Saturday, April 11, 2009

iTunes: Elasticity, Price Changes and Total Revenue

A previous CD post several weeks ago reported on the new variable iTunes pricing (69 cents, 99 cents and $1.29; replacing the single price of 99 cents), which went into effect this week on Tuesday.

What effect has variable pricing had on sales ranking (chart position) for the top 100 songs, unit sales, and total revenue per song? There's only a few days worth of sales data so far with the new pricing, but here's what's happened so far this week, according to Billboard:

Two days after the Apple iTunes Music Store raised prices on some individual tracks, there was evidence the increases have hurt the sales rankings of songs given the higher $1.29 price.

While it is difficult to say with certainty whether a price increase had resulted in less revenue, rough estimates reveal slight, negative changes in chart position would result in a positive change in revenue. The changes in chart position between Tuesday and Thursday, however, clearly show that higher prices had forced many songs to cede chart position to lower-priced songs.

The two-day trend from Tuesday to Thursday mirrored the two previous one-day trends (on Wednesday and Thursday separately). On Thursday, 47 songs on the iTunes Top 100 chart were priced at $1.29. The more expensive songs had lost an average of 2.7 chart positions from Tuesday to Thursday. Only six of the $1.29 songs rose up the chart while 29 dropped and 12 remained at the same chart position (see red bars on the the chart above for Lower Rank and Higher Rank).

The 53 songs that had remained priced at $0.99 during that two-day span had gained an average of 1.96 chart positions. Of the $0.99 songs, 32 rose up the chart, 12 dropped and nine stayed even (see blue bars above). The 32 songs that had remained at $1.29 for all three days had lost an average of 3.3 chart positions.

MP: There's also some interesting discussion on the effects of the price changes on sales revenue per song, and some caveats at the end of the article that the analysis is preliminary and doesn't control for all of the relevant variables, but concludes that "What is left is an incomplete but valuable look at the impact of price increases on relative sales performance."

HT: Mike W.


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