Variable pricing policy allows Apple to increase sales revenue by pricing more popular songs or artist at a higher price, then less popular songs or lessor known artist. Let us take for example the Grammy winner for Best New Artist Sam Smith and the song of the year Stay with Me, today you can purchased the song for $1.29, but let us assume ITunes ups the price to $1.39 sells 100 copies. $1.29 X 100 = $129 or $1.39 X 100 =$139, ITunes can increase sales by $10.00 for every 100 copies sold based on popularity. Eventually the cost of the song will increase due to popularity and ITunes …show more content…
Sophisticated pricing schemes can pose a risk of consumer moving to competitors such as Amazon.com to download music. According to Milian (2009) “Apples new cost options had pushed consumers to shop around for the cheapest downloads” (Milian, 2009) within days of announcement. Additionally, ITunes runs the risk of limiting its availability in getting the licensing rights to songs from record labels. Record labels can opt to sell licensing rights for less favorable songs to Amazon or Wal-Mart who will sell those songs for .99 cents versus .69 cents on ITunes. This can impact ITunes from increasing the volume of sales, which happens to be a big component of variable pricing.
5. Is Apple’s pricing objective to maximize the revenue it receives from the sales of downloaded music? Is this the objective of the major record companies? Explain.Hint:review the revenue/product data from Apple’s 10-K.)
6. Do you think that Apple’s ability to control the pricing of downloaded music is likely to change in the future? Explain.
Yes Apples ability to control pricing of downloaded music is likely to change in the future. In part Apple did away “with copy-protection technology known as digital-rights management, or DRM, allowing customers to play more songs on devices other than Apple's own