more variable pricing policy for customers will increase sales revenue from
Apple’s Music Store. According to CNBC, Apple had announced that their online
music store known as iTunes had actually exceeded Wal-Mart in becoming the
greatest music retailer in the country (CNBC, 2008). By becoming the greatest
music retailer in the United States, it is no surprise that this company has
considerable market power. Due to this, Apple would be able to increase the
price of their songs and albums and would not see a major decline in customers.
There is a very large diversity of music, meaning different songs and artists
have different demands. Apple choosing to increase the price of the
latest/popular songs and decreasing the price of older songs, will cause not
only more revenue in new music since it’s high in demand, but will also
increase revenue for older songs due to the low cost attracting more customers.
This will increase Apple’s income.
had moved from one to three price points in 2009 in hopes to increase revenue.
By offering customers different prices, they will be tempted to buy older songs
that are cheaper. Older songs are priced less, and newer more popular songs are
marked at a higher price due to the high demand for them. Buy decreasing the
cost of a “golden oldie”, more people may be enticed to purchase it.
potential pricing policy that may increase revenue from Music Store sales would
be bundling. Many times, firms use bundling in order to obtain more of a profit
from customers with varied product demands. Usually bundling is more lucrative
than retailing items separately (Brickley, Smith, & Zimmerman, 2016, p.
251). In Apple’s case, they may decide to price a song at 1.29 each. However,
they can sell the entire album which consists of 13 songs for $13.99. At this
point the buyer will debate on whether to purchase songs separately or just
purchase the entire album which they’re more likely to do. By purchasing the
whole album, the buyer will have saved $2.78.
potential risk of implementing more sophisticated pricing schemes for the
downloaded music would be losing current and potential customers. Take into
account, the price discrimination. Price discrimination happens when a firm
decides to charges different prices for customers according to their will to
pay for that good (Brickley, Smith, & Zimmerman, 2016, p. 250). Now this
may occur with Apple when a buyer notices they bought a song for the rate of
$1.29 when someone else happened to pay $.99 for the same song. This may result
in customers being upset and no longer trusting Apple to purchase their music
is in fact Apple’s objective to maximize the revenue it receives from the sales
of downloaded music because this also leads consumers to buy other Apple
products. There is a huge demand for online music. In order for apple to receive
higher revenue they must increase the cost of not only their music, but also
the iPhone, iPod, etc. According to Apple, “iPhone, Apple Watch & App Store
drive revenue growth of 22%.” (Apple, 2015). Apple does not only have to rely
on downloaded music for increased revenue. The objective of major record
companies is to sell music online. This is how most music companies maximize
their own revenue due to the constant evolution of the internet.
consumers where able to download music through iTunes, Apple was at the top of
the market. Now, eventually as time goes on Apple will have some competition and
may need to change their pricing. Take for example, Jay-Z owns Tidal, a
subscription based music streaming service. A monthly subscription is $9.99 to
listen to unlimited music. It is apparent that Apple had realized people may
rather pay for a monthly subscription to listen to unlimited music rather than
paying for each individual song or album which would end up equaling more than
$9.99 a month. Tidal was only created in 2014. Soon there will be many other
online music stores that’ll be just like Tidal or better. Apple will most definitely
need to control their music pricing in order to stay on top of the game in the