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EMI: Apple will raise some iTunes song prices

updated 12:25 pm EST, Wed November 16, 2005

Apple to raise song prices

EMI Group said it expects Apple to and cut those by unknown acts on its iTunes Web site within a year, according to the Wall Street Journal. In talks with Apple CEO Steve Jobs, EMI's chief executive said he believed Apple planned to end its single-price $0.99 per song pricing policy for iTunes music. "We are having discussions which make us believe it will happen in the next 12 months," Mr. Levy said at a press conference in London for the company's half-year profit results. "There is a common understanding that we will have to come to a variable pricing structure. The issue is when. There is a case for superstars to have a higher price."

by MacNN Staff

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scottnichol
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Joined: Oct 1999

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11/16, 12:53pm | report spam | close Reply |
Superstars?

and who gets to determine which artists are superstars? for my money there's no better band than WILCO, but they don't seem to sell many records. so, if you want to raise the prices on ashley simpson's new release go ahead. getting the latest WILCO release at a discount because they're not superstars seems like a win-win situation to me!

testudo
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Joined: Aug 2001

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11/16, 12:55pm | report spam | close Reply |
woohoo!

But this is only good if they variablize it below 99 cents, as well as above. Most new c*** is c***. I want my KC and the Sunshine Band at 50 cents a song! That's what I want!

And I would think demand would affect the price (with the theory being strong demand equates to superstars!)

TimmyDee51
Mac Elite

Joined: Mar 2000

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11/16, 12:57pm | report spam | close Reply |
Playing with fire

Wow, I hope this tool knows who he's dealing with. Most of the time, talking about something that hasn't already come to pass with Apple (and Jobs, particularly) only leads to bad things (ATi, I'm looking at you).

Ikon
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Joined: May 2005

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11/16, 01:15pm | report spam | close Reply |
EMI

Time for The s** Pistols to re-release their anti-EMI song exclusively on iTunes.

But seriously, I have three iPods and never bought a song on iTunes.
They just don't have what I need.

pnorman
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Joined: Oct 1999

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11/16, 01:28pm | report spam | close Reply |
EMI CEO's Argument?

I'm very interested in hearing the case for higher prices for superstars. Why the h*** is this not elaborated upon?

The CEO of EMI says there must be a variable pricing structure. He says there is a valid argument to be made to support the variable pricing structure. Has anyone heard that argument?

If so, does the argument explain why EMI went with the single price per song in the first place? If the EMI CEO can explain their original decision without mentioning the concept of an experiment (ie, testing the waters with a new business model - iTMS), then i would be very interested in hearing it.

However, if the EMI CEO's explanation does acknowledge the experiment scenario, then the original arrangement can be criticised for not establishing a solution to the obvious problem of price increases when the contract became due for renegotiation.

Who is to blame for that failure? Was it a failure? Perhaps Apple did not press the record companys for an iron clad longterm deal because the whole project WAS an experiment; perhaps Apple was interested in setting a precedent for pricing when making those first contracts - a precedent that would cast the record companies as greedy if they ever wished to change the agreement to support price increases.

This is what has, in fact, happened; Steve Jobs summarized the current state of negotiations back in September - "if they want to raise the prices it just means they're getting a little greedy."

dashiel
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11/16, 01:34pm | report spam | close Reply |
i wonder...

itunes seems to be a bit less "superstar" oriented. not totally, but look at today's top 10, chris brown, the pussycat dolls and two tracks by fall out boy. not exactly your top 10 on TRL.

i'm theoretically not opposed to variable pricing, but �99 is the absolute ceiling for a track.

if record companies got real they could make a killing by following a pricing/encoding structure more like allofmp3.com. itunes catalog depth and convenient interface + allofmp3's pricing and encoding options would dwarf the current sales of itunes.

mike3k
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11/16, 01:45pm | report spam | close Reply |
Works out great for me

I hate mainstream music and I never buy anything top-40. I'd rather buy music by sigur ros, gogol bordello, or Amadou & Mariam than the flavor of the month rapper or teen singer.

ibugv4
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Joined: Jun 2003

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11/16, 02:38pm | report spam | close Reply |
I'm glad..

I'm glad that many of you have taste. Now move over because you make up less than 20% of the over-all music buying population. This does annoy me, because I like upbeat music and I own a load of top 40s (and only the #1 hit song, usually the rest of the disc is trash). This bothers me, because, they will have the ability to cite any song or artist as a "superstar" and go up on price. $.99 has seen it's day now.

ender
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Joined: Mar 1999

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11/16, 03:08pm | report spam | close Reply |
Songs less than 99

So I keep hearing the music execs saying that variable pricing is what is needed, and I can agree to a point. But what I've rarely (never?) heard them say is what they think the distribution of prices should be. Should there be an equal number of tracks be above and below 99 cents? Should the average of all tracks sold be 99 cents? What's the limits, both high and low? I mean, 0.99 - 2.99 is variable, but hardly in the interest of consumers (or the industry).

Steve Jobs keeps implying that variable pricing would mean the lowest price would be 0.99. I think that is a bit mis-leading...but probably less misleading than the record companies trying to convince us that variable pricing would mean a lot of older songs available for under 0.99. My guess is that their "vision" would result in the average selling price being far above that.

jhorvatic
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11/16, 03:45pm | report spam | close Reply |
Who said?

This guy says but does Steve Jobs actually say anything like this. I've heard nothing that quotes him saying he wants to raise the prices. In fact I've seen otherwise.
I would take this with a very small grain of salt. And I wouldn't doubt Steve Jobs might have something to say soon about this guys comments.

Al G
Forum Regular

Joined: Jul 2003

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11/16, 04:02pm | report spam | close Reply |
it will cost more

Let's be realistic. The ONLY reason record companies want variable pricing is because they want to make more money. And they think variable pricing will in fact be more profitable. Again, if there were any other reason than them making more money it wouldn't be an issue.

It's also apparent that they think consumers will be willing to pay more for the latest hot stuff.

On that last point, I disagree. I won't pay more than 99 cents. And I really hope most are like me and that the record companies are dead wrong.

I have nothing against variable pricing. Lower the price for older music, fine. But raise the price above 99 cents and I won't be buying it.

rok
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Joined: Mar 1999

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11/16, 04:04pm | report spam | close Reply |
the goose is dead

well, not quite, but it soon will be. you know the fable... goose lays golden eggs. greed spawns the thinking that, somewhere, deep within the goose, must be the source of all that wealth that can be manipulated beyond what the goose can produce. the goose is killed, only to discover... it was just a goose. and now with it dead, no more golden eggs, either.

you know, this just ticks me off to no end. so who's going to draw that line between what is superstar versus wannabe? what about those on the cusp? and how can you possibly justify just raising prices on pre-exisiting tracks? monday, this track is $1. tuesday, it's $2. why? it's no harder to produce. we're not running out of supply. it's not getting rare. we just did it because we think you'll still pay for it.

i don't think the music industry understands who they are messing with. teenagers with nothing better to do than to crash websites and servers are gonna get quite nasty.

vwtreg
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11/16, 04:27pm | report spam | close Reply |
Great timing

Just when it was announced earlier today that digital music sales have remained flat, EMI wants to go to a new and improved (improved profit for them but not the artists I'm sure) variable pricing structure. Wonder if that will improve the state of digital music sales.....

khaihon
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11/16, 04:43pm | report spam | close Reply |
Who agrees?

When new music is available in stores, it is typically LESS expensive in order to promote large sales numbers. As songs get older, they tend to be selling for full price with some items on the clearance rack.

In a model where resources are limited and factories can only pump out so many CD's at a time, it would make sense to charge more for more popular songs (which happens after the initial ramp in media production, but until then, demand is low relative to the supply)

Once the demand catches up to supply of popular music, the price is higher. For older songs, the demand is pretty consistent and the as the supply dwindles (these songs compete for manufacturing with more popular songs, and so the supply is lower), prices will steadily rise.

In a digital model, where the production costs are almost ZERO (to the labels) and virtually unlimited distribution, the supply curve almost completely elastic. If you don't know what this means, think about gas prices.... No matter how much gasoline costs, we are so dependent on it that we'll pay any price. That is because gasoline is in inelastic product. Digital music is the opposite of that, or elastic. If you increase the price of digital music, fewer people will pay for it, and people will resort to pirating it.

In short, the argument that more popular artists should sell their music for a premium does not hold up for the digital music economic model simply because of the the elastic supply of digital music vs. mustic on physical media. There is probably a "sweet spot" for musical pricing, but the psychological barrier of 99 cents is considered close enough to satisfy most parties.

testudo
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11/16, 05:08pm | report spam | close Reply |
Re: who agrees

I agree! Man, you people seem to think that the only pricing structure that makes sense is Apple's initial structure. And you're keying on the word 'superstar' like someone's just going to go around and say "Hey, Wilco's now a superstar, so raise the price!". Why don't you look at it from a business and consumer perspective and judge the thought on its merits.

Currently they've got this "One-size fits all" model. But that's completely different that standard supply/demand economics. Let the market decide the prices. If you had three songs, one that was highly desired, one that was moderately wanted, and one that only a small minority of people cared about, you'd be stupid (yes, stupid) to sell the highly desired one for less then what the market would pay. If people want it bad enough, you could sell it for $1.50 a shot and still get a large percentage of sales that would've paid 99 cents for it, and make more money doing it (and I know its hard to actually come to terms with, but the labels are in the business to make money, as is most everyone on this planet). In this example, you'd need to keep like 75% of your customers to generate more revenue then at 99 cents.

Its not about availablity or 'elasticity', its completely about what the market will bear. Saying "Its just bits, there's no reason it should cost more" is missing the point completely.

Fixed pricing also deters or prevents artists from charging what they want for their wares. If some artist wants to charge $3 a song because they think their music is worth it, let them. If people want it, they'll pay. If not, guess what, the guy gets no money. Gee, that's business!

apple4ever
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11/16, 07:07pm | report spam | close Reply |
This sucks

I really hope they don't raise prices. I will refuse to pay more than $.99 for songs. It makes no sense to pay more, cause then its approaching the price of a song via a CD, and that is w/o DRM and better quality.

rok
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Joined: Mar 1999

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11/16, 10:19pm | report spam | close Reply |
testudo, stfu

i swear to god, do you ever contribute anything sensible? oh yeah, you're the market.. which conveniently brings me to my point: sometimes the MARKET is WRONG. sometimes you need to do what's right, not what you can get away with. but hey, i like to sleep at night... you do whatever you want.

beeble
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Joined: Mar 2004

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11/16, 11:15pm | report spam | close Reply |
Elastic pricing

Since repricing the songs is simply a matter of of having iTunes say it's a different price, why can't there be a model of dynamic pricing based on demand. Surely Apple can come up with some algorithm that will satisfy the labels. If the songs download rate has changed by x during the last 24 hours then it's price goes up or down by $0.01 within a minimum and maximum value. It would put a little extra load on Apple's servers and databases but these values could be either calculated dynamically or done once per day.

If you by the latest hit before it's a hit, then you pay $0.50. If you wait until everyone wants it, then you pay $1.50. The pricing should reflect what the market is willing to pay, however the market is probably not going to want to pay more than 99c for the vast majority of songs. Many songs would sell better with a lower price and some would continue to sell well (but not better) with a higher price. At some point the increased profit from increase price starts to decline as sales drop off. Law of diminishing returns and all that. 99c seems to have worked very well so far. Changing it is going to be like playing with fire.

If the record labels kill iTMS do they not think that Apple legal will persue them from here to the ends of the earth. They will find something and when they do, that will be a very interesting day in court.

cooner
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Joined: Sep 2003

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11/17, 01:21am | report spam | close Reply |
Economics

You know, if you want to look at marketing and economics ...

You COULD say that, y'know, if they go through the trouble of mastering and compressing Britney Spears' latest single, and they sell 100,000 downloads on iTMS, then hey, they've grossed $99,000 just for that one file.

If they master and compress a track by some little-known garage band from Schenectady, and they sell 50 downloads, they've only grossed $49.50 at 99c per track. Same amount of postproduction work, for a fraction of the profits.

By those economics, they should charge MORE for obscure, unpopular tracks, and LESS for the popular ones that are guaranteed to make their money back. Meh. I think the most sane and piracy-preventing way to go is just leave one price for all tracks. That way more popular (and presumably "better") songs naturally earn the most money.

As for taking away artists' choice to price thier own music: They gave up that choice when they signed on with a label; labels and distributors set the price. Anyway, ask just about any artist if they were given a choice between (a) being allowed to set their own price, or (b) having the labels share the profits a bit more ethically and equitably ... well, I think you can guess what most would pick.

dmpmax
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Joined: Nov 2005

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11/17, 02:33am | report spam | close Reply |
Higher prices

What the.....
On another music site here in Australia - quite often the more popular songs are cheaper
ie. $1.89 for something you should already own on 8-track, record or CD and 0.99 cents for the top 10 songs.

At Target top 20 CD are available at a discount price...
So what gives - with expecting us to pay more for popular songs that is one way to make them unpopular.

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EMI: Apple will raise some iTunes song prices

updated 12:25 pm EST, Wed November 16, 2005

Apple to raise song prices

Superstars?

woohoo!

Playing with fire

EMI

EMI CEO's Argument?

i wonder...

Works out great for me

I'm glad..

Songs less than 99

Who said?

it will cost more

the goose is dead

Great timing

Who agrees?

Re: who agrees

This sucks

testudo, stfu

Elastic pricing

Economics

Higher prices

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EMI: Apple will raise some iTunes song prices

updated 12:25 pm EST, Wed November 16, 2005

Apple to raise song prices

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Superstars?

woohoo!

Playing with fire

EMI

EMI CEO's Argument?

i wonder...

Works out great for me

I'm glad..

Songs less than 99

Who said?

it will cost more

the goose is dead

Great timing

Who agrees?

Re: who agrees

This sucks

testudo, stfu

Elastic pricing

Economics

Higher prices

Login Here

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