Shock: When You Raise iTunes Prices, People Buy Less Stuff

A shocking revelation from the Warner Bros. earnings call this morning: Since they bumped prices on a bunch of iTunes tracks, digital sales growth has slowed down! It grew 10 percent in the fall quarter, but now it's slowed to growing just 5 percent this past quarter, which means they're piling up less money—digital revenue grew less than half as much, 8 percent, versus 20 percent a year ago.

The prudent point in this for book publishers, as Peter Kafka notes, is that raising prices like they wish might slow growth down more than they think. The price difference between a $10 book and a $15 book is a gaping maw, so I wouldn't be surprised to see people react that much more vehemently. But we'll see—maybe people will pay more for fancy ebooks. [MediaMemo]


What makes you think it's about the money? It's about control. Warner Brothers, MacMillan, the whole lot would gladly take a 50% cut in revenues and profits if it means having better control of what is sold and at what prices. Remember, the CEO incentives are relative, not absolute, so they'll still collect their salaries and bonuses. As long as they get their cut, they don't care if they don't publish a thing in a year.

I've tried and tried, but I still can't come up with any other explanation. Like most, I'll be sticking with the cheap paper editions, read 'em and sell 'em, rather than the more expensive ones.