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May 2, 2006
The Money Stops with Steve Jobs
Looks like Jobs has once again managed to hold the line on prciing of downloadable singles at iTunes. In announcing renewal of deals with the big four Cartel producers there didn't seem to be a repetition of the harsh language we heard last fall as the companies jockied for position.
As I noted yesterday, the Cartel are starting to realize significant revenue from digital downloads; however, much (most?) of that revenue is not coming from the 99-cent tracks downloaded off iTunes. Instead it's coming from specialty downloads such as ringtones, for which consumers appear to be willing to pay a lot more money (often over USD 3) for much less music than they get with a downloaded track. Given those numbers, the Cartel reasons it ought to be able to squeeze more revenue out of popular song downloads.
What Jobs isn't currently saying out loud but obviously recognizes is that this would kill the goose that lays the golden egg. Variable pricing would introduce friction into the buying process. Right now I make one decision - do I want to buy that song. I don't have to think about price because it's always the same. If prices were variable, however, I'd have to make several decisions: do I want that song? Do I know how much it costs? Do I want it that much? Will the price go down if I wait a bit?
I make my living studying and building user experiences and I can tell you that thought processes like the latter are a much worse model. They lead to hesitation and missed sales opportunities. Sure, you'll squeeze a few more pennies out of the people who do buy, but you'll do so at the expense of constricting your market and increasing the sales cycle times. Not a good tradeoff. Jobs has it exactly right.
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