Legal online music download more expensive than retail CD

ray · 04-07-2004, 12:18 PM

Thought this was an interesting article. Anybody remember the days of CD/Cassette singles being 99 cents? Anybody remember what happened to that market once they raised the price on the singles? Looks like iTunes along with other online music stores may suffer the same fate.

Downloading Music Gets More Expensive
The Wall Street Journal
April 7, 2004

TO SEE THE future of online music prices, look no further than "Fly or Die," the new album by rock-meets-hip-hop trio N.E.R.D.

For months, digital-music services have been touting albums for $9.99 to entice more people to buy online. But Apple Computer Inc.'s iTunes Music Store has been charging $16.99 for "Fly or Die," while Roxio Inc.'s Napster service sells the 12-song collection for $13.99. Both prices are higher than the $13.49 that Amazon.com charges for the CD itself. The same pricing shifts are showing up on albums by a growing slate of artists, from Shakira to Bob Dylan.

Unburdened by manufacturing and distribution costs, online music was supposed to usher in a new era of inexpensive, easy-to-access music for consumers. In many cases, buying music online is still cheaper than shopping for CDs at retail outlets. But just a year after iTunes debuted with its 99-cent songs and mostly $9.99 albums, that affordable and straightforward pricing structure is already under pressure.

All five of the major music companies are discussing ways to boost the price of single-song downloads on hot releases -- to anywhere from $1.25 to as much as $2.49. It isn't clear how or when such a price hike would take place, and it could still be months away. Sales of such singles -- prices have remained at 99 cents -- still account for the majority of online music sales.

The industry is also mulling other ways to charge more for online singles. One option under consideration is bundling hit songs with less-desirable tracks. Another possibility is charging more for a single track if it is available online before the broader release of the entire album from which it is taken. There is also talk of lowering the price on some individual tracks from older albums.

Several record-company executives acknowledged that pricing changes are being discussed at all five major companies.

The new pricing developments come as digital-music sales are growing steadily. Some 25 million digital tracks were sold in the first three months of this year, versus 19.2 million for all of the second half of last year, according to Nielsen SoundScan.

That growth is why some in the industry are uncomfortable with the talk of price increases. Most music-company executives believe that the download market is still in a critical early-growth stage, which could be disrupted by raising prices. "For us right now the issue is not, `Do we make another $300,000 by raising the price five cents?"' says a music company executive. "It's making sure the market grows."

Revenues in the music industry have been dragging in recent years, in part because of the rise of illegal downloading services. Raising digital-music prices could spur additional illicit downloading. Weaning people off those illegal services by giving them an alternative that they consider viable is critical to the industry's future profitability.

N.E.R.D's "Fly or Die" is far from the only album that now costs significantly more to download from iTunes than to buy on CD. And many high-profile albums from two of the big five music companies, Sony Corp.'s Sony Music Entertainment and EMI Group PLC, are now priced on iTunes and its competitors well above the $9.99 norm. Sony artist Pete Yorn's "Musicforthemorningafter," for example, costs $13.99 on iTunes and $10.88 on average in retail stores, according to the NPD Group. Albums by EMI artists from Kylie Minogue to Blur also cost more in digital than physical form. (EMI also distributes N.E.R.D.)

The reason this disparity is so pronounced at EMI and Sony is that both companies routinely set wholesale prices for online albums higher than their competitors, according to people familiar with the matter.

A much smaller number of titles from the other major music labels also cost more than $9.99 on iTunes. A handful of albums from Bertelsmann AG's BMG, Warner Music Group, and Vivendi Universal SA's Universal Music Group also cost more online than they do as CDs. But these tend to be double discs such as OutKast's "Speakerboxxx/The Love Below," which incur higher costs in certain kinds of royalties when sold online than as traditional CDs.

"There's a lot of experimentation in the industry," says Peter Csathy, president and chief operating officer of Musicmatch Inc., which sells digital music.

The music companies are reluctant to talk openly about their wholesale-pricing strategies, but they are quick to blame the retailers for higher prices. A spokeswoman for EMI, for instance, stresses that the retailers, not record companies, ultimately set the prices consumers pay.

However, the digital-music services say they base their retail prices directly on the wholesale prices the music companies charge. "Our pricing comes when the fees come in from the labels," said Musicmatch's Mr. Csathy.

ITunes, the market leader among downloading services, and its competitors offer music at two distinct price points: Single tracks cost 99 cents. A full-album has generally cost $9.99, regardless of how many songs are on it.

Napster was until recently the lone holdout among the major online services on full album prices, charging $9.95 for numerous titles that cost between $12.87 and $16.99 on iTunes. But two weeks ago, it relented and created a higher tier of album prices, set at $13.99.

Separately, Walmart.com, the online arm of Wal-Mart Stores Inc., recently rolled out a slightly cheaper 88-cents-per-track price. Many observers, however, argue that any advantage conferred by the 11-cent difference will be offset by a user interface that early reviews have called less friendly than those of other services. Executives at competing services also contend that research shows that consumers don't care much about price differences within the band of about 75 cents and 99 cents.

The issue of online music prices raises philosophical debates for music executives. Some executives, for example, believe they should be charging a premium for the online versions of older tracks because consumers may be willing to pay more for harder-to-find material.

---

Fly or Die, N.E.R.D.
iTunes $16.99
Amazon.com $13.49

Self Portrait, Bob Dylan
iTunes $13.99
Amazon.com $10.99

Feels Like Home, Norah Jones
Napster $13.99
Retail* $12.58

*Average price determined by the NPD Group

Sources: NPD Group; WSJ research
---
Pricing Your Music

Some titles are cheaper on CD than when purchased in digital form. A
sampling of artists and prices:

ARTIST/TITLE: Anastacia, Freak of Nature
PUBLISHER: Sony
ITUNES: $13.99
NAPSTER: $13.99
MUSIC-MATCH: $11.99
RETAIL STORES(a): $11.98
AMAZON.COM: $14.99

ARTIST/TITLE: Beyonce, Dangerously in Love
PUBLISHER: Sony
ITUNES: 9.99
NAPSTER: 15.84(b)
MUSIC-MATCH: 9.99
RETAIL STORES(a): 13.87
AMAZON.COM: 13.49

ARTIST/TITLE: Chingy, Jackpot
PUBLISHER: EMI
ITUNES: 13.99
NAPSTER: 13.99
MUSIC-MATCH: 11.99
RETAIL STORES(a): 12.78
AMAZON.COM: 13.99

ARTIST/TITLE: Fountains of Wayne, Welcome Interstate Managers
PUBLISHER: EMI
ITUNES: 13.99
NAPSTER: 9.95
MUSIC-MATCH: 11.99
RETAIL STORES(a): 13.88
AMAZON.COM: 13.49

ARTIST/TITLE: Jewel, 0304
PUBLISHER: Warner Music
ITUNES: 11.99
NAPSTER: 12.88(b)
MUSIC-MATCH: 9.99
RETAIL STORES(a): 13.25
AMAZON.COM: 13.99

ARTIST/TITLE: Korn, Korn
PUBLISHER: Sony
ITUNES: 11.99
NAPSTER: 9.95
MUSIC-MATCH: 9.99
RETAIL STORES(a): 13.85
AMAZON.COM: 13.98

ARTIST/TITLE: Liz Phair, Liz Phair
PUBLISHER: EMI
ITUNES: 13.86
NAPSTER: 13.99
MUSIC-MATCH: 11.99
RETAIL STORES(a): 12.46
AMAZON.COM: 13.49

ARTIST/TITLE: Norah Jones, Come Away With Me
PUBLISHER: EMI
ITUNES: 13.86
NAPSTER: 13.99
MUSIC-MATCH: 12.49
RETAIL STORES(a): 13.74
AMAZON.COM: 13.49

ARTIST/TITLE: Norah Jones, Feels Like Home
PUBLISHER: EMI
ITUNES: 12.87
NAPSTER: 13.99
MUSIC-MATCH: 11.99
RETAIL STORES(a): 12.58
AMAZON.COM: 13.49

ARTIST/TITLE: OutKast, Speakerboxxx/The Love Below
PUBLISHER: BMG
ITUNES: 19.98
NAPSTER: 19.90
MUSIC-MATCH: 16.49
RETAIL STORES(a): 15.79
AMAZON.COM: 16.99

ARTIST/TITLE: Pearl Jam, Riot Act
PUBLISHER: Sony
ITUNES: 13.99
NAPSTER: 13.99
MUSIC-MATCH: 10.99
RETAIL STORES(a): 14.09
AMAZON.COM: 14.99

ARTIST/TITLE: Pete Yorn, Musicforthemorningafter
PUBLISHER: Sony
ITUNES: 13.99
NAPSTER: 13.99
MUSIC-MATCH: 10.99
RETAIL STORES(a): 10.88
AMAZON.COM: 13.99

(a)Average prices determined by the NPD Group
(b)Available on a track-by-track basis only

Sources: NPD Group; WSJ research

By Ethan Smith (Copyright (c) 2004, Dow Jones & Company, Inc.)

~~Cantacuzene~~ · 04-07-2004, 12:50 PM

You mean the music industry is shady and profit hungry? Say it ain't so.

whitak24 · 04-07-2004, 12:56 PM

Quote:

Originally posted by Cantacuzene
You mean the music industry is shady and profit hungry? Say it ain't so.

i don't think it's so much that they're shady and profit-hungry, although they probably are. this article is more indicative of the fact that the recording industry STILL does not understand the fundamentals of why sales slumped and revenue fell in the first place. consequently, they are about to make the same mistakes in digital marketing/pricing that they did in cd/tape pricing/marketing.

consumers downloaded because it was quick, cheap, and they felt like they were getting a good value as opposed to buying CDs in stores. as soon as the industry tries to start charging $5.00 for singles, the online market for (legal) downloads is going to dry up.

Airencracken · 04-07-2004, 01:06 PM

Quote:

Originally posted by Cantacuzene
You mean the music industry is shady and profit hungry? Say it ain't so.

Gosh, Canta. You sound so....Sarcastic.

I totally agree. Look at the recent CD price lawsuit thing. I wish I had registered to get some money back from that. Oh well...

bachviet · 04-07-2004, 04:31 PM

This will really kill the music industry if it's not dead already.

zenbooty · 04-07-2004, 04:54 PM

Quote:

Originally posted by Airencracken

Gosh, Canta. You sound so....Sarcastic. I totally agree. Look at the recent CD price lawsuit thing. I wish I had registered to get some money back from that. Oh well...

I did

Booyamos · 04-08-2004, 10:15 AM

damned record companies. If i was an artist i would go crazy trying to understand why i made the music, put all the work into it, yet the record company made all the money off it.

I only buy cd's that are good, which is rare now. Most cd's have 1 or 2 good songs. i'll just stick with my current methods.

gear02 · 04-08-2004, 10:21 AM

The thing that gets me is that the RIAA blames everyone but themselves for the drop in music, the poor economy, piracy, etc.

It's not like music is a necessary commidity like gas and food. The music SUCKS. The RIAA's actions SUCK.

I don't find a need to buy any cd, and I haven't heard a single song in the last 6 months that I would consider buying.

04-07-2004, 12:18 PM	#1
ray captain awesome Join Date: Jan 2003 Posts: 7,054	Legal online music download more expensive than retail CD Thought this was an interesting article. Anybody remember the days of CD/Cassette singles being 99 cents? Anybody remember what happened to that market once they raised the price on the singles? Looks like iTunes along with other online music stores may suffer the same fate. Downloading Music Gets More Expensive The Wall Street Journal April 7, 2004 TO SEE THE future of online music prices, look no further than "Fly or Die," the new album by rock-meets-hip-hop trio N.E.R.D. For months, digital-music services have been touting albums for $9.99 to entice more people to buy online. But Apple Computer Inc.'s iTunes Music Store has been charging $16.99 for "Fly or Die," while Roxio Inc.'s Napster service sells the 12-song collection for $13.99. Both prices are higher than the $13.49 that Amazon.com charges for the CD itself. The same pricing shifts are showing up on albums by a growing slate of artists, from Shakira to Bob Dylan. Unburdened by manufacturing and distribution costs, online music was supposed to usher in a new era of inexpensive, easy-to-access music for consumers. In many cases, buying music online is still cheaper than shopping for CDs at retail outlets. But just a year after iTunes debuted with its 99-cent songs and mostly $9.99 albums, that affordable and straightforward pricing structure is already under pressure. All five of the major music companies are discussing ways to boost the price of single-song downloads on hot releases -- to anywhere from $1.25 to as much as $2.49. It isn't clear how or when such a price hike would take place, and it could still be months away. Sales of such singles -- prices have remained at 99 cents -- still account for the majority of online music sales. The industry is also mulling other ways to charge more for online singles. One option under consideration is bundling hit songs with less-desirable tracks. Another possibility is charging more for a single track if it is available online before the broader release of the entire album from which it is taken. There is also talk of lowering the price on some individual tracks from older albums. Several record-company executives acknowledged that pricing changes are being discussed at all five major companies. The new pricing developments come as digital-music sales are growing steadily. Some 25 million digital tracks were sold in the first three months of this year, versus 19.2 million for all of the second half of last year, according to Nielsen SoundScan. That growth is why some in the industry are uncomfortable with the talk of price increases. Most music-company executives believe that the download market is still in a critical early-growth stage, which could be disrupted by raising prices. "For us right now the issue is not, `Do we make another $300,000 by raising the price five cents?"' says a music company executive. "It's making sure the market grows." Revenues in the music industry have been dragging in recent years, in part because of the rise of illegal downloading services. Raising digital-music prices could spur additional illicit downloading. Weaning people off those illegal services by giving them an alternative that they consider viable is critical to the industry's future profitability. N.E.R.D's "Fly or Die" is far from the only album that now costs significantly more to download from iTunes than to buy on CD. And many high-profile albums from two of the big five music companies, Sony Corp.'s Sony Music Entertainment and EMI Group PLC, are now priced on iTunes and its competitors well above the $9.99 norm. Sony artist Pete Yorn's "Musicforthemorningafter," for example, costs $13.99 on iTunes and $10.88 on average in retail stores, according to the NPD Group. Albums by EMI artists from Kylie Minogue to Blur also cost more in digital than physical form. (EMI also distributes N.E.R.D.) The reason this disparity is so pronounced at EMI and Sony is that both companies routinely set wholesale prices for online albums higher than their competitors, according to people familiar with the matter. A much smaller number of titles from the other major music labels also cost more than $9.99 on iTunes. A handful of albums from Bertelsmann AG's BMG, Warner Music Group, and Vivendi Universal SA's Universal Music Group also cost more online than they do as CDs. But these tend to be double discs such as OutKast's "Speakerboxxx/The Love Below," which incur higher costs in certain kinds of royalties when sold online than as traditional CDs. "There's a lot of experimentation in the industry," says Peter Csathy, president and chief operating officer of Musicmatch Inc., which sells digital music. The music companies are reluctant to talk openly about their wholesale-pricing strategies, but they are quick to blame the retailers for higher prices. A spokeswoman for EMI, for instance, stresses that the retailers, not record companies, ultimately set the prices consumers pay. However, the digital-music services say they base their retail prices directly on the wholesale prices the music companies charge. "Our pricing comes when the fees come in from the labels," said Musicmatch's Mr. Csathy. ITunes, the market leader among downloading services, and its competitors offer music at two distinct price points: Single tracks cost 99 cents. A full-album has generally cost $9.99, regardless of how many songs are on it. Napster was until recently the lone holdout among the major online services on full album prices, charging $9.95 for numerous titles that cost between $12.87 and $16.99 on iTunes. But two weeks ago, it relented and created a higher tier of album prices, set at $13.99. Separately, Walmart.com, the online arm of Wal-Mart Stores Inc., recently rolled out a slightly cheaper 88-cents-per-track price. Many observers, however, argue that any advantage conferred by the 11-cent difference will be offset by a user interface that early reviews have called less friendly than those of other services. Executives at competing services also contend that research shows that consumers don't care much about price differences within the band of about 75 cents and 99 cents. The issue of online music prices raises philosophical debates for music executives. Some executives, for example, believe they should be charging a premium for the online versions of older tracks because consumers may be willing to pay more for harder-to-find material. --- Fly or Die, N.E.R.D. iTunes $16.99 Amazon.com $13.49 Self Portrait, Bob Dylan iTunes $13.99 Amazon.com $10.99 Feels Like Home, Norah Jones Napster $13.99 Retail* $12.58 *Average price determined by the NPD Group Sources: NPD Group; WSJ research --- Pricing Your Music Some titles are cheaper on CD than when purchased in digital form. A sampling of artists and prices: ARTIST/TITLE: Anastacia, Freak of Nature PUBLISHER: Sony ITUNES: $13.99 NAPSTER: $13.99 MUSIC-MATCH: $11.99 RETAIL STORES(a): $11.98 AMAZON.COM: $14.99 ARTIST/TITLE: Beyonce, Dangerously in Love PUBLISHER: Sony ITUNES: 9.99 NAPSTER: 15.84(b) MUSIC-MATCH: 9.99 RETAIL STORES(a): 13.87 AMAZON.COM: 13.49 ARTIST/TITLE: Chingy, Jackpot PUBLISHER: EMI ITUNES: 13.99 NAPSTER: 13.99 MUSIC-MATCH: 11.99 RETAIL STORES(a): 12.78 AMAZON.COM: 13.99 ARTIST/TITLE: Fountains of Wayne, Welcome Interstate Managers PUBLISHER: EMI ITUNES: 13.99 NAPSTER: 9.95 MUSIC-MATCH: 11.99 RETAIL STORES(a): 13.88 AMAZON.COM: 13.49 ARTIST/TITLE: Jewel, 0304 PUBLISHER: Warner Music ITUNES: 11.99 NAPSTER: 12.88(b) MUSIC-MATCH: 9.99 RETAIL STORES(a): 13.25 AMAZON.COM: 13.99 ARTIST/TITLE: Korn, Korn PUBLISHER: Sony ITUNES: 11.99 NAPSTER: 9.95 MUSIC-MATCH: 9.99 RETAIL STORES(a): 13.85 AMAZON.COM: 13.98 ARTIST/TITLE: Liz Phair, Liz Phair PUBLISHER: EMI ITUNES: 13.86 NAPSTER: 13.99 MUSIC-MATCH: 11.99 RETAIL STORES(a): 12.46 AMAZON.COM: 13.49 ARTIST/TITLE: Norah Jones, Come Away With Me PUBLISHER: EMI ITUNES: 13.86 NAPSTER: 13.99 MUSIC-MATCH: 12.49 RETAIL STORES(a): 13.74 AMAZON.COM: 13.49 ARTIST/TITLE: Norah Jones, Feels Like Home PUBLISHER: EMI ITUNES: 12.87 NAPSTER: 13.99 MUSIC-MATCH: 11.99 RETAIL STORES(a): 12.58 AMAZON.COM: 13.49 ARTIST/TITLE: OutKast, Speakerboxxx/The Love Below PUBLISHER: BMG ITUNES: 19.98 NAPSTER: 19.90 MUSIC-MATCH: 16.49 RETAIL STORES(a): 15.79 AMAZON.COM: 16.99 ARTIST/TITLE: Pearl Jam, Riot Act PUBLISHER: Sony ITUNES: 13.99 NAPSTER: 13.99 MUSIC-MATCH: 10.99 RETAIL STORES(a): 14.09 AMAZON.COM: 14.99 ARTIST/TITLE: Pete Yorn, Musicforthemorningafter PUBLISHER: Sony ITUNES: 13.99 NAPSTER: 13.99 MUSIC-MATCH: 10.99 RETAIL STORES(a): 10.88 AMAZON.COM: 13.99 (a)Average prices determined by the NPD Group (b)Available on a track-by-track basis only Sources: NPD Group; WSJ research By Ethan Smith (Copyright (c) 2004, Dow Jones & Company, Inc.)

04-07-2004, 04:31 PM	#5
bachviet What's Da Pho*? Join Date: Aug 2001 Location: SoCal (714) Posts: 13,296	This will really kill the music industry if it's not dead already. __________________ Dell Dimension 9200 \| Intel Core 2 Quad Q6600 (2.4GHz) \| 4x1GB DDR2 \| 256MB nVidia GeForce 8800GT Dell Studio 17 \| Intel Core i7-720QM (1.6GHz) \| 2x2GB DDR3 1066MHz \| 1GHz ATI Mobility Radeon HD 4650 Intel P4-C 3.0GHz \| ECS 865PE-A \| 3x512MB PC3200 \| 128MB PNY GeForce 6600GT

04-08-2004, 10:15 AM	#7
Booyamos Commander Join Date: Jun 2000 Location: Boston, MA Posts: 1,277	damned record companies. If i was an artist i would go crazy trying to understand why i made the music, put all the work into it, yet the record company made all the money off it. I only buy cd's that are good, which is rare now. Most cd's have 1 or 2 good songs. i'll just stick with my current methods. __________________ Boo ya Grandma

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04-07-2004, 12:50 PM	#2
~~Cantacuzene~~ Banned Join Date: Jan 2002 Location: Atlanta, Georgia, USA Posts: 8,700	You mean the music industry is shady and profit hungry? Say it ain't so.

04-08-2004, 10:21 AM	#8
gear02 Admiral Join Date: Apr 2000 Location: Seattle, WA Posts: 7,223	The thing that gets me is that the RIAA blames everyone but themselves for the drop in music, the poor economy, piracy, etc. It's not like music is a necessary commidity like gas and food. The music SUCKS. The RIAA's actions SUCK. I don't find a need to buy any cd, and I haven't heard a single song in the last 6 months that I would consider buying.

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