Billboard takes a look at the iTunes sales charts and determines that “the increases have hurt the sales rankings of songs given the higher $1.29 price.” Once sales fall more than 23.3%, the label starts losing more money than they would’ve made had they left the price at 99 cents. The average $1.29 song dropped “about three positions” since the price increase. A drop from #3 to #6 equals a 30% drop in unit sales, which means the label is losing money on that. Billboard has a handy graph to explain this:
Further down the chart, with lower unit sales differences between chart positions, it can work out better for the labels. A drop from #42 to #45 represents a difference in sales of “about 300 units per day,” but ends up earning almost $1,100 per day more for the label.
So who knows? I’m not an economist and I hate math, so if somebody can tell me whether or not this was a smart financial move by the labels, I’d appreciate it. Thanks.
Previously: iTunes: Why Pay More!