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Labels Losing Money on iTunes Variable Pricing…

Major labels are seeing sales decreases following a shift towards variable pricing on iTunes, according to numerous sources to Digital Music News. The sources include executives within the majors, all of whom requested anonymity.

In the initial weeks following the pricing changes, including a move towards top-end, $1.29 downloads, overall revenues are moving downward. Lower unit sales can still result in greater revenues given the higher pricing tiers. But according to the figures shared, unit sales are dipping far enough to produce aggregated revenue declines compared to the pre-variable position.

The assessment goes far beyond top tracks, and includes the broad catalog of millions of songs. “It’s what we’re seeing after the first couple of weeks,” one executive shared, without discussing specifics on individual artists.

One possible takeaway is that music fans are simply recoiling from higher prices, and jumping towards freebie channels instead. But the executive stressed that the early results are not be treated as the final verdict on variable pricing. Instead, various price-points are probably going to be adjusted in an attempt to increase and optimize results. “It’s back to the abacus to figure out the best mix,” another executive relayed.

But what about using a more scientific approach to pricing? Indianapolis-based Digonex is one company that has been focusing on demand-based, real-time pricing for years, though labels prefer the control of pre-set prices – for better or for worse.