Wondering why there is all this hoopla about iTune tiered pricing? An interesting analysis on the Joel on Software homepage called
Price as Signal is well worth reading.

Forbes: “EMI Group boss Alain Levy said at press conference today that he believed Jobs would introduce multiple price points for iTunes music within the next year.”

The story they’re trying to tell you is that “older, less popular songs could be discounted, and in-demand singles could go for more than a dollar.”
Let’s think this through, because I think the recording industry is lying about why they want different prices.

Before I start with that, have you ever noticed that movie theaters charge the same price for all movies, whether they are Steven Spielberg blockbusters or crappy John Travolta religious quackery disguised as science fiction that nobody in their right mind would want to see?

Theoretically, when a super-duper-blockbuster comes out, like, say, Lord of the Rings, there’s so much demand that the movie theaters just end up turning people away. Econ 101 says that they should raise the price on these ultra-popular movies. As long as the movie is sold out, why not jack up the price and make more money?
Similarly, when stinkers like Lesbian Gangster Yoga with Ben Affleck come out, the movie theatre is going to be pretty much empty anyway … so Econ 101 says they should lower the price and try to get a few more bucks filling up the theater with price-sensitive moviegoers.

And indeed this is what the recording industry is telling you that they want to do on iTunes. But they don’t do it in movie theaters. Why not?

This entry was posted on Saturday, December 3rd, 2005 at 9:34 pm and is filed under Tech Musing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.