Will Amazon’s Music Service Embrace Variable Pricing?
In a recent statement related to his company’s investment
in Aimee Street (a new artist site that utilizes dynamic pricing), Amazon SVP of Business Development Jeff Blackburn said
allowing customers to directly influence song pricing “is an
interesting and novel approach to selling digital music.”
With Amazon
due to launch its own download store this year some are speculating that
dynamic pricing will be part of the equation.
We can’t imagine that
labels – major or indie – are anywhere near being ready to adopt such a radical pricing plan or that current recording contracts would allow it.
But everything we know leads us to believe that Amazon’s new music service will
embrace variable pricing in a big way just as the company has in every other are of e-commerce.
Variable pricing – up and down – is something that labels have demanded of iTunes from the start and long overdue.
I don’t see contract issues as being a major hurdle for labels to authorize variable pricing. Almost every recording contract contains royalty deductions for mid-level and budget-level priced MSRP and whole sale pricing. In reality it could be a good thing for labels as a lower priced digital sale (in relation to a top line price of .99) could actually raise their profit margin when artist royalty and mechanical royalties are reduced.
Not the best for the artist, though. But they usually have approval over budget and mid-line authorization.
Thanks for your comment. I was referring to modern record contracts not having enough flexibility to allow dynamic pricing not variable pricing. Sorry if I was not clear.
And I agree with you on the power of lower prices.