Analysis: iTunes Price Hike Takes In Extra $43K

Analysis: iTunes Price Hike Takes In Extra $43K

May 01, 2009

By Glenn Peoples, Nashville

Three weeks after 33 of iTunes' 100 best-selling tracks received price increases, the end result is a win for the labels. Tracks that received the price change from $0.99 to $1.29 have generated more revenue on fewer unit sales than they would have had they remained at lower price and sold slightly more units, which is the assumed result based on previous Billboard analysis of the price changes.

On average, the $1.29 tracks generated more than $43,000 in extra revenue since the price hike - bringing in more than $14,000 extra per week than they would have collected had they sold the same volume at the lower price point.

Of the 67 tracks that remained at $0.99, they sold a total of 29% fewer units than they sold in the week before the price increase. Because their prices remained unchanged, that 29% drop in unit sales resulted in a 29% decline in revenue last week. The 33 tracks raised to $1.29 dropped, in aggregate, 34.5% in unit sales from the week before the price increase. Because their price was raised to $1.29, the 34.5% drop in unit sales resulted in only a 14.7% decline in revenue.

The below graph shows the weekly, per-track revenue of the songs priced at $0.99 and $1.29. In the first week, all 100 tracks were priced at $0.99. In the second week, 33 of the songs were raised to $1.29. Both lines trend downward and the $1.29 group sold about 50% more units than the $0.99 tracks before the price change. After the price change, the more expensive tracks generated more revenue and fared a bit better in the two weeks after the price hike. The $1.29 group fell nearly 30% from the week of the change while the group of $0.99 tracks fell nearly 31% from the week of the change.