iTunes: Variable Pricing to Replace 99¢ Pricing
LA Times -- The world's largest music store, Apple's iTunes, plans to boost the price of many hit singles and selected classic tracks to $1.29 on April 7, breaking the psychological barrier of 99 cents in what could be the first big test of how much consumers are willing to pay to download individual songs.
The move, part of a new "variable-pricing" strategy that will also lower the price of selected songs, is an attempt by the music industry to wring more revenue from digital downloads in the battle to offset declining CD sales. Label executives contend the new pricing will allow them to offer packaged downloads of songs that might entice consumers to spend more on music.
Apple Inc. set the 99-cent-per-song rate in 2003 when it launched the iTunes Store. The company long resisted pressure from the music industry to allow flexible pricing, arguing that it would inhibit sales. Apple changed its tune in January, however, announcing that it would begin selling music at three prices: 69 cents, 99 cents and $1.29, based on wholesale costs set by the labels.
True to supply-and-demand economics, the price of music downloads will be geared to the artist's popularity. Releases from new artists would receive the lower pricing, while tracks from popular acts would get slapped with the higher rate. Even classics, such as Bruce Springsteen's "Born in the USA," could retail for the higher price. Most of the 10 million songs in the iTunes catalog are expected to remain at 99 cents.
MP: If this works for Apple, maybe movie theaters will be next to implement some kind of "variable-pricing" strategy for movie tickets. If it doesn't make sense to sell all music at a single price, it probably doesn't make sense to price all movies the same.