Dancin' on the Margin

Contra Peter, I think iTunes’ price tiering is blissfully intuitive.

Imagine that Apple’s practically saturated the mp3 market by this point, and therefore is depending less on new iTunes customers than new business from old customers. It’s fair to assume that shortly after joining, a customer ensured that all of his “Must-Haves” were in his iTunes library. So new acquisitions will either be a) new music; b) old music he just got turned on to or c) just-remembered rarities and impulse buys. (The radio industry calls these “oh wows.”)

I think the “ease of transaction” metric makes more sense for c) than b). (Let’s face it, a lot of b) consists of music that the customer’s Cooler Friend just turned him on to, but that the Cooler Friend, her friends, and the kind of record store she frequents have been hip to for years. So it’ll be much more readily available in the online marketplace.) But with c), customers are more likely to be dissuaded by cost than the other two categories, because the song isn’t considered a “must-have.” This is especially true in the current economy, when people like to think they’re making fiscally responsible choices even when they’re drowning in credit-card debt. Marking down the songs most likely to produce a “but I really shouldn’t spend 99 cents” reaction sounds like a really good move on iTunes’ part.