RealNetworks cuts prices in half, sells a million tunes
By Peter Rojas 
posted August 25th 2004 10:39AM
posted August 25th 2004 10:39AM
Trash them all you want, but RealNetworks says that they've managed to sell a million music downloads since they cut their prices in half to just 49 cents a song and $4.99 per album last week. We don't exactly see Apple shaking in their boots over either this or Real's recent moves to hack the iPod so that music downloaded from their Rhapsody online music store will play on the iPod, but at least it'll make it a bit tougher for Apple to justify raising the current 99 cents they're charging for downloads.
At $0.49 each they're losing about $0.40 per song. Once they raise their prices back up to a profitable level, let's see if they can continue selling at that pace.....
Price wars are great for consumers! At the current prices, iTunes is priced perfectly to not canabolize CD sales. I would never buy a DRM'ed album for $10 when I can pay just 2-3 more to get a CD from which I can make unrestricted mp3s. At $5/album, though, it becomes a value proposition and the restriction are a little more tolerable. Unfortunately, this does appear to be a limited-time offer.
Apple won't be able to raise rates, unless of course they increase the resolution to 192 or 256. This would be pretty damn close to CD quality, especially after Quicktime 6.6/7.0 moves to AAC with VBR. Real is losing money for market share, and as Loss Leader stated, once they raise their prices, Real will be forced to justify the cost with features.
Apple has continually said that they have no intention of raising prices and keeps saying that no one wants to spend more then a dollar on a song. They've also said they're getting music industry pressure to raise prices, but they fight back saying no one will buy at higher prices.
if the RIAA in all their glory can't get Apple to raise prices, why would a publicity stunt by Real do any different?
Apple has no need to "justify raising" their prices because they have no plan to.
Who wants to pay more than $5 for a CD they've never heard anyway? I don't, but on the other hand I don't usually get into any of the radio play crap. People like me get screwed when they go to the CD store. At $5 I wouldn't mind taking my chances on CDs I haven't heard though. That would be good for artists and music sellers.
50 cents a song and $5 for an album actually sounds like a price that people would be willing to pay. If all the sites could drop their prices to that level I think it would be a boon to the whole recording industry. I know I would do some serious album shopping.
...for losing around $400,000! The more they sell the more they lose. What a great strategy and frankly it couldn't happen to a nicer company :)
What about that Russian site that sells downloads? $0.05/song can't be beat! Gotta love the currency conversion rate.