Monday, November 2, 2009

More on iTunes pricing

The most profitable scheme would be two-part pricing, with an "entry" fee and a low cost per song:
The most revenue, according to the 2009 survey data, would be generated by charging the students $21.19 for entry and 37 cents a song. This could raise the producer surplus by 30% compared with uniform pricing. Consumer surplus would also rise in this instance, because some people would buy songs they would have not have done at a higher uniform price. Spotify, a rival to iTunes, has a model somewhat like this for its premium service, where it charges a monthly fee for songs without limit.

1 comment:

  1. However, it is interesting that these 'Netflix for music' models such as Napster and Spotify have so far failed to take off in any big way. Consumers still seem to prefer iTunes.

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