Itunes Music Pricing

Josefina Anorga Carlos Albizu University iTunes medication Pricing Adopting a variable price form _or_ system of government might add-on the gross revenue revenue enhancement of apples medicinal drug Store. Pricing the more popular songs at a higher monetary value and the less popular ones at a lesser rate would grant higher sales for the lesser popular ones. Thus making up for the slight drop in sales of high- costd tracks and ultimately work towards overall emergenced revenues. Although most songs with a higher footing bloom experienced nearly 21 % drop in sales, the 29 % increase in price made up for the loss.Moreover, sales for the top 40 songs have a relatively inelastic demand and argon anticipate to be unaffected by the price rise. The customers of these popular songs are price-insensitive and and so make a greater contribution to the increased revenues since the optimal price can be marked at a value oftentimes higher than the marginal cost. With the tiered pri cing structure, iTunes symphony Store would to a fault be able to tackle the increase competition by the study wireless companies offering downloadable symphony to the cell phone subscribers.Variable pricing intelligently supports the maximized returns by allowing the connection to adjust the value of per-unit prices to increase revenues and encourage the authorization customers to be allured by the lowered prices of specific tracks. apples iTunes Music Store might adopt other strategies such as crop Bundle Pricing strategy to make a bundle of diverse songs (both popular and less popular tracks) and move them at reduced prices. This pass on not merely help the sales of the slow moving effectual tracks, but also work as a revenue writer by way of alluring potential consumers.The bundling strategy will help in increasing profits by extracting additional consumer surplus. other strategy that the company may adopt is the captive pricing policy. This go about will require the company to charge higher prices for the songs since they can altogether be downloaded exclusively on the iPod. This will ensure higher revenue from the existing customer downloads, however the company might not be able to increase the iPod sales following this pricing policy. The company may implement promotional pricing strategies such as offering approximately specific songs at discounted prices along with the purchase of the new iPods.This would not unless boost the sales of the iPods, it would also attract the customers to buy the usually expensive songs at discounted rates. This would directly promote the unison sales thus increasing revenues. While the variable pricing strategy is seen as way to increase revenue, the sophisticated pricing structure poses high risks and potential costs to the company. With the sexual climax of the information technology and the rise in the unauthorized file swapping networks, the company is already at a high risk of losing consumers, who can well download pirated music free of cost.Moreover, since a major share (about $0. 70) of the revenue per song goes to the record companies that have the right to the songs and the iTunes Music Store gets a very small share of the profit from the downloaded music, the company cannot afford to move back profits from the sales of iPods. A complicated pricing structure poses a great risk of losing the customers to other companies, which will adversely affect the sales of the iPods also. With the music companies tying up with other competitors such as virago. om, who sell the music catalogs wrapped in digital rights management software, implementing the complicated pricing, would only mean losing the sales and promoting the unethical practice of unauthorized free downloads. Apples pricing objective of flat pricing is not order at maximizing revenues callable to the sale of downloaded music. The company is enticed to sell the downloaded music at low prices in order to promote the sale of iPods. Apple follows a profit maximizing policy for the iPods revenue stream and so follows a stable policy for the attracting the customers by a flat price for the downloaded music.However, the record companies are only concerned about maximizing revenues from the downloaded music and they are not concerned about the revenue from the sale of iPod. The iTunes Music retention is a service that Apple offers to its consumers who wish to buy the terzetto party music and audio books over the internet. Moreover, with no subscription fee and loose range of personal rights being offered with the music substance, including playing the music on an unlimited number of iPods, Apple is clearly not focused at generating increased revenues through music downloads (Forms 10-K).Apples ability to control the pricing of downloaded music is likely to change in the future. Third party content providers require Apple to provide variable pricing policy along with adequate security mechanis m. If the company continues to focus on revenue maximisation of iPod hardware sales considering the music content download as a peripheral business activity, the recording companies might get agitated due to the absence in increased revenues.The company might lose its supplement over music companies owing to the increasing competition. With other companies like Amazon ready to sell the music with embedded security features, the music companies are likely to collaborate with companies thus adversely affecting iTunes Music store business.References Forms 10-K, United States Securities and Exchange Commission Apple Computer, Inc. Retrieved on August 18, 2010 from http//www. sec. gov/ archive/edgar/data/320193/000104746904035975/a2147337z10-k. htm