Surprise: Warner admits pricier iTunes prices make for lower sales!!

Warner Music – who wanted this so so much – revealed their financial results today, and guess what – they found that more expensive tracks just didn’t sell as well. What a shock, eh?

OK, let’s reiterate: Way back in 1999/2000, young Napster founder, Shawn Fanning, attempted to get a legal music distribution deal from major labels with the argument that making music available internationally online for a few cents would generate millions for the labels.

They didn’t bite.

Apple comes along with its 99-cent (79p in UK) price point and digital music comes of age, sales get made, the sector grows (though not enough to make up for the shortfall left by CD sales – which the labels at that time were happily gouging customers by charging too much for) and music’s still here. Albeit changing.

This wasn’t enough for the labels though – they wanted higher prices – eventually Apple gave in and offered them the chance to set prices at three bands, including $1.29 per track.

Warner said digital revenue growth in the last quarter was 8 percent compared to 20 percent in the previous year’s corresponding quarter.

“This is in line with an industry-wide slowdown in which year-over-year “digital track equivalent album unit growth” dropped to 5 percent in the December quarter, after being at 10 percent in the September quarter and 11 percent in the June quarter,” we’re told by the Silicon Valley Business Journal.

This, according to the Byzantine logic of Big Music, equates to a “net positive” for Warner. So – selling fewer tracks by artists to fewer people is a success, so long as the profit per tune ranks high.

Warner CEO Edgar Bronfman Jr. predicted subscription services could eventually become more important than iTunes type sales.

“The number of potential subscribers dwarves the number of people purchasing music on iTunes,” he said.

In the subscription model, of course, people pay a few cents for each track they have access too.

Sound familiar?

(Oh yes – and just what kind of profit do artists see on each track played via subcription? Answer is less, cos it’s a rental rather than an ownership model, which artists receive lower compensation for.)

Who wins there, then?

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6 thoughts on “Surprise: Warner admits pricier iTunes prices make for lower sales!!

  1. Partner

    Actually in the US iTunes music was originally consistently priced at 99 cents a track. Might have been 79p in the UK though. 😉

  2. Joe

    Maybe you should get someone to explain the math to you.

    Let’s see: Industry wide sales grew by 5% in the December quarter. Warner’s sales grew by 8%.

    Why wouldn’t Warner be happy?

    Sure, sales growth was lower compared to the previous year, but that was true of the entire industry. The only comparison we can make is that for the one period that we have both Warner figures and industry figures, Warner was ahead.

  3. Tasha

    There hasn’t been a single successful music stores that Rent music. People want to own their music. They don’t want to rent it and possibly lose it when the licensing changes.

  4. Cali F. Kate

    Warner CEO Edgar Bronfman Jr is a dynamo-sour! He’s just playing the same tired B-school games that landed him the opportunity to try and ride the tiger no one has yet wrapped their head around. He should listen to Randy Neuman, short-sighted people got no reason…

    I agree with Tasha, and I think it’s part of the reason that digital online music sales growth stinks… it’s cuz thinking people know better than executives what has value and what doesn’t. I’m not paying for anything less than an actual copy, and online subscriptions will always suck if we’re forced to listen to someone else selects and that’s limited to the music made available through behind the scenes contractual agreements, none of which place any importance whatever on the buyer/customer/consumer, the human who gets the bill. Make your little contracts and eat your little pie. But don’t forget to scrutinize the sad demise, the killing of EMI.

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