Record companies hoping to come out ahead on new iTunes pricing

Posted by Dennis Sellers Jan 14, 2009 at 2:46pm

Although Apple announced this month that some songs sold on the iTunes Store 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, according to the Associated Press. In fact—and this will no doubt shock you—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, says the AP.

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?”
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. At least that’s the theory.

“You’ve got them spending $4, when yesterday they were spending 99 cents,” Crupnick says. “Is this going to be the salvation of the industry? No. But all these incremental things that we do will be helpful.”

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