Tuesday, May 02, 2006

Different Prices are Confusing??

It may well be true that variable track pricing at the iTunes Music Store could well have ended up as a price increase by another name. The record labels certainly weren't pushing for variable pricing so that they could make less money. Therefore, holding at a 99 cent fixed price—which carries with it a sort of psychological barrier against an across-the-board increase—was probably a good thing for consumers on balance.

But that doesn't make a lot of the commentary from the Apple fan club any less silly. A 99 cent fixed-price for music downloads might be a good compromise for buyers in an imperfect world, but let's not pretend it makes economic sense—especially in a long tail world with negligible distribution and inventory costs. There is virtue in simplicity, but it's hard to credit that a single price for all the music in all the world is best sold at a single, identical price.

I any case, some of the campaigning against variable pricing as variable pricing (as opposed to against price increases) is just silly. Witness the following example from ars-technica:

In our report on variable pricing, we speculated that "polluting" the iTMS with a mishmash of prices would not only confuse potential customers, but possibly stunt the entire online music industry, something we still believe, but looks less likely to happen after today's news:

"Critics of the "mix of prices" ideology say that users will be confused and scared off by prices that are not consistent across the board and possibly end up going back to downloading illegally via P2P. While this sounds ridiculous upon first blush, I personally don't think it's all that far out of the realm of possibility."

Users confused because things they want to buy may have different prices? Somehow I think that most people have figured out how to handle that particular complication of life.

1 comment:

Anonymous said...

Price and value are not synonymous. To say that users would have no reaction to variable pricing is simplifying the issue too drastically. If one were browsing music that was unfamiliar to them, and certain albums they came across were much cheaper, they are presented with the issue of why? Is it because the music is worse? Or is it because it's older? Or is it brand new and being pushed for heavy first week numbers? Or is it because one company is willing to take a lower margin to push their artists? Then the consumer has to rationalize whether paying MORE for a certain album is worth it, since they aren't familiar with the music and haven't established a value base. iTunes 99 cent fixed price encourages spontaneous purchases, and opens casual buyers with more incentive to try new music. And since Apple has seen double digit sales percentage increases year after year, obviously they are on to something. Just because Amazon and other digital competitors are now re-innovating the digital download idea doesn't make Apple's store any less important and revolutionary.