Culture

by Mike Masnick




Will Walmart's Entrance Signal Download Store Price Wars?

from the had-to-happen-sooner-or-later dept

I've been wondering how long the $0.99/song price for music could hold. Already, some say that the dollar a song price is too much, and basic competition would suggest that the prices will get driven down over time. The floor at this point is the $0.67 that the labels demand from each song sold. So far, the various download stores have mostly (though not completely) held the line at a dollar. Sooner or later, though, you had to know that someone would realize they could get more attention by going lower, and who else but the leader in "everyday low pricing" Walmart? They're testing their new download store with songs at $0.88 per song. Hello, price wars! Of course, they know that they'll be losing money on this offering, but they see it as a loss leader to get people to buy other stuff at Walmart.com. So, if the price war continues, at what point will someone realize that, since they're just using the music as a loss leader anyway, they don't mind paying the $0.67 themselves. For example, Apple already says they're losing money on iTunes, but more than making it up on iPods. Wouldn't they sell more iPods if the music were even cheaper? It's an optimization question of "how low do you go?" until the cost of the music outweighs the benefit of selling more other stuff. However, if the music really is acting as incentive to buy other (high priced, high margin) goods, you'd think they'll eventually be willing to go pretty damn low.

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  1. identicon
    oi, 19 Dec 2003 @ 5:58am

    Wouldn't they sell more iPods if the music were ev

    Mo.

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