[In this the second entry in our
look at the new iTunes pricing model, we’ll be examining the causes behind the
price hike and why Apple might not be to blame but rather the first victim of
an increasingly desperate industry.]
Last week we took a closer look at Apple’s
shift to DRM-free tracks and saw that it was, in essence, a veiled price surge
of the 30% variety. Elusive are the purported 69¢ tracks and bountiful are the
‘popular’ songs priced at $1.29. The new pricing structure made iTunes one of
the most expensive retailers of online music found on the web. Well, in less
than 24 hours following Apple’s official price change, other online retailers were
following suit with the now ubiquitous $1.29 track. Initially it was only
Amazon matching the increase but others are quickly joining in, including Rhapsody and
Wal-Mart. But who’s to blame? Did Apple create a watershed moment that allowed
for other retailers to raise their prices or are all online music retailers feeling the
squeeze from the recording industry?
Well, if you look at the details it becomes
apparent that Apple shouldn’t be crucified for their move; the whole paradigm
reeks of lost sales and it appeared as though they were heading towards a diminished
market share. However, when other retailers began raising their prices in kind,
it quickly became evident that there was something larger at work. Whether
Apple had to submit before the inflation would begin or whether they were simply the first to bite the
bullet remains to be seen. What is clear, however, is the root cause: the music
labels themselves.
This can be seen in the implementation of
the new pricing scheme. Firstly, Amazon has been selling DRM-free tracks for
some time at a comparable price to iTunes’ DRM-laden 99¢ mp3s. Less than 24
hours after iTunes introduced the $1.29 track Amazon was following suit and
others would soon follow. Such a widespread mark-up, especially in a recession,
would require strong pressure the likes of which only the labels could supply
on such a scale. This coincides with the testimony of an industry insider who
stated that all the major retailers were approached by the labels and were
‘asked’ to introduce the new pricing scheme on Tuesday, April 7th.
While this new structure is an unfortunate development, especially for those
lovers of legitimate music, it also reflects a massive shift in today’s music
market. Something we’ll be discussing in the third and final installment in our series on the music industry’s 30% revolution.
