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On this morning’s earnings call for Warner Music, CEO Edgar Bronfman, Jr said that the company’s $1.29 tracks — a 30 percent price boost over Apple’s standard 99 cents — have been a “net positive” for the company. Yet as media pundit Peter Kafka observed, the entire music industry’s iTunes sales growth is slower than a year ago, when consumer confidence and willingness to spend were much lower:
Industrywide, year-over-year “digital track equivalent album unit growth” was at five percent in the December quarter, down sequentially from 10 percent in the September quarter and 11 percent in the June quarter. And since iTunes sales make up the majority of Warner’s digital revenue, growth is contracting there, too. In the last quarter, digital revenue at the label was up eight percent compared with a year earlier, when that number was 20 percent.
On the call, Bronfman said:
“Digital growth has slowed following iTunes’ introduction of a variable pricing model in April 2009 … It couldn’t have come at a worse time. [Variable pricing was] agreed in summer of 2008 before the financial crisis even hit — Apple went through that price increase in April, but in the face of the worse recession since the Depression … It’s difficult to know, even today, if it is just consumer resistance to a higher price points or if [the cause was] taking a pricepoint of 30 percent more at such a fragile time.”
Don’t overreact to the news. iTunes sales are still creeping upward. And Michael Bublé’s “Crazy Love” album with its hit single “Haven’t Met You Yet” has helped Warner’s revenue stay pretty much flat. But it’s odd that while most spending has begun to recover from the panic of 2008-2009, music sales growth is slowing. Kafka thinks the prices are putting off would-be new buyers. I think it’s possible that the target market for iTunes music is spending its money on iPhone apps instead.
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