Others Join Price Hikes Under Apple’s iTunes Model
Apple managed a price increase for music Tuesday under the veil of a variable pricing model for its iTunes Store. Now Amazon, Lala, Wal-Mart and Rhapsody are adopting the tiered pricing scheme.
In the variable pricing model, new releases and top tracks are now selling for $1.29 instead of 99 cents. Wal-Mart is the exception, offering new releases for a market-leading $1.24. Apple and others are selling recent songs for 99 cents and older selections for 69 cents.
“It’s really not the retailers that are raising the prices. It’s the record labels. The retailers are just passing it along to the consumers,” said Phil Leigh, senior analyst at Inside Digital Media. “Retailers have no choice but to raise prices or sell below cost.”
Where Are the 69-Cent Songs?
Under variable pricing, classics are supposed to sell for 69 cents. But Leigh’s investigation on Amazon.com and other sites found older songs still selling for 99 cents. It’s not clear whether the companies have not yet updated their catalog or don’t plan to reduce prices on songs like Louie, Louie, Zippity Do Dah, and Beethoven symphonies. Amazon could not immediately be reached for comment.
Will consumers object to the price changes in the midst of a down economy? Leigh is betting consumers are going to be disappointed by the new pricing model.
“The record labels may find that the new pricing reduces overall demand and stimulates piracy,” Leigh said. “If the record industry can’t get away with this, it may cause the video industry to go back to the drawing board, because it is focusing on ways to restrict free access to videos at advertising-supported Web sites.”
As Leigh sees it, the record labels and the video industry — and the newspaper industry, for that matter — must find a way to make advertising work online. As it stands,…
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