Apple altering $9.99 album pricing?

Posted by: Aaron Pressman on August 29, 2006

Could be just a coincidence but maybe Apple (Symbol: AAPL) is finally feeling some competitive pressure on the downloadable music front. Checking out the iTunes Music Store this morning, there’s a link to albums priced at only $6.99. Steve Jobs has so far been adamant about sticking to a one-size-fits-all pricing scheme. So even though only 40 or so albums are listed – and all from bands I’ve never heard like Gran Bel Fisher and Quietdrive – this could mark a significant change in strategy. Could just be a test and some of the albums included on the two pages are actually selling for Apple’s usual $9.99 price. UPDATE: Some albums are listed on the first page for $9.99 but are $6.99 when you click through to buy.

The reason I was particularly intrigued is that only two months ago, I altered my buying habits. For the first couple of years I had an iPod, when I wanted to buy some new tracks I used Apple’s music store. But earlier this summer, the growing buzz about a competitor, called eMusic, got my attention. Checking out the site, I noticed they stocked a lot of music I listened to in my youth that I was kinda missing. And all the tracks were offered in an unprotected MP3 format, so they’d play on my iPod. So I signed up and have since bought more than half of my “new” music there.

Some analysts and bloggers have noted a decline in the number of tracks bought from Apple’s music store per iPod sold over the past couple of years. I’ve tended to be skeptical of such reports because they assume that all iPods ever sold are still in use. That’s certainly not the case in my household where two iPods have been retired after two new iPods arrived.

Viewed on a quarter to quarter basis, the change reverses. In the quarter ended April 1, 2006, for example, Apple reported 8.5 million iPod sales and music revenues of $485 million, or $57 per new iPod sold. A yera earlier they company sold 5.3 million Ipods and $216 million of music, or $41 per iPod. That’s not a fair comparison either, since there certainly are more iPods in use now than a year ago — the whole market isn’t just replacements or it wouldn’t be growing. Still music sales rose 125% versus just 69% growth in iPod sales. Shares of Apple have rebounded nicely from a recent low in mid-July just over $50 to yesterday’s close of $66.98 as the quarter’s results were seen as better than expected.

Reader Comments

Christian Hoeferle

August 29, 2006 3:48 PM

Aaron,

I might be wrong, but I think the one-price-fits-all at the iTMS has always been limited to single track sales. Album pricing has been flexible for quite a while now.

Best
ch

Aaron Pressman

August 29, 2006 4:11 PM

Christian,
I've seen plenty of upside flexibility, with big stars like Madonna and Dylan selling new albums for $12.99 and up. But I haven't seen anything as low as $6.99 and certainly not linked off the front page of the store.
-Aaron

Wayne Jones

August 30, 2006 10:21 AM

I have purchased several albums as low as $6.99, perhaps even one less than that, ever since ITMS opened. Best example I can remember was Toby Lightman's album, with bonus tracks, when it came out - not sure how it is priced now. And, it was highlighted on the store front when I bought it.

Wayne

RichS

August 30, 2006 10:28 AM

This low album price point isn't new. I've purchased classical albums (specifically the NAXOS label, which is a budget line) more than a year ago for $5.99/$6.99.

Timbo

August 31, 2006 7:52 AM

One reason why the ratio of itunes downloads/ipods sold ratio is dropping is that people get ipods now for reasons other than just listening to music.

Also, looking at overall market share of itunes and ipods, they are both similar and very high.

JMHO

I use ipod as a portable hd that plays solitaire and records business meetings (with an adapter). I got it for such a purpose. My friend uses his ipod to show home videos to other friends/coworkers. ipods are so multi-purpose now that many people get ipods for reasons other than listening to music while others get an ipod with listening to music as a secondary purpose.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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