Variable Pricing Affecting Sales

Preliminary reports from the major record labels indicate that the variable pricing on digital downloads they've desired for so long may be backfiring. It's early yet (only a month since it's been instituted), but so far pricing any track at $1.29 has affected sales in the wrong direction.

It's true that you can make more money with fewer sales with an increased price, but that's not what's happening as initial indications are that anything priced at $1.29 is actually losing money as compared to when it was priced at $.99.

What's even worse is that there are indications that the price increase is actually forcing consumers to look for free options instead of buying anything at all.

Everyone in the industry-know cautioned that variable pricing would set a bad precedent and make a business already falling off a cliff even worse, yet the majors wouldn't take no for an answer. As a result, an industry that's already dying from a thousand small cuts may finally take one in the heart.

New iTunes Tiers on April 7?

It looks like the new iTunes variable pricing plan will finally hit the streets on April 7th.

If you've not heard, instead of every song in the iTunes catalog available for a flat 99 cents, a 3 tier variable pricing structure will be introduced - 69 cents for catalog, 99 cents for recent releases, and $1.29 for current hits. The $1.29 tier will have higher bandwidth and no DRM.

iTunes has over 10 million songs now available at 99 cents. According to the NPD Group, the average spend per consumer is $41 a year.

In this economic climate, raising the price on anything seems like market suicide, but the labels have fought for this for a long time. I guess we'll know on April 8th just how smart of a decision it really is.