

That is what you get for makin sons more expensive! Why go to itunes when you can get songs off of other vendors for 99 cents and even lower. Besides, you can use itunes to transfer them into a higher quality format! So warner brothers needs to think about choosing more places to sell their music online.

Posted by weirdalguy360 on February 9, 2010 at 12:54 PM (PDT)

3

Doh!

What a brain trust those guys are…

You get what you deserve, I guess!

Posted by DomArch on February 9, 2010 at 12:54 PM (PDT)

4

I meant to say songs.

Posted by weirdalguy360 on February 9, 2010 at 12:54 PM (PDT)

5

I know that the variable pricing scheme has driven me from iTunes to Amazon.  Every single I consider buying from iTunes is prcied at $1.29 (and no, it’s not just new releases, it’s all the most popular tracks even if very old), so I just get it from Amazon for $.99 instead or don’t buy at all.  I have yet to see a $.69 track even though mostly what I shop for is music that is 20+ years old and would be an ideal candidate for $.69 pricing.

For the past 9 months or so I mostly download only $5 MP3 album specials from Amazon.  $5/album is a price that makes it worthwhile for me to take a risk and try out some new bands I might not end up liking, or else pick up some older albums that I’d otherwise probably only buy used on CD.

Posted by Dyvim on February 9, 2010 at 1:02 PM (PDT)

6

@2: “Besides, you can use itunes to transfer them into a higher quality format!”

... scratches head…

You can convert them into a higher bitrate format that will make the resulting file larger in size, but they will not magically become higher quality.

Posted by Dyvim on February 9, 2010 at 1:06 PM (PDT)

7

I spent a decade in the music business as a CD buyer for retail stores. The money is always in the back catalogue for sellers.  You attract people with new releases and titles, and make money off of older releases. Volume always makes up for the loss in new releases, so you can sell those cheaper. By keeping a static $.99 price point, Apple was able to keep a money balance between catalogue and new titles. Now that the balance has been destroyed, well, you see the result. Short term profit, long term loss and no growth for the market.

Posted by Steve on February 9, 2010 at 1:24 PM (PDT)

8

Well, still, I think people would agree with me that we could sacrifice a bit of quality for money. I never got why itunes bumped up its pricing and now I believe they are paying the price.

Posted by weirdalguy360 on February 9, 2010 at 6:24 PM (PDT)

9

I’d just like to say that I’ve still yet to see a $.69 track on iTunes.

Posted by David on February 11, 2010 at 12:45 PM (PDT)

10

They’re actually there, but they tend to be pretty obscure stuff.  Try searching the iTunes Store for things like “polka music” and you’ll come across plenty.

Posted by Jesse Hollington in Toronto on February 11, 2010 at 1:16 PM (PDT)

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