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APPLE, AMAZON E-PRICING OVERTURNED

eBooks, eMovies and eMusic "rip-off" stopped by social networks

No one really knows how Apple managed to get away with its iTunes pricing for so long, but now consumers have teamed up on social networking platforms to take electronic retailers to task.

How could they charge around a dollar a track for a download when the physical album cost was around the same? Isn’t more than 80% of the cost of a CD in the physical medium, in logistics and physical store costs?

Shouldn’t the iTunes price have been 80% less per track? That would pass on real cost savings to consumers and still get the artist the same royalties.

The reality is that this pricing policy for not-quite-equivalent eProducts went unchallenged for years. It was only with the launch of the iPad and the re-pricing of e-books by some publishers that the cat was let out of the bag.

With the escalating war for consumers between the Amazon and Apple eBook platforms, publisher Macmillan forced through a price increase for digital versions of its top titles.

Apple suggested a price of US$ 12.99 to 14.99 for its eBooks, clearly higher than Amazon’s US$ 9.99 bargain price. Publishers obviously loved that idea – it would bring the eBook price closer to the price of a physical book and seriously increase their profits.

Amazon’s knee-jerk reaction was to banish those publishers’ books from their online stores.

But, consumer reaction was firm and unpredictable. Suddenly consumer interest groups started emerging on all social networks demanding that eBook and eMusic prices be brought in line with real cost savings. Piracy blossomed once again, especially among the young consumers.

Yesterday’s announcement of a sea change in ePricing shows the first signs that consumers have won. During the next year consumer prices are likely to drop by more than 50%, and more beyond that as government regulation kicks in.

It is now clear that to beat piracy, all you have to do is charge low, but fair, prices.


ANALYSIS >> SYNTHESIS: How this scenario came to be

When you buy a download, especially of music or a movie, you’re buying a technically inferior version of the original of physical version. For example, the MP3 process has deliberately thrown away lots of the sonic information that was in the original – all in the interest of speeding up the download.

The biggest providers of digital downloads are getting more aggressive with the pricing, but are still far from enticing us. Obviously we’re not the only ones not buying overpriced, over-compressed videos, music and movies, and for good reason. Part of the reason that this isn’t enough is because we believe that the perceived value of digital delivery is actually less than packaged media. Not only do you not get something tangible to own, but also because you can’t resell it. Every way you look at it there are fewer freedoms.

Warning: Hazardous thinking at work

Despite appearances to the contrary, Futureworld cannot and does not predict the future. Our Mindbullets scenarios are fictitious and designed purely to explore possible futures, challenge and stimulate strategic thinking. Use these at your own risk. Any reference to actual people, entities or events is entirely allegorical. Copyright Futureworld International Limited. Reproduction or distribution permitted only with recognition of Copyright and the inclusion of this disclaimer.