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Ops hit wrong note on music pricing

Mobile operators are fighting a losing battle when competing with Apple over the pricing of digital music, say analysts.

Pyramid Research believes that whether operators and record labels like it or not, the public perception of the cost for legal downloadable music has been defined by Apple’s ‘one size fits all’ pricing of $0.99 per song.

“The $0.99 price point was set at a time when the majority of digital music consumers had a very different expectation for the price of digital content – free,” said Nick Holland, senior analyst with Pyramid Research.

“The legal alternative to free music had to be at a price point that was not deemed to be excessively high in the public perception. A sub-dollar price tag was probably as high as Apple could have realistically charged,” he said.

Despite heavy pressure from the music industry to adopt tiered pricing for premium content and to increase retail pricing, Apple has stuck to its guns since iTunes launched in 2003.

Although $0.99 per track leaves little scope for margins from selling tunes, this is of little consequence to Apple, said Holland, since the company’s business is primarily focused on the sale of hardware.

However, the $0.99 price “presents a significant barrier to entry for newcomers to the market basing a business purely around content driven margins,” Holland said.

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