When iTunes announced in January that it was planning to offer music at variable prices [click to read], it was not clear when the change would happen, or if it would happen at all. However, according to The Los Angeles Times, iTunes is moving forward with the plan, boosting prices of hit singles to $1.29.
Although the higher price of select singles will lower the price of other songs (new artist releases dropping to 69 cents, and current releases remaining at 99 cents), a few music label execs are criticizing the 30% increase.
“This will be a PR nightmare,” said former EMI Music executive Ted Cohen. “It is for the music industry what the AIG bonuses are for the insurance industry.”
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With CD sales declining drastically, iTunes is hoping that the variable-pricing strategy will help to increase revenue in the music industry. Yet, in a period where online music spending is low and consumers are being hit hard by a recession, some music industry vets are questioning whether the decision to raise prices is a wise one.
“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?” said Jim Guerinot, manager to bands such as No Doubt and Nine Inch Nails.
Others believe that the change is a smart business move, drawing their opinions strictly from the economic foundations of supply and demand. Russ Crupnick, a senior analyst for NPD Group said, “If you’re not drawing new people and your spending isn’t growing, it’s a natural part of the product life cycle” to raise prices.
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As a trade-in for flexible prices, iTunes will offer DRM-free music. This means that consumers will be able to play purchased music on devices other than their iPods and other Apple devices. It remains to be seen whether the benefits of DRM-free music will trump the benefits of the 99 cent purchase.
The variable-pricing system will go into effect on April 7th.
