iTunes Update: Sales May be Down, but Revenue is up
On Monday I wrote about a report from Billboard on the initial effects of iTunes increased prices. That report showed that the increased prices hurt a song's chart positions on iTunes top 100 singles charts compared to those songs that did not see a price increase. Well Billboard has a new report on the price increases.
In my first report I cautioned that "a small decrees in sales because of the raised prices could generate more revenue..." Well that is exactly what the new Billboard article found. While the songs with the new higher price did sell less copies for the week, sales as a whole were not down.
"Even though fewer units of those 100 songs were sold, their total
revenue increased in the first week of the price change. The drop in
sales was not large enough to offset the extra $0.30 received." - Glenn Peoples, Billboard
For the major labels the increasing is Revenue is nothing but good news, at least in the short term. Thought no work on their part they made more money this week than last.
For the artists this could be a mixed bag that is mostly bad. Some artists might see their royalties rise or become more likely to "recoup" the money owed to their label and thus see some profit. But most artists never see royalties of their albums, and the royalties are based on units sold and not price received for the unit. The costs to a artists career of selling fewer copies to fans could be far worse than the extra .30 cents their labels made.
In the long term, this feels like a step backward to me. The big problem most artists are having is getting their music in the peoples' hands, and this will not help that any. When even Superstars' new albums are being heard by only a fraction of the number of people that would have heard them a decade ago it does not seem smart to be getting that album into even fewer hands.
Also report does not even mention what the whole effect was, only what the effect was on the head of The Long Tail with Top 200 Songs. The effect on the Tail could have far more impact for the industry. Small revenue increases for stars will never be able to make up of a small decrees in revenue from everyone else.
The solution needs to be getting a little money from far more people. It needs to be some form of licensing/subscription. The new media model is so clear to me. Google sells ads for a fraction of what traditional media sells them for and sells them to far more people and then profit far more than traditional media ever did in that systems' heyday. The labels need to embrace this model or they will become even less relevant.