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Digital Music Prices: Is Cheaper Better?

image from www.google.comIf you visit Amazon's digital music store and browse the top albums chart one thing you might notice is how low the prices are. Almost every album is "on sale" in some way making it one of the cheapest places to buy digital music. On the other side, glancing at the iTunes top album charts you notice a stark contrast with almost every album over $10.

Using some basic math, the average price of an album in the 'top 10' albums on iTunes is more than $10 at $10.69 while over at Amazon (not including singles) it's just less than $6 at $5.99. The cheapest 10 song album in iTunes' top album is American idols' 'Top 3' Compilation at $6.99. The price difference on the two stores seems to heavily skew what appears in the top 20 with only about 6 albums overlapping between Amazon and iTunes. For example, Coldplay's newest release, Mylo Xyloto, which was released in October of 2011 is #20 on Amazon chart while it's #47 on iTunes. The difference is probably the fact that there's a $6 gap between the two stores selling price with Amazon hugely undercutting at just $3.99.

These results were calculated on May 18th and obviously could change at any point depending on the new releases or different promotions. Amazon, clearly taking a different approach, is always having some promotion on music. They have 100 different albums on sale for $5 each month, they have a daily album sales and to top it off they are constantly giving away promo codes for $2 and $3 mp3 credits. By doing these regular promotions, Amazon is effectively testing new waters and pricing digital music in a way that makes more sense. Because digital music costs less to reproduce, it should cost the consumer less.

What's the right way to sell digital music though? Do you sell it a lot cheaper and hope you sell three of four times as many copies making up sales in volume, or do you stick the more traditional price of $10 per album? This is where my bias for digital comes in. I grew up with physical media like vinyl, tapes and then CDs and have a strong connection like anyone else in that age range, but like it or not 1's and 0's are the next format, forever. And if that's the case we need to stop pretending that digital is the same as physical media and price it accordingly. CDs and Tapes had this inherent cost that was fixed to it, the same way if you had been selling rolls of toilet paper. But digital music is unique in that you can copy it over and over at no additional no cost, which should be passed on to users. This is a chance to make money on volume, also raising sales figures. 

With both Apple and Amazon, the two largest stores, using music as a vehicle to encourage other sorts of spending whether that be on hardware or services, it makes it nearly impossible to tell whether cheaper music actually does sell better and produce better results. Bandcamp, however, is a stand alone digital music seller which mentioned to me that a lot of artists set prices for albums (7 tracks or more) at $7 and EP with 6 tracks or less for $4. Ryan at Bandcamp also pointed out that artists can leave the option open to fans to pay more on a individual basis and that some 40% of the time, fans actually do pay more and increase the sale by 50%. Maybe the solution to digital pricing is somewhere in the ballpark of charging a small and reasonable fee per album and then placing a "tip jar" for your obsessed fans to support the music they love.  

What's the actual best way to sell digital music? I guess it depends on who you ask, but I doubt it's the exact same price as physical music.