Saturday, January 07, 2006

Variable Pricing on iTMS

The Labels are demanding that Apple loosen the reins and allow variable music pricing. And there are sound economic reasons for this to happen. Others in the blogsphere have explained the reasoning behind variable pricing in more detailed than I will go here. The labels though, want variable pricing which would put new releases at a price well above what is currently charged.

I personally find this hard to justify. To me it smacks of monopolistic pricing brought on by a lack of competition and waste in the labels operations. But back to the case of variable pricing.

EMI's boss has publicly stated that he expects Apple to institute variable pricing. Many bloggers expect Apple will expect implement variable pricing. Elliot Spitzer's investigation of the US music industry could easily force greater price competition.

So will Apple implement variable pricing? Quite likely. It was bound to happen and Apple will need to maintain "freshness" in the service or risk losing large numbers of users to other download stores. Already this is happening.

But Apple isn't likely to give the Label's exactly what they want. They will implement variable pricing but the upper price is going to be 99 cents. That will be the maximum price and prices for songs will descend from there.

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