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Price Hikes Dampened iTunes Sales

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Last week was the first week of iTunes’s new, steeper pricing on some tracks, and consumers voted with their wallets, according to Billboard. Sales figures from iTunes show that tracks that now sell for $1.29, up from $0.99, sold 12.5 percent fewer units than during the previous week, while tracks whose prices were unchanged sold 10 percent more than the week before. (Overall track sales were up 3 percent during the week).

Billboard also looked at how the sales of iTunes’s top 100 songs (about half of which now sell for $1.29, up from $0.99) were impacted by the price hikes. While unit sales dropped about one percent, revenues were up over the prior week, according to iTunes, though exact figures weren’t provided by Apple.

Many saw the move to higher prices for the most-popular tracks as a way to encourage consumers to buy more albums (versus single songs), but it’s still unclear whether consumers will be nudged in that direction; digital album sales were up only 3 percent over the previous week. As with any data, there are some nuances in last week’s figures: the Black Eyed Peas Boom Pow Pow, for example, was in the second week of its release so there would have likely been a dropoff from the initial week’s pop regardless of the price change. That said, the numbers indicate that music is sensitive to price changes, even for the most popular tracks.

6 Responses to “Price Hikes Dampened iTunes Sales”

  1. Why is the music industry the only industry to sue its customers, raise prices during a recession and then applaud the resulting lower sales? Between Apple and the music industry neither are keeping an eye on what consumers are actually doing online. Music fans are moving to not owning music but having access to it from the web. As Rio Caraeff of Universal Music's ELABs said in a keynote speech recently "the browser is the new iPod."
    iTunes and the labels ought to take note…

  2. Rory Maher

    Good comments. Dorian is probably right – the price increases will lead to higher margins so from a financial perspective its a win for iTunes – as long as sales don't decline so much that revenue also declines, despite price increases.

    I don't see the higher prices causing consumers to buy less music long-term, but psychologically its tough to go from $0.99 to over a buck, don't you think?

  3. I think the initial impact of any marginal price hike is always a drop in the number of sales, but people eventually get round to the new prices and sales are back to normal again, especially for such a common and "much-needed" commodity like music. Probably would have to wait a longer term before seeing the real impact of such a price hike.

  4. Well, from a purely financial perspective, they got the perfect result, if they sold fewer items, but made more revenue. that means higher operating margin, and therefore more profit. Short-term, true, and may end up alienating customers. But for quarterly results, they seem to have done fine by this measure.

    Also, by way, your comment field won't let me post from Firefox on a Max, using Leopard (OS X.5). Had to swtich to Safari browser.