Has Amazon Started a Price War?
This week, the iTunes Store started selling its 10 million+ songs without DRM copy protection (aka iTunes Plus) and introduced its new variable pricing structure. Operating at three pricing levels, you can purchase a song for $0.79, $0.99, or $1.29 depending on factors such as a song's age and popularity. The problem is, if you want to purchase a top 100 track, you'll now have to pay $1.29 instead of $0.99. You may argue that the extra 30 cents is worth it for a DRM-free track, and you'd probably have a good point - until you check out Amazon's prices.
In the highly competitive music downloads market, Amazon has ensured that the cost of most of its popular selling tracks are below the asking price of the iTunes Store. At the time of writing, Black Eyed Peas 'Boom Boom Pow' single for example is 30 cents cheaper if purchased from Amazon MP3. Another top selling single, Blame It (Featuring T. Pain) by Jamie Foxx, can also be downloaded from the Amazon MP3 store for 99 cents compared to $1.29 from the iTunes Store.
Wal-Mart also has a pricing structure that is more competitive than Apple. Songs can be purchased using their 3-tier system for $0.64, $0.94, and $1.24. How long before other music services feel the strain and join in on the looming price war?
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These graded price structures are great on the face of it, but the question is how much does the artist get? If the musician is getting the same amount whether we pay 99 or 129 cents then I’m totally opposed to it. However, if there’s a correlation (a SENSIBLE correlation, mind you) between how much the musician gets and how much the song costs then I can see some value in it.
I suspect this is not the case, however. In much the same way I find it hard to believe that two record stores on a high street who have a different price on a particular album are charged different prices for the CDs. I suspect some of them are simply ripping us off. Imagine…
In the long run, Amazon is better suited for surviving this war and ending up on top. MP3 are just a small part of their overall business, so they don’t need to profit as much on each sale. This will ultimately kill iTunes. Even though iTunes is the leader, Amazon will start making significant stride. Amazon’s everyday prices on MP3 are simply better. But on top of that, they have some great promotions. In today’s economy people are looking for great bargains and deals and that is were Amazon does well. IMO the best one is their daily MP3 album deal where you can buy a whole album for usually around $2 or $3. That is awesome especially if you are on a budget.
This does not bode well for artists. While big-name artists can afford to charge lower prices and make it up on volume, indies are going to take a hit here. It galls me that Apple feels it can just re-price my songs from 99 cents to 69 cents because they dont’ think they are selling well enough. I think that is for me to determine and agree to, not for them to unilaterally force upon me. When I first agreed to distribute digitally through iTunes, I did not agree to allow them to re-price my products, since I am paid only based upon a percentage of the sale. Ultimately, what is going to happen is that they will turn the music into a commodity, with a race to the bottom on pricing. Ultimately, since indies have smaller sales and need to keep prices elevated slightly in order to ever have a chance at recoup, this is going to put a lot of people out of business.
Every time we get to the point where we reach some sort of “disintermediated” balance, the huge corporations do something to change the rules of the game so that you can’t make a buck. I don’t really care how much Apple takes off the top (as well as my “distributor” CDBaby, as long as I can guarantee myself a minimum payout on sales that, let’s face it, I am generating — Apple is not promoting my music, they are just providing some virtual “shelf space”.
If this results in lowered net royalties for artists on iTunes, there should be a lawsuit. Ditto for Amazon MP3, if they want to try to spur more sales by lowering prices, let them do it on their dime.