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I think we all recognized the REAL intent last year when Apple finally caved to the music industry to allow for a new price structure in exchange for getting the same DRM-free music they were already giving everyone else: it was to make more money from every type of consumer. Anyone who didn’t get the message that day saw the truth soon enough – like my kids who instantly saw that a $15 iTunes Gift Card was worth about 4 songs less than before. Well, it turns out that folks are none too happy – and are voting with their wallets.
The impact of the new prices was immediate: the majority of music people cared about quickly sold for $1.29 – and this was regardless of age, making instant liars of the music industry officials who spoke of only recouping the higher costs from the newest artists. I saw that when my kids were buying stuff that week and were getting older music from artists they liked, including stuff from the 80’s and 90’s.
Since I’m a jazz fan I checked that genre, and sure enough found that the #1 jazz song, Louis Armstrong’s 1968 recording of ‘What a Wonderful World’ was now $1.29. There was supposed to be balance in terms of the music that went to $0.69, but I spent some time looking and saw that nearly everything I could find – and I like obscure stuff – was either $0.99 or $1.29.
As I mentioned, it seems that no one is happy with the change, and that is reflected in the year-end earnings of companies such as Warner who depend on Apple’s iTunes for the bulk of their digital music sales:
Warner Music Group (WMG) said this morning that it has seen unit sales growth at Apple’s (AAPL) iTunes decelerate since the price increase: Industrywide, year-over-year “digital track equivalent album unit growth” was at five percent in the December quarter, down sequentially from 10 percent in the September quarter and 11 percent in the June quarter.
And since iTunes sales make up the majority of Warner’s digital revenue, growth is contracting there, too. In the last quarter, digital revenue at the label was up eight percent compared with a year earlier, when that number was 20 percent.
The fact that sales still increased, albeit at a much slower rate, allowed Warner to spin things as a maturation of the market rather than customer reluctance to pay the higher price.
I have always thought that Apple hit the sweet spot at $0.99 – pirates would still steal music, but those who wanted to pay were easily able to justify that price. The boom of sales with Apple becoming the largest music retailer attests to that, and the subsequent decline only shows that the greed of the publishers is costing them sales.
So what do you think about all of this? And what does it mean for the growing ebook market? Chime in below!