Often price wars are won by no one but the consumer. The producer is often out of the control loop and their RRP becomes meaningless, other than to act as a discount mark. The reseller may control the price and discount but its often down to the depth of their pockets, the nerves to fight it out and the margin hit they can stomach. Supermarkets can often cross subsidise pricing, but ‘one product offer’ stores such as music and books only often have the one product mix, one opportunity and when they make steep discount move these are made its often in hope that they can be retracted as quickly. No retailer wants a discount war unless they are in control and have the margin to play it.
Today we see price wars breaking out in the music download market. They are not driven by the producers, nor the artists but by two giants who want to destabilise the others offer and capture share.
Amazon has launched a new campaign reducing the price of 100 of its mp3 downloads to 29 pence. This is only a small number of its 5 million music downloads on offer but is focused at those that sell, current chart toppers and genre leaders.
The response from Apple was to introduce a new three-tier pricing system for downloading tracks from its 10 million track iTunes online store. Downloads now cost either 59p, 79p or 99p per track with the majority of songs priced at a price of 79p. Apple’s tracks will now be DRM (Digital Rights Management)free and able to be played on any player not just Apple's iPod.New releases will now often be priced 99p.
Major labels said the price of a song should reflect how much buyers were willing to pay for it. That is wise of them and obvious to everyone else! By removing DRM protection from the downloads we see the death of the highly unpopular DRM-limited music.
The music legal download business is now moving into uncharted waters with the big two potentially squaring up on the only thing they can – pricing and the rest now wondering how the battle will unfold. What is certain is this is the beginning not the end of this price war and their biggest competitors don’t charge but operate different business models.
We often watch other media markets to learn lessons and with the debate still ongoing on ebook pricing,DRM being the normal ebook practice, the current High Street madness on book discounting, then perhaps music is worth watching today.
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