The Real Reason For Variable Pricing on iTunes?

18 Nov ’05

Joel on Software explains why he thinks the music industry really wants variable pricing on iTunes – because pricing sends a signal:

Now, the reason the music recording industry wants different prices has nothing to do with making a premium on the best songs. What they really want is a system they can manipulate to send signals about what songs are worth, and thus what songs you should buy. I assure you that when really bad songs come out, as long as they’re new and the recording industry wants to promote those songs, they’ll charge the full $2.49 or whatever it is to send a fake signal that the songs are better than they really are. It’s the same reason we’ve had to put up with crappy radio for the last few decades: the music industry promotes what they want to promote, whether it’s good or bad, and the main reason they want to promote something is because that’s a bargaining chip they can use in their negotiations with artists.

I’m not happy with variable pricing either, but any economics geek will tell you that price discrimination optimizes revenue. And I have to believe this is particularly true where goods are not fungible. [Insert wisecrack about music here]. So while I’m inclined to believe the worst of the recording industry, this has probably been in the cards since iTunes began to get traction.

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