Back in April, we blogged about Apple’s move to eliminate the “one price fits all” model for its iTunes digital media store, opting to shift to a three-tiered pricing model. While this news was met with some trepidation by media, music labels and consumers, a new article from Billboard‘s Antony Bruno and Glenn Peoples suggests that Apple’s variable pricing approach may just be working.
An analysis of Nielsen SoundScan data conducted by Billboard found that while Apple’s variable pricing model may have caused overall sales volumes to decline, tracks that were priced higher compensated for the decline and actually generated more revenue.
Bruno and Peoples note, “Playing with pricing won’t solve the music industry’s biggest problem: Digital revenue is increasing too slowly to compensate for the decline of CD sales. But variable pricing will help labels bring in more money from online downloads, according to the results so far.”
One of our clients, Digonex (on behalf of which we secured this piece), a provider of real-time, demand-driven automated pricing solutions, knows first-hand the impact that variable pricing can have not only on the digital music industry, but on other industries such as event ticketing and e-commerce. The company’s Digital Online Exchange (DOE) platform is an innovative dynamic pricing solution that systematically changes prices based upon behavioral and econometric principles. In a nutshell, it finds the optimal price for every item in a given product catalog and updates those prices in real-time.
Some industry analysts think it’s still early to tell if these new pricing models will truly impact the digital music industry. Forrester Analyst, Mike McGuire says, “For the first year or so the labels are looking at this to see how the market reacts.” “It’s real-time research, in effect. They need as much data as they can to try to understand where they go from here.”
Clearly, this is an evolving landscape. From a PR perspective, it’s important for organizations in emerging markets to establish thought leadership early on to drive awareness and adoption of products and services. We’ve been working closely with Digonex to build relationships with key media and analysts who are covering this space to build awareness around the company and the category.
Aside of the Billboard/Reuters piece above, in the short time we’ve been working with Digonex we’ve secured key coverage on behalf of the company in Red Herring, Reuters, and Billboard.biz. We’ve also set-up introductory briefings with several key industry analysts to ensure they’re grounded in Digonex’s vision and the benefits dynamic pricing. Laying the groundwork early has helped Digonex gain early awareness in this market and establish itself as a credible thought leader in the category.