Though the online world tends to give Steve Jobs and Apple the benefit of the doubt, there has been an incredible amount of second-guessing about iTunes’ decision to allow a three-tiered pricing system. A number of tracks – one third of yesterday’s Top 100 – have been raised to $1.29.
Engadget, the second-ranked blog according to Technorati, called the current iTunes “infected with variable pricing.” The logic of the strategy was questioned by MediaMemo. The shift away from the ease of universal 99-cent pricing was lamented by The Unofficial Apple Weblog. For the most part, online outlets merely reported the price change. A good deal of fretting, anger and confusion
Those who complained they were unable to find any songs priced at $0.69, as did Ars Technica, should have waited a few hours for iTunes to advertise its “Great Songs at a Great Price” compilation that offers 23 popular rock songs (among them Boston’s “Rock and Roll Band” and Korn’s “Falling Away From Me”) for $0.69 apiece of $15.87 for the entire playlist. Gizmodo also went on a search for $0.69 songs – with the misunderstanding that not all prices were going to be changed on the first day – and after finding none called labels’ pricing tactics “selective price gauging.”
NPD Group’s Russ Crupnick added some rational thought to a post by Newsday’s Glenn Gamboa. Up to 60% of teens purchase songs at iTunes using gift cards, Crupnick said, meaning they may pay more for a hit song but will not spend more in total – the amount of the gift card effectively puts a cap on much per-teen spending. In general, predicted Crupnick, the higher prices will have very little impact on downloads sales or iTunes’ market share.
Crupnick has similar comments in an LA Times article last week. In that same article, though, a pricing expert from Simon-Kucher & Partners consulting predicted the $0.99 price point would be a hard habit for consumers to break. Ted Cohen, a former EMI executive and managing partner at TAG Consulting, predicted a “PR nightmare.”
That’s a lot of grief for the first substantial iTunes price increase since the store was launched in mid-2003. If the original $0.99 price had been adjusted along with the change in the consume price index, today’s standard single track price would be about $1.15. That’s considerably less than the $1.29 some tracks will cost. Perception, though, is reality. Labels may face increased consumer frustration since their most visible tracks – the most popular – will tend to carry the higher price.
According to label sources quoted by MediaMemo, one label plans to price ten tracks at $0.69 for every one track in raises to $1.29 while another says 75% of its tracks will remain at $0.99 and a greater share of the remainder will be dropped to $0.69.
Aside from complaints about the price increases, many critics believe consumers don’t have the processing power to move beyond a simple dollar-a-song pricing. Never mind that tracks at iTunes UK cost 79 pence and uptake has not been slowed. One dollar per song seems to match the ease of use of Apple software and hardware. Three-tiered pricing, in that sense, is very un-Apple.
And there could be an impact on iTunes’ market share. Amazon.com’s MP3 store is getting an incredible amount of press over the last few days. These iTunes’ price increases should raise consumer awareness for its main competitor.
