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Amazon matches Apple's $1.29 for top tracks while Walmart undercuts by a nickle

Digital music stores are where the glut of music sales come from today, much to the chagrin of the record industry. In the heyday of the industry, sales of physical formats like CDs and tapes were big money, but today's digital tracks are low margin leaving the record companies with a fraction of the profits they previously enjoyed.

The leader of the digital music revolution and the largest music retailer around is Apple's iTunes Store. Yesterday, DailyTech reported that Apple had moved to the tiered pricing model that had been expected. The tiered pricing was in response to the record labels wanting more control over the pricing of songs on the popular music store according to some reports.

With iTunes being the clear leader in the digital music industry, it comes as no surprise that the smaller players in digital music follow Apple's lead. Such is the case with the new iTunes pricing structure. Amazon and Walmart have both now increased the price of some of the songs in their digital catalogs to the same level as Apple.

Electronista reports that as of today, both Amazon and Walmart have introduced a tiered pricing structure. Ten of the top 100 songs on Amazon increased in price to the same $1.29 per track as iTunes. On the Walmart digital music store, the top price for popular tracks is now $1.24 per song.

Amazon and Walmart also followed Apple's lead by reducing the price of some tracks in the digital libraries. Select Amazon songs now sell for 79 cents while Walmart sells some select tracks for 64 cents. Electronista says that the Apple hike and subsequent price increases on two of the other major digital music stores highlights that the digital music industry is raising prices across the board.

What isn’t clear at this point is if the record labels have demanded a larger cut of sales from digital tracks or if the digital music retailers have simply decided to squeeze more out of their customers.

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What Isn’t Clear
By ViRGE on 4/8/2009 11:35:57 AM , Rating: 2
What isn’t clear at this point is if the record labels have demanded a larger cut of sales from digital tracks or if the digital music retailers have simply decided to squeeze more out of their customers.

No, it's pretty clear that the labels are demanding a larger cut of sales (or rather they're forcing price increases). Apple was the only one big enough to keep the labels at bay, which resulted in things like Amazon getting to go DRM-free faster in order to try to destabilize Apple.

Something (I suspect it to be the matter of cellular music sales and being able to go DRM-free all the way) finally made Apple capitulate to the labels demands. Once Apple fell, no one else was strong enough to resist the demands of the labels.

None of these guys are making any money off of music sales, and WalMart may very well be losing money via loss-leader pricing.

RE: What Isn’t Clear
By TomZ on 4/8/2009 11:42:24 AM , Rating: 4
None of these guys are making any money off of music sales, and WalMart may very well be losing money via loss-leader pricing.
I doubt that very much. I keep hearing that nobody is making any money from these downloads, but I just can't believe it. The entire cost structure for digital music is super-low, from manufacturing to inventory to distribution. As of mid-last-year, Apple had sold 5 billion songs on iTunes, which translates to about $5B in revenue. Somebody's making some money there.

RE: What Isn’t Clear
By Shadowself on 4/8/2009 2:14:16 PM , Rating: 3
Apple has repeatedly reported in their SEC filings that the iTunes store is doing barely more than break even. The cash flow is huge, but Apple's fraction does little more than make up for the costs of developing and maintaining the site.

Apple has repeatedly stated (and reporters & analysts have repeatedly stated) the purpose of the iTunes store is to sell iPods and iPhones. Apple makes its profits there.

RE: What Isn’t Clear
By TomZ on 4/8/2009 2:25:24 PM , Rating: 2
Think about this: 5 billion songs sold...assume Apple keeps $0.20 on averaget...that is US$1B of revenue. Do you think that the cost to develop and maintain iTunes over that time period is even close to that figure?

No, I think Apple's story about "just breaking even" on music download is PR BS. I think the reality is they are making plenty of money on both the hardware and the content.

RE: What Isn’t Clear
By melgross on 4/8/2009 3:52:41 PM , Rating: 2
Apple has stated that they make almost five cents profit per 99 cent song.

It's been estimated that the other sites make much less, or nothing, as their sales are so much lower, and their costs are higher per sale as a result.

Even so, the labels have stated that they get paid more from Apple. Interesting!

RE: What Isn’t Clear
By Doormat on 4/8/2009 9:02:47 PM , Rating: 3
Bandwidth. Servers. Lawyers to negotiate with the music industry (who probably don't get paid enough to put up with their garbage). Up until recently, development of DRM algorithms. The iTunes software they give away for free (or at least part of it, since its the mechanism through which the store is delivered, in addition to being the only method of managing iPod/iPhone devices).

RE: What Isn’t Clear
By MadMan007 on 4/8/2009 4:36:18 PM , Rating: 2
I'm sure the Apple accountants or managers shuffle (pun!) funds around just about however they like or fudge costs as long as it's not insanely off enough to raise flags. If they don't make money the other sites probably don't either and I don't believe the others would be in it for slim margins.

RE: What Isn’t Clear
By tallcool1 on 4/8/2009 11:54:01 AM , Rating: 5
What isn't clear is how does the movie industry manage to sell us a DVD of a blockbuster movie for the same price as a the recording industry sells an album (CD) which costs substantially less to make, yet they complain they are not making money?

RE: What Isn’t Clear
By DASQ on 4/8/2009 12:11:25 PM , Rating: 4
Because those damned spinners aren't going to buy themselves, yo

RE: What Isn’t Clear
By kmmatney on 4/8/2009 3:37:30 PM , Rating: 2
Decent point, but movies also make a lot of money at the box office, which you don't get with an album.

RE: What Isn’t Clear
By Homerboy on 4/8/2009 4:06:32 PM , Rating: 2
Music "artists" (I use that term loosely) have world-wide tours which the labels get a decent cut of).

RE: What Isn’t Clear
By AntiM on 4/8/2009 12:52:16 PM , Rating: 2
This article(from 2005)

says that the record industry receives somewhere between $0.65 and $.85 per song file (different sources quote different numbers). The rest goes to iTunes who picks up the tab for everything.

Steve Jobs has staunchly defended the $.99 per song model, so I doubt that anyone other than the labels are responsible for the pricing changes.

The labels are still trying to live in the past when they made enormous profit margins off the sale of CDs.

I have nothing against them raising their prices, the market will determine whether or not they succeed. They can charge whatever they want for their product, people don't have to buy it, and there are certainly other ways of acquiring it.

They can continue to try to market their shoestrings to a world that's wearing loafers. The labels are desperately trying to remain relevant in a world that doesn't really need them anymore.

News tomorrow: Piracy rates increase
By Bateluer on 4/8/2009 12:52:30 PM , Rating: 2
First rule of business: The customer is always right.
Second rule of business: If the customer is wrong, refer to rule #1.

Message to the labels: Pay attention, you're forcing yourselves right out of business by failing to give the customer what they want.

By SpaceRanger on 4/8/2009 2:00:52 PM , Rating: 2
Problem is, if the customer is going to buy these tracks at a higher price then who's at fault? The customer is. Now is the time for the consumer to stand up to the likes of Apple / Amazon / etc. if they feel they are paying too much.

The consumer is the only one that has a chance of changing the future. Continuing to buy stuff at the higher price will only enable the retailers more.

RE: News tomorrow: Piracy rates increase
By PrinceGaz on 4/8/2009 2:02:50 PM , Rating: 2
Yes. Higher pricing for legal downloads will inevitably lead to more piracy instead. Most people will only spend a finite amount on entertainment, and the less they get for what they spend, the less likely they are to spend it in the first place.

Far from increasing prices per track, they should reduce prices as most people would probably end up spending at least as much, and quite probably a bit more as they are getting better value for money.

RE: News tomorrow: Piracy rates increase
By nixoofta on 4/8/2009 5:52:23 PM , Rating: 2
That would be nice,(reduced prices), but I think that's too much to hope for from Apple, Amazon, Wally World, etc...

I think they're making up for losses due to the downturn in the economy. If I was losing my house, Apple/Ipood music bill would be one of the first luxuries to go.

I think a lot of these corporations literally "bank" on predicted sales. The money they were expecting to make has already been spent and they're scrambling to make up for it. Then again my foil hat does seem a little tight. :P

By Bateluer on 4/8/2009 7:50:09 PM , Rating: 2
No, you're right. Politicians do it all the time.

Fact of the matter is, raising prices nearly always also drives sales down in the long term. It'll result in a short sales spike out the gate, then it drops off fast.

Things you don't do in a recession are raise prices and raise taxes. Particularly in this recession, since the bulk of it is caused by consumers being too nervous to spend money. Sounds like a brilliant business move, make things cost more. That'll boost sales.

By MrCoyote on 4/8/2009 2:42:56 PM , Rating: 2
I still think Microsoft offers a better value with [b]Zune Marketplace.[/b] You pay a small monthly fee to listen to any amount of songs and artists you want. Plus you now get to keep 10 songs each month. I discovered a lot of artists music I like, without having to pay per song. If I like the album a lot, I order the CD and rip it lossless to my collection. :)

Apple needs to think about adding the option for subscriptions.

RE: Zune
By Aquila76 on 4/9/2009 7:44:39 AM , Rating: 2
I agree with the subscription method, too. I'm using Rhapsody and I definitely download far more music than the $14.99/mo can get you at iTunes et al. I just grabbed the entire Beastie Boys catalog. It would have cost ~$19 to get just Paul's Boutique from iTunes et al.

By Emryse on 4/8/2009 5:27:05 PM , Rating: 2
Not that I'm surprised since it's Apple, but...

Wasn't it just a while ago that Apple was fighting the good fight to absolutely refuse to raise their prices from $.99?

So they do the PR thing, let everything think they won, and then sneak this around the back door after the fact.

Well - they're not getting any of my money - so I don't personally care, but their consumers should care... oh wait - Apple consumers are used to paying way more for stuff than it's actually worth.

By michael2k on 4/9/2009 6:12:59 PM , Rating: 2
They announced a while back that they got the DRM free catalog but had to offer tiered prices instead.

So what are you going to do if the recording industry refuses to give you DRM free songs? Not sell them?

That was their only option; DRM for $0.99 or DRM-free for $1.29; at the time only 1/3 of their catalog was DRM free, so it seems the remaining 2/3 required the $1.29 pricepoint.

By mjcutri on 4/8/2009 12:31:01 PM , Rating: 3
From what I can tell, it is only songs from SonyBMG labels that have the higher price on this is probably driven by them. They were the last major label to sign on to Amazon a little over a year ago, so I wonder if this was somehow part of that agreement?

Sony Labels:

immitation ... flattery
By vapore0n on 4/8/2009 3:24:47 PM , Rating: 3
Apple should now bring back down the prices, and re-take the whole market again


By DeathBooger on 4/8/2009 11:49:30 PM , Rating: 1
Greed is what is all boils down to. Producers aren't getting their millions of dollars anymore for sitting on their ass and doing nothing substantial. The RIAA is prime example of this.

In reality, who honestly gives a shit if some stupid song is pirated off the internet? It's not like today's artists work hard to write new songs. Most of the time the songs are written for them and all they are is the trendy fashion to attract retarded teenagers.

By PhoenixKnight on 4/9/2009 9:58:00 AM , Rating: 2
Most of the time the songs are written for them...

But doesn't it cost money to run the computerized random word generator that writes said lyrics?

Price Fixing
By DtTall on 4/8/2009 12:45:15 PM , Rating: 2
I'm no expert on how to price stuff, nor am I a legal expert on collusion.

That said, it seems a bit odd to that the whole industry (iTunes, Amazon, etc.) is moving as one in the pricing structure. Sure the music industry folks may have been pressuring for a higher price but to have it be the same pressure across the board?

I see only a single response from most people: Arrrg!

seems fishy
By MadMan007 on 4/8/2009 4:31:09 PM , Rating: 2
Oligopoly much? I guess they'd aruge they competed in offering services as well.

At least it's for the 'Top 100' songs or whatever which means it's likely some fotm popular fad garbage that I wouldn't listen to anyway. I don't buy lossy music either so that's a double don't care.

Concerts stil costl an arm and leg
By Shig on 4/8/2009 6:09:48 PM , Rating: 2
Any live show will just become increasingly expensive to make up for it. Anyone who goes to concerts nowadays knows what I mean.

Who buys this garbage?
By iAURA on 4/8/2009 6:20:20 PM , Rating: 2
This doesn't affect me but I do have a Zune subscription I only use it to discover/appraise music before buying the CD then ripping to a lossless format.

By MadDogMorgan on 4/9/2009 4:27:09 PM , Rating: 2
News flash, stop buying something that isn't worth what they're charging and the price will come down.

Question: Why do people buy something they don't need (at all) that's overpriced, and then complain about the price being too high?
Answer: The fundamental tenets of capitalism are not taught in school. The schools are too busy working as an arm of the socialist movement to teach anything useful.

"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller
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