AllThingsD: Book Publishers Beware! At iTunes, Expensive Music Equals Slower Sales.

kjk · 02-09-2010, 11:44 AM

http://mediamemo.allthingsd.com/2010...-slower-sales/

Quote:

After years of complaints, last year the music labels finally got what they wanted from Apple–the ability to raise prices on their songs. Last April, iTunes introduced a “variable pricing” scheme, which gave the labels the ability to move prices from 99 cents a song to $1.29 (and for some tracks, down to 69 cents).

The results? Music sales are slowing.

Quote:

So here’s the question for the book industry, which has been working very hard to boost the price for its digital goods: Which lesson do you learn from this?

My gut is that the industry will see this parable the way Bronfman apparently does: If you can move prices up early in the digital adoption cycle, you’re much better off.

During the earnings call, Bronfman sounded a bit wistful as he noted the book industry’s apparent success, with the help of Apple, at raising prices above the $9.99 floor Amazon (AMZN) had set. “It’s interesting that the book publishing industry, on the iPad, has much more flexibility than the music industry had,” he noted.

The counter here is the one that seems obvious to everyone else: Lower prices, and you can sell more stuff. Looks like we’ll be getting another real world test of this economics lesson soon.

dsvick · 02-09-2010, 11:50 AM

According to the article it is slower sales growth, but it is still growth. In fact 8% revenue growth over the last year for Warner, yes that is down from the previous year but the economy still sucks and unemployment was still climbing for much of the year. I'm not sure they can look at a single factor (the price increase) and say that it was the cause.

kjk · 02-09-2010, 11:51 AM

Quote:

Originally Posted by dsvick

That is slower sales growth, but it is still growth.

True. Plus..

Quote:

And indeed, Warner CEO Edgar Bronfman Jr. argued that the pricing change has been a “net positive” for Warner. But he also suggested that in hindsight, perhaps it wasn’t a great idea to raise prices 30 percent during a recession

Bremen Cole · 02-09-2010, 11:58 AM

I didn't even know iTunes had this price scheme, I have never bought a song there. Will have to check Amazon mp3 sales to see if they are doing the same, been a while since I bought something.

Yes, cheaper prices = more sales. On the other hand there is a sweet spot for companies. That is where you can sell fewer units, but have higher profits. Too high a price and you take to big a hit in sales. Too cheap, and you just don't make much. The are trying to find that sweet spot.

The consumer can of course control it, by what price point they refuse to buy. Companies are not completely stupid. Why sell an ebook for $9.99 if you can get $14.99? On the other hand, if sales drop too much at the $14.99 price point, they they will retreat.

My guess is it will work out for them. Most consumers will go along with a price hike if "everybody's" doing it. With Apple and Amazon on board, all the rest will have to follow. There are a few rogues like me that will use alternate means to get the products we want, but we are a small minority.

WillAdams · 02-09-2010, 12:44 PM

There's also the issue of how much of a readership a given title might have --- my last freelance project was a translation of _Thomas Harriot's Artis Analyticae Praxis_:

http://www.springer.com/mathematics/...-0-387-49511-8

Despite its importance, it's really only of interest to scholars of mathematics history (how many of them do you know?), so had to be priced at a pricepoint which would allow its limited sales figures to pay out.

William

MrBlueSky · 02-09-2010, 04:47 PM

Big corporation jack up prices and unit sales growth decelerate.

Company exec. crows that the 30% price increase is a “net positive” for said big corporation’s profits, while joking about timing of worldwide recession.

Customer parsimony puzzles said exec. Can't see beyond end of nose. Exec. bonus safe for another year.

Macmillan inspired by evidence of innovative business model, seeks “net positive” growth too.

Business as usual.

Why is nobody surprised?

Kali Yuga · 02-09-2010, 11:28 PM

Correlation does not necessarily prove causation, as even Bronfman himself is aware:

"“It’s difficult to know, even today, if it is just consumer resistance to a higher price points or if taking a pricepoint of 30 percent more at such a fragile time (is to blame)."

So it could be the price increase, it could be the recession, or (most likely) a combination of the two.

Let the amateur economic punditry, without access to actual numbers or sales figures analysis, continue.

02-09-2010, 11:50 AM	#2
dsvick Wizard Posts: 2,737 Karma: 635747 Join Date: Nov 2009 Location: Northeast Ohio, USA Device: PRS-900	According to the article it is slower sales growth, but it is still growth. In fact 8% revenue growth over the last year for Warner, yes that is down from the previous year but the economy still sucks and unemployment was still climbing for much of the year. I'm not sure they can look at a single factor (the price increase) and say that it was the cause. Last edited by dsvick; 02-09-2010 at 11:52 AM.

02-09-2010, 04:47 PM	#6
MrBlueSky Connoisseur Posts: 53 Karma: 400693 Join Date: Jan 2010 Device: Sony 600	NEWS FLASH! Big corporation jack up prices and unit sales growth decelerate. Company exec. crows that the 30% price increase is a “net positive” for said big corporation’s profits, while joking about timing of worldwide recession. Customer parsimony puzzles said exec. Can't see beyond end of nose. Exec. bonus safe for another year. Macmillan inspired by evidence of innovative business model, seeks “net positive” growth too. Business as usual. Why is nobody surprised?

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02-09-2010, 11:58 AM	#4
Bremen Cole Wizard Posts: 1,115 Karma: 2718 Join Date: Dec 2009 Location: Texas Device: iPad	I didn't even know iTunes had this price scheme, I have never bought a song there. Will have to check Amazon mp3 sales to see if they are doing the same, been a while since I bought something. Yes, cheaper prices = more sales. On the other hand there is a sweet spot for companies. That is where you can sell fewer units, but have higher profits. Too high a price and you take to big a hit in sales. Too cheap, and you just don't make much. The are trying to find that sweet spot. The consumer can of course control it, by what price point they refuse to buy. Companies are not completely stupid. Why sell an ebook for $9.99 if you can get $14.99? On the other hand, if sales drop too much at the $14.99 price point, they they will retreat. My guess is it will work out for them. Most consumers will go along with a price hike if "everybody's" doing it. With Apple and Amazon on board, all the rest will have to follow. There are a few rogues like me that will use alternate means to get the products we want, but we are a small minority.

02-09-2010, 12:44 PM	#5
WillAdams Wizard Posts: 1,234 Karma: 3350652 Join Date: Feb 2008 Device: Amazon Kindle Paperwhite (300ppi), Samsung Galaxy Book 12	There's also the issue of how much of a readership a given title might have --- my last freelance project was a translation of _Thomas Harriot's Artis Analyticae Praxis_: http://www.springer.com/mathematics/...-0-387-49511-8 Despite its importance, it's really only of interest to scholars of mathematics history (how many of them do you know?), so had to be priced at a pricepoint which would allow its limited sales figures to pay out. William

02-09-2010, 11:28 PM	#7
Kali Yuga Professional Contrarian Posts: 2,045 Karma: 3289631 Join Date: Mar 2009 Device: Kindle 4 No Touchie	Correlation does not necessarily prove causation, as even Bronfman himself is aware: "“It’s difficult to know, even today, if it is just consumer resistance to a higher price points or if taking a pricepoint of 30 percent more at such a fragile time (is to blame)." So it could be the price increase, it could be the recession, or (most likely) a combination of the two. Let the amateur economic punditry, without access to actual numbers or sales figures analysis, continue.

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