Record Labels Misunderstanding The Market... Yet Again

from the keep-trying... dept

We all knew that many of the decision makers at various record labels were fairly clueless, but it's still somewhat amazing to witness just how little they understand about the market they're dealing with. Almost a year ago, we wrote about how various record labels, noting the "success" of iTunes, wanted to raise prices or force users to buy a bad song with each good song. That plan seemed to fade away, but not in the mids of all recording industry execs. alex points us to an article saying that the folks at a few record labels now believe that the download music store market is working so well that it's time they raised prices. Universal and Sony BMG apparently have seen the light and agree that this might not be a good idea -- but the other record labels seem to think it's a good idea. It's not hard to see how this will backfire -- quickly. People have become used to the $0.99 price, and a move higher will just be seen as price gouging. Meanwhile, the number of people paying for downloaded music is still dwarfed by the number of folks getting unauthorized files. You get the feeling that the people making these decisions don't quite understand elasticity and substitutions. Someone want to send them an intro econ textbook?

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