Apple Says .99 Per Track, and So It Stays
Posted by Emru Townsend | Monday, May 01, 2006 8:19 PM PT
Apple announced earlier today that it has renewed its contracts with the music industry's Big Four (EMI, Sony BMG, Universal, Warner), and that they're
keeping the cost of a single iTunes track at 99 cents.
If you haven't been following this, then you should know that three of the Big Four have been trying to convince Apple to let them set prices, any they haven't hidden their desire to charge more for premium acts. In the past, Steve Jobs has called the music industry "
greedy" in reference to this desire, and it's hard for me to disagree. I just picked a random Big Four album on Amazon, and came up with the Red Hot Chili Peppers'
Stadium Arcadium... at $16.96 for 28 tracks, that works out to 60.57 cents per track. Heck, even at the list price of $21.98, that's 78.5 cents per track. So on a track-by-track basis, iTunes users are being charged more, despite the fact that they get less (no liner notes, for instance) and Warner saves money on the manufacturing and shipping of physical goods.
You're comparing the average price of a track from an entire double-album (which receives a discount from Amazon.com for being a top seller and costs less than any two single albums you buy from Amazon's top sellers list) to the average price of 28 individual tracks from iTunes.
Unfortunately, your conclusion that iTunes is pricier is faulty for numerous reasons.
1) You can't compare the average price of 28 tracks from a discounted double-album to 28 individual tracks from the same double-album on iTunes. If you actually bothered to look up the RHCP album, you'd see that iTunes is selling the entire double-album for $19.90, NOT 99 cents times 28. (And no one's dumb enough to buy each of the 28 tracks individually. That's a lot of clicking.)
2) You fail to take into account that iTunes may bundle its own extras. Again, if you actually bothered to look up the RHCP album on iTunes, you'd see that they include the "making of 'Dani California'"video and the liner notes in PDF format. You'd also see pre-order bonuses: audio commentary and access to a Ticketmaster pre-sale.
3) You fail to take into account the cost of shipping and the time needed for delivery.
4) Because you chose a double-album, your average track price is further distorted. Most single albums sell for $10-13. You're making a blanket statement on the relaitve price of all music on iTunes based on a sample size of one album that is not representative of the majority of albums that are released.
Fair enough. As I said, the disc was chosen entirely at random. I just went back to Amazon and went through the six "What's Hot in Music" selections (figuring that they would likely be the types of acts that the Big Four would want to charge more for) and all except one came out to about 99 cents per track; the exception came out to 71.2 cents per track.
So going by my original reasoning, it's still a case of the music industry wanting to charge more for iTunes users.
Points 1-3:
1) It's true that albums typically cost about ten bucks on iTunes (as I understand it -- as I've mentioned elswhere, I don't buy my digital music from iTunes), but part of the service's attraction is that you can cherry-pick favourite tracks. Besides, the disagreement is about single-track prices.
2) Actually, since I'm on the RHCP mailing list (longtime funky-monk fan here), I was aware of those extras. My understanding, however, is that this is not typical.
3) It's so easy to get free shipping through Amazon, I don't even bother to figure it into the cost. And yes, convenience is a factor. But the lack of a physical product, especially with rising fuel and paper costs, is a factor for manufacturers.
I still stand by my argument. Digital music is a growing segment of the music industry's revenue, and I can't help but think that the desire to increase prices is because it's considered a quick and dirty way to boost that revenue.
I actually agree that the record labels were getting too greedy in trying to push for higher prices in iTunes. I just think you need better examples than the one you initially used.
Once you establish the average cost of a track through CDs vs. iTunes, you then should look at how much of the cut record labels get.
From what I've read, record labels get about 70 cents of the revenue from each track sold on iTunes, which is much more than they get from selling physical CDs. That, perhaps more than anything, prompted Steve Jobs to call the record labels "greedy."
P.S. I get free shipping all the time from Amazon, but waiting a week for a CD versus a couple of minutes is not pleasant.