Tuesday, 12 July 2005

The Price of Music

Since I bought my Mac, I have been discovering . With iTunes, I have also been discovering the iTunes Music Store. Some would say it is yet another tempting way to spend a lot of money with evil music empires, without realising it because it is so easy to buy something in the store through the iTunes interface.

An interesting aspect of the iTunes store is that all songs are priced the same at £0.79; all albums as well at £7.90. It makes sense because the iTunes store doesn't need a stock. All they sell is an electronic version of the music, which people download. This means that contrary to the normal offer and demand logic prevalent on the high street, they don't have to price their offering depending on how popular it is. Whether an album is downloaded once a month or 10 times a second doesn't matter, it just use a minimal amount of hard disk space. Thus they are shielded from stock issues: you can never have an item that runs out of stock nor can you ever have unsold stock of any item. They don't need to price popular items higher because they will never run out of copies and they can keep selling them. Similarly they don't need to discount unpopular items because it doesn't cost them anything to keep them. In practice, selling a song once will pay several times over for the amount of disk space it uses.

Compare this to your standard high street store. Everything they sell is a physical item that uses store space and that they have in finite quantities. If a brand new album is extremely popular, like Coldplay's X&Y, they can potentially price it higher because they know they will sell it. If they have large stocks of an older album they can't shift, they'll discount it, sometimes very heavily, on the grounds that selling something very cheap is still better than not selling it at all.

Now that's basic economics, not rocket science. But it's something that we, as consumers, can use to our advantage. Last Sunday, I went to my local MVC store. I went directly to the discount section and only looked at what was under £7.90, on the grounds that anything over that price would be cheaper at the iTunes store. I left the store with 6 albums for a total cost of £26, that is £4.33 per CD. Fair enough, one of them doesn't read in any of my CD players so I'll have to go back next week-end to exchange it but at the end of the day it means that, in theory, I could get all the music I want for a maximum of £7.90 per album. Of course, in practice, there are a lots of caveats: music I have only in electronic form is at the mercy of a computer crash, although I can make a backup copy and CDs deteriorate too; I don't have the nice leaflet with the lyrics when buying through iTunes not the feeling of actually holding something in my hand; I have eclectic tastes so there are a lot of things I simply won't find on iTunes. But beyond this, I reckon the only reason I'll buy an original CD again for a stupid price is if it comes with extras, such as the Gorillaz albums that typically come with stuff like screen savers or wallpapers for your computer.

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