Digital Music Prices: Is Cheaper Better? - hypebot

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Wommusic

Amazon is trying to generate business for itself while ripping off artists. That's the bottom line. Music is the loss leader for generating sales in other categories with a higher profit margin, because music is forever, people always want music. So you can always attract people by offering people some cheap -> free music. And what do you care since you make your money elsewhere...except if you are the artist.

More here:

http://www.wommusic.com/2011/05/amazons-new-digital-pricing-is-unfair-to-artists/

Jason Spitz

I think it has a lot to do with the retailer itself, and its market share. iTunes charges more because it owns the whole ecosystem. Most people have iPhones/Pads/Pods, and iTunes is their default music player AND music store. People love Apple because of its ease-of-use and convenience, so they're willing to pay a premium for something that "just works". Amazon is trying to carve out some market share for itself, so it competes against iTunes on price.

When it comes to digital, context is crucial. You can't separate price from retailer. If you can sell direct-to-fan (through Bandcamp or your own online store), I recommend setting a reasonable price (not too cheap, though...I never go below $6.99) and offering some exclusive bonus tracks as an incentive. The big benefit of selling digital direct-to-fan is the margin...iTunes & Amazon take a 30% cut of sales, whereas Bandcamp, Topspin, and other D2F solutions only take 15%.

Roger Bixley

I don't know what you heard, or if you're just assuming the facts, but Amazon doesn't set the price for special promotions, the labels do.

Theresa

Wrong. In order to participate in these sales, Amazon give you several price tiers to choose from, but all of them lock you into giving away extreme margins in order to benefit Amazon. The label does have some say, but Amazon always want to go deeper and deeper into the label & distributors pockets. Amazon will also tell you that in order to even be considered and selected for these sales, that it's the deepest discounting that gets the most consideration.

It's all about Amazon. Always.

swiftindie

In a wholesale/retail model, the retailer (Amazon) sets the consumer price, not the wholesaler (label). There was press about angry label execs when Amazon dropped the Lady Gaga album to $0.99.

Roger Bixley

That's a bad example. With Lady Gaga's 99 cent album, Amazon paid the label the standard rate for the album, netting Amazon a multi-million dollar loss.

http://www.billboard.biz/bbbiz/industry/retail/how-many-millions-did-amazon-lose-on-two-1005206452.story

So the argument that this is "bad for artists" is nonsense. The label got paid the standard rate. Either way, the Label had to sign off on the promotion.

As for your recollection of "angry label execs", those were most likely from OTHER labels, not Lady Gaga's, because they felt it was unjustly influencing the charts. Billboard adjusted their charting rules shortly after these complaints to eliminate pricing stunts like this.

http://www.billboard.biz/bbbiz/others/editor-s-note-new-billboard-policy-sets-1005528912.story

swiftindie

My point was that Amazon sets the retail price independent of the wholesale price, which was the case with the gaga album.

The bad for artists question is separate, and not one I addressed.

Liz

Not wrong Theresa. Yes, Amazon do have several price tiers, and they also have formal discount promo offers, whereby the distributor/label must formally drop the wholesale price in order to participate. They do, however, also often drop the retail price of ANY digital music product on store and pay the distributor/label the full wholesale at which they originally delivered that release.
It's a double edged sword but Amazon is indeed testing the waters on products to see where the sweet point is, often at their own 'loss' - and it's not always the lower price that drives sales, sometimes pricing down can be perceived as lowering the value of a product and not all fans will buy into that.

Roger Bixley

A product that nobody is buying already has an inherently lower value -- the law of supply and demand at its simplest.

If Amazon has to discount some albums to move some product that isn't necessarily selling at full price, and the label is getting their full wholesale price regardless of the retail price, why is this bad for anybody?

Amazon gets something rather than nothing, the labels get a bump in sales and don't have to take a cut in revenue to get it, the artists reach more fans, and the consumers get a discount on music they might not have bought.

Wommusic

The point is that when a major player like Amazon start suggesting that a whole album is worth only $6.99, or in Lady Gaga's case $0.99 (what a mistake by her management!), then it undermines music producers everywhere in the mid- to longterm. While neither Apple nor Amazon make their money in music, Apple at least had the decency to try to set a low bar for what music should be worth of $1/track. And made it work. Amazon demonstrates that they really do not care about music or the producers of music. They are not innovators in that market, they are just manipulators.

Roger Bixley

Since when do retailers have to "care" about every product they sell? I don't think you understand how business works.

Robbie Fields

My deep catalog label has consistently reduced our selling prices on our directly distributed iTunes titles. The iTunes interface offers a huge numbers of price tiers for long form product but only 3 for a single download (69, 99 cents and $1.29).

Our distributor simply has not been able to price the same titles and a further 40 lesser ones on Amazon for less than $5.99 for long form. We submitted our best selling title for an Amazon featured sale but was turned down. So it is hard for me not to feel that Amazon is just the latest version of the chain store in cahoots with the majors.

Back to iTunes. We probably started off at $9.99, then $5.99. Two years ago we went to $3.99 and it was a resounding success, mainly because of CMA (Complete My Album). When I see 41 single downloads @ .69 one day last week, I know that those 41 buyers will be back with another few bucks to buy the remainder of the album.

But it has not been plain sailing. A few weeks I discovered we could go down to the $2.99 price point. Very slight increase in album sales, singles sales declined! So after a week, decided to see the results @ $5.99. 95% decline in US sales. But I had noticed at the $2.99 level, we had a spike in our moribund European sales, so I kept the lower price for non U.S. sales.

We're back at $3.99.

I still think the magic price point is $1.99 for albums. We're at UKL 1.79 in the UK, UKL 1.20 net royalty which is brilliant. Because we now have sales.

Wommusic

That's interesting Robbie Fields. But you guys are a catalog label, which is not the same as a label that releases new music, obviously. Almost no label would be able to recoup their investment in new music at price points of $1.99, $3.99 or even $5.99. We also look at sales from various sources, and it is not true that cheaper sells better in our case. It is true that certain market segments won't buy at the higher price, but given iTunes command of the digital music market, I think it's relatively safe to say that - on average - people have been comfortable with the price point. Otherwise the iTunes charts would be dominated by the lower priced items.

chelsea

how much are there cds are plz let me know

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