Coolfer takes on the download pricing trial balloon

He unfortunately blames Apple for the pricing system.

Coolfer's the best industry blog, even the best industry website aside from the Velvet Rope.

But he's a little off base when it comes to download pricing.

Coolfer correctly points out that Apple's iTunes Music Store success is largely due to factors other than pricing--namely the iPod and the overall user experience. If anything, iTMS is a lot like Amazon.com in that the user experience transcends pricing as long the pricing is reasonable i.e. market rate. Price would be the premier sales driver if another vendor was selling songs for $.49 per track. That's not happening, and that's also where Coolfer misses the boat.

Apple has repeatedly stated that they're not making much, if any, money on the iTMS. It's pretty much an open secret that Apple is paying $.65 or more per track, which, at $.99 retail only leaves a 50% markup to find profit after expenses. Slim pickin' for sure; if it were easy money then why would the labels bother licensing Apple in the first place? The value of the portal (iTunes) isn't all that established.

There's no evidence that Apple is insistent on the pricing system, given that Apple probably does all the work for no direct profits off of sales. So Coolfer raises a good point--that pricing should be unhinged from $.99--but he assigns blame in the wrong direction. It's the labels and the copyright owners that have the largest bearing on pricing. And it is those two groups that see the greatest benefits from economies of scale, not Apple. Imagine the margins on any track available on iTunes that was released before, say, 2002. Virtually none of the $.65 label/copyright cost is new--it's all a unique revenue stream with no marketing or manufacturing cost. All gravy.

Coolfer's right that a multiple-tiered pricing scheme is attractive. But it also completely ignores the emotional premise and key marketing angle of iTMS--that people go there for the singles, not the albums. So even if you want to buy off an established catalog--Journey's "Open Arms", for example--why should Apple charge less? The market value is arguably the same as buying a new 50 Cent track. And even in the case of a greatest hits, many of those compendiums have a lot of clunkers.