Warner Music revealed on Tuesday something we've all long suspected: music sales have witnessed a growth slump on iTunes since the record labels pushed Apple to implement a variable or tiered pricing model. As a result, consumers have slowed their spending habits of media on iTunes, making fewer purchases and fewer Miley Cyrus downloads -- I'm ok with that part in fact.
The cause of decelerating sales can be attributed the associated price hike in new or premium content, which received an unpopular 30% cost of living increase from $.99 to a more salty $1.29 price point. It turns out that people are reluctant to pay thirty cents more today for something that cost a buck yesterday. What is it with you crazy people and your fickle spending habits?
This decline in spending is beginning to eat into Warner's bottom line, where iTunes makes up the majority of its digital revenues. The company saw a 50% decline in revenue in their December quarter, at just 5% growth -- down from 10% in the previous quarter. Ouch! Note to businesses everywhere: This is what happens when you issue a price increase in the middle of a recession. We'll have to see if the record companies take a hint and reconsider their pricing at all.