Published Mar 27, 2009Brace yourself, folks: it appears iTunes is finally going to break the 99-cent barrier. On April 7, Apple will reportedly introduce a new tiered pricing scheme, which would boost the price of many hit singles and selected classic tracks to $1.29.
While the new iTunes pricing has not been officially announced, the Los Angeles Times reports that Apple has been notifying record labels that it will go into effect in the next few weeks. Apparently, this new "variable-pricing" strategy comes as an attempt by the floundering music industry to earn more revenue from digital downloads amongst waning CD sales.
According to the Times, some record execs see the flexible-pricing model as a way to offer "packaged downloads of songs" that might entice consumer to spend more, while some say the 30 percent hike couldn't come at a worse time.
"This will be a PR nightmare," former EMI executive Ted Cohen, who is managing partner of digital media consulting firm TAG Strategic, told the newspaper. "It is for the music industry what the AIG bonuses are for the insurance industry."
Jim Guerinot, who manages such bands as Nine Inch Nails and No Doubt, added that the move would be in the wrong direction, considering the still-rampant music piracy that occurs online. "Wouldn't it make sense to try to price it cheaper instead of squeezing the handful of people who are still willing to pay for music?" he said.
As we previously reported in January, the tiered pricing scheme follows a deal between Apple and all four major labels - EMI, Universal, Warner and Sony - for all songs on iTunes to be free of copy protection software. As part of that DRM-free deal, Apple was in exchange allowed to relax their strict 99-cent pricing scheme, with songs under the new system being broken down into three tiers: older catalogue tracks that would cost about 69 cents, hit songs (where downloads can often be in the millions) that would be bumped up to $1.29, and newer songs that aren't hits keeping the 99-cent price.
"The power of 99 cents will be harder for the labels to overcome than it would have been if they'd had this ability [to change prices] a few billion downloads ago," said Frank Luby, a pricing expert with Simon-Kucher & Partners consulting, told the Times. "The longer a habit like that lasts, the harder it is to break."