Sometime last week, a few reports emerged detailing how quite a few number of songs whose price was increased from 99¢ to $1.29 experienced a sales decline. From the vantage point of the record labels, this is hardly a reason for concern as they can sell a significantly lower number of songs and actually end up making more money in the process.
Here’s a simple example: The top song on iTunes is currently “Boom Boom Pow” by the Black Eyed Peas, and let’s assume that the top spots nets 1000 downloads a day on average. Before the price hike, that meant that the record label was raking in $990 a day (for the sake of simplicity, we’re assuming that the record label gets all of the revenue). With the song now priced at $1.29, the record labels only need to sell 768 copies to make $990. Everything after 768 is pure gravy.
Now, assuming that the drop off in sales isn’t that significant, record labels and artists will certainly be making more money with their new and beloved tiered pricing in place. But using the BEP example above, that also means that 232 less people are being exposed to the music. On a grand scale, that could easily translate into a lot fewer ears, especially when you consider the viral nature of music.
I guess we’re left with a classic trade-off. Extra profits vs. extra exposure. We know what the record labels are all about. I wonder what artists are inclined to choose.
Any thoughts? Please chime in below in the comments.