Misplaced Blame Over iTunes Pricing

from the not-price-fixing dept

With the news coming out that, as expected, Steve Jobs wouldn't back down and convinced the labels to sign new contracts that keep the price of songs at $0.99, some are wondering if that's really a good thing. Mathew Ingram is the latest to suggest that, in doing so, Apple is also missing out on the ability to lower the price of some songs -- and suggests everyone thinks the result is good because they hate the record labels and like Steve Jobs. In fact, he suggests that Apple is "price fixing" here. That's not quite right. The concern over price fixing is whether or not the labels are having undue influence over the retail price -- and perhaps colluding to set retail prices. As a wholesaler, the record labels should be able to set their wholesale price at whatever they want -- and the retailer (in this case Apple) has the right to accept it or not. However, where the price fixing question comes in is that the labels should have no say in the final retail price -- and Apple's decision to set the retail price across the board at $1 isn't price fixing, so much as a merchandising decision of the retailer.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Jon, May 4th, 2006 @ 6:09pm

    You know what they say...

    People will do anything for a buck.

     

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  2.  
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    yossi, May 4th, 2006 @ 6:25pm

    99 cents

    Here in L.A. we have 99 cents only stores. Everything is 99 cents, even if its worth much less.

     

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  3.  
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    Topher3106, May 4th, 2006 @ 7:12pm

    Why should the price go up?

    Recently, I have been on a bit of a spending spree on music. I wanted to get the latest Coldplay, Pearl Jam and Tool CD's. I have been buying individual songs from other artists, but these were the first full CD's I have wanted in a long time. I was about to just buy them from the iTMS when I decided to check out Futureshop.ca.

    What a surprise, I could buy each of those albums for $9.99.

    So, I not only get the songs, but the CD and the Case along with all the artwork. Sure, I spent a little more money on the gas to get the the store, but I was on my way home from work and it was a short excursion.

    I think Apple and the Music industry need their heads read because $.99 songs and $9.99 albums (actually, most albums are more then $9.99 because Apple includes stupid bonus videos nobody wants) is freaking rediculous. There is NO cost overhead. I am sure Apple is running their iTMS for cheap, they are their own equipment suppliers. I can get a domain and server space from GoDaddy for $5 a month, I know the iTMS is a little more complicated, but web space isn't that expensive these days.

    The fact there is no physical media or materials involved means that iTMS songs should be like $0.50 each and the album cost $5.00.

    BTW, the new Tool CD comes in a nifty case that includes stereographic glasses and artwork. Leave it to Tool to actually make the CD case part of the product and desireable. You can't even buy Tool from the canadian version of thes store.

    I will not pay for iTMS again. It is a rip off unless they drop prices by at least 50%. Both Apple and the RIAA are ripping iTMS customers off because they are too lazy to get up off their asses and go to a store and get the same music for the same price, or even cheaper!

     

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  4.  
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    Javarod, May 4th, 2006 @ 7:20pm

    Chuckles, "My, aren't we greedy. Last time I checked, and this was a few years ago, a CD cost about $12.99 at Sam Goodies and the like, Apple's competition. Congratulations, you found a discounter that can offer a physical CD for the same price, something that's quite rare. Apple's prices are rarely more expensive than, and often cheaper than the price of the CD new, that's why people are happy to buy them there, after all, if you don't need the physical CD, why pay extra? Now would it be nice if these were cheaper? Sure, but its not bloody likely, heck, the studies are complaining about the price now, and consider the class action suit against Sony, I'm sure they'd like to see 'CDs' from ITMS priced at oh, $20 at least, so I don't think you've much room to complain, you're simply not Apple's market, so have a nice day, don't let the door hit you on the way out.

     

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  5.  
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    Alex Nassour, May 4th, 2006 @ 7:59pm

    Cost-Benifit

    Technology is the paragon of consumer data collection. Because iTunes is an online store, it has the ability to automatically survey and calculate projections for sales, this means they know exactly how much to charge for the most profit even if less people are using the service -- its a fine tuned money device more so than a music service.

    Maybe the "lazy" factor lies within apple's inability to explore the options to re-market certain areas (that might not be doing so well) as cheaper, which may instill consumer confidence in the service and boost sales.

     

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  6.  
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    garfalk, May 4th, 2006 @ 8:10pm

    Re: 99 cents

    sometimes it's even 99 cents if its worth more than 99 cents. its all bought in bulk like at costco and sam's club, but they spread it out over more stores so it goes further.

     

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  7.  
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    Scruffy Dan, May 4th, 2006 @ 8:32pm

    it would not get any cheaper

    I really do not think that any song would ever have sold for less than $0.99, I think the variable pricing would have simply made certain songs more expensive, but no song would have gotten any cheaper.

     

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  8.  
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    Mathew Ingram, May 4th, 2006 @ 8:41pm

    iTunes

    A fair point, Mike -- and you're right that price-fixing is usually something that manufacturers do, not retailers. My point is that with a quasi-monopoly-level market share in downloadable music, iTunes is a lot closer to having a stranglehold on the market than many people -- particularly rabid Apple fans -- would like to admit. And I think if it was Microsoft doing all that price-controlling, there would be a lot more uproar than there has been about Apple.

     

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  9.  
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    yossi, May 4th, 2006 @ 9:25pm

    Re: Re: 99 cents

    I know that, but I was just bringing out the cases when it is a ripoff.

     

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  10.  
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    Rick, May 4th, 2006 @ 10:37pm

    Misplaced Blame Over iTunes Pricing

    The truth be known ... iTunes was overpriced at its' inception and still is. While the Suits play their game of Monopoly, it is the consumer that foots the bill. In agreement with a few others here ... It's greed and it is a ripoff. I only buy music now from the artist directly, or borrow my friends music cd's if there's a song I really would like to have. Having been a professional musician in my younger years (1966-1976), the music industry politics haven't changed. Some of their gripes are legit, but most of them aren't.

     

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  11.  
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    Mike (profile), May 4th, 2006 @ 11:42pm

    Re: iTunes

    My point is that with a quasi-monopoly-level market share in downloadable music, iTunes is a lot closer to having a stranglehold on the market than many people -- particularly rabid Apple fans -- would like to admit.

    Indeed. That's a good point. However, an interesting element of this is that it's mostly the labels own fault! They wouldn't be in this position if they hadn't required Apple to use DRM, effectively locking those customers to Apple's service alone...

    So, while I'm hardly an Apple apologist... again, I'd say it's the recording industry that has itself to blame.

     

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  12.  
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    Tim, May 5th, 2006 @ 1:37am

    Re: iTunes

    So, while I'm hardly an Apple apologist... again, I'd say it's the recording industry that has itself to blame.

    Certainly the industry has itself to blame for Apple not raising the prices. But the point Mathew is making is that their "quasi-monopoly" means there is no pressure on Apple to lower their prices.

    It would be interesting to see Apple's reaction pricewise if allofmp3.com began to get a significant market share....

     

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  13.  
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    Mike (profile), May 5th, 2006 @ 2:31am

    Re: Re: iTunes


    Certainly the industry has itself to blame for Apple not raising the prices. But the point Mathew is making is that their "quasi-monopoly" means there is no pressure on Apple to lower their prices.


    Indeed. I agree with that point, but again, the reason for the monopoly was the labels own insistence on DRM. It's hardly Apple's fault.

    Secondly, there's no way the labels were thinking of lowering their wholesale prices on songs, so it's unlikely that Apple would have lowered their prices no matter what.

     

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  14.  
    identicon
    Mathew Ingram, May 5th, 2006 @ 5:17am

    Re: iTunes

    That's a good point, Mike -- the labels have made this particular bed in many ways, and now they are being forced to lie in it. It's not like they haven't had years to get their own versions of iTunes off the ground, but instead they've been too busy suing their own customers.

     

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  15.  
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    Grumpy Old Man, May 5th, 2006 @ 5:57am

    Loss Leader

    Ok let me start with accenting the Old in my name, I have not bought a new peice of misic in a decade or more, I listen to all that "hair" rock from the '80s. But I thought Apple was selling music on Itunes at break-even and/or even a loss to sell Ipods? just a question from the geezer.

    GOM

     

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  16.  
    identicon
    Tom, May 5th, 2006 @ 6:09am

    Econ 101

    Okay, thank you for clarifying the fact that Apple is a retailer and that price fixing would relate to the music companies exercising ANY control over the retail price. Let's move on to the next canard - monopoly. A monopoly relates to a company's market share for a product, it is not the market share in a specific channel. In other words, a monopoly company totally dominates an economic market - see MS Windows. Ergo, Apple, with about 5% of total music sales, is not anywhere near a monopolistic position. Please return to your regularly scheduled program.

     

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  17.  
    identicon
    Tom, May 5th, 2006 @ 6:46am

    why iTunes?

    why people still using ITunes if allofmp3.com has MUCH lower prices?

     

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  18.  
    identicon
    paul, May 5th, 2006 @ 7:26am

    Why should popular songs cost more?

    While I understand the appeal variable pricing may have for the industry, and for some consumers, the fact is that it only makes sense in more traditional, physical product (e.g. CD's, DVD's, etc.)

    In the digital store, the supply for any song is darn near infinite. No amount of demand will ever make it less so. Unlike physical CD's, which need to be pressed, delivered, etc., there is very little cost to deliver digital content, even if every man, woman, and child in North America wanted to purchase it.

    One could even argue that the most popular songs should be less expensive, because their production costs are recouped many times over. Moreover, the promotional costs for high-profile artists should be much less, since the industry to does not need to educate the consumer about who the artist is, etc.

     

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  19.  
    identicon
    Moogle, May 5th, 2006 @ 9:57am

    Re: why iTunes?

    "why people still using ITunes if allofmp3.com has MUCH lower prices?"

    Legitimacy. I'm not assured that allofmp3 is actually legal, so why pay at all if I can get it for free? No advantage.

    Like Techdirt has pointed out on numerous occasions, vast numbers of people are genuinely willing to pay for what they enjoy. If I give Apple a buck for a song, I don't ever have to feel guilty, and like a good pavlovian creature, apple/the industry/the artist will try to make more of something I'll buy.

    In this respect, allofmp3 is a parasite. I have nothing against them or their customers, just offering an explanation. To many people, it's worth paying the source.

    (I'm intentionally avoiding the argument of artists compensation by record labels)

     

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  20.  
    identicon
    Tom, May 5th, 2006 @ 2:03pm

    Re: Re: why iTunes?

    It's called: outsoursing.
    AllofMp3 pays royalty to RIAA but it's much cheaper because it's different country and different law.

    But it's 100% legal no matter what iTunes says.

     

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  21.  
    identicon
    Walking Dude, May 6th, 2006 @ 10:55am

    Re:

    Apple's album prices are definitely not a bargain compared with than the CD. Most new albums go for 10.99 or 11.99 version (I've even seen iTunes charge 13.99 or higher). With the Foo Fighter's lastest CD, for example, iTMS was more expensive than Amazon. There are exceptions of course. Comedy albums are usually cheaper on iTMS for some reason and the quality issue isn't a concern with spoken word stuff. But still no artwork or case.

    It's probably not Apple's fault. In order to get that 99 cent song price they probably had to give on album cost. However, Jobs knows iTMS is all about buying the song. Buying an album on there is rip-off because the cost is equivalent to the CD and the quality is much, much lower.

    Also, if you wait a few months, the CD price is often available for less than 10 bucks (Amazon's CD Club offers many of them for 8 bucks). iTMS' price almost never falls.

     

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  22.  
    identicon
    applegiest, May 7th, 2006 @ 3:41pm

    the price would'nt go down. Be real.

    Why would the prices go down? Thats a pretty ridiculous assumption. And Itunes is obviously a convienience store. You pay more for chips at the gas station but probably never give it much thought.
    The price is set by analyzing the psychological response to the number .99, not the actual value of the work. I wonder if people actually really respond more favorably to .77 then .99. I doubt it. consumers operate on an unconcious level for the most part, Especially in a convienience store environment.
    The day that artist sell directly to their audience will day of the music revolution. Until then, nothings really changed.

     

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