Apple's U2 'box set' a sign of shifting music pricing?

More "digital box sets" may well be on the way. Could an end to flat-rate music pricing be next?

It may be a small, $149 step, but Apple Computer's introduction of a U2 "digital box set"--a downloadable compilation of every song the band has ever recorded--could portend a shift in online-music pricing.

Since the launch of Apple's iTunes store in April 2003, the price of digital music has gravitated, with few exceptions, to 99 cents per song, following the Mac maker's unwavering lead. Apple CEO Steve Jobs has been adamant that a consistent price is important to help consumers understand the new world of online music.

But even as they have been pleased with Apples' iTunes successes, record label executives have chafed at the fixed prices. They're used to the retail world, where some albums can be priced higher than average, and some lower, in order to take advantage of demand.

In announcing the U2 package, Apple executives stopped well short of saying that the flat-rate pricing era was over. But they did say that more experimentation might be on the way.

"I think it's a sign that we have arrived, and we can start thinking beyond just making it work, and bringing in customers," said Senior Vice President of Worldwide Marketing Phil Schiller. Reaching that level of market maturity means companies can start thinking of "new ways" to distribute music, he said.

Apple has played an undeniable trend-setting role in the digital music market, with other companies' prices, usage rights and available catalog often following in iTunes' wake.

Already, online music stores are desperately trying to distinguish themselves with exclusive or prerelease tracks not available on rival services. Though most have also experimented with putting together their own suggested playlists for potential consumers, the addition of the digital box set is likely to set off a race to bundle new collections and compilations that are unavailable elsewhere, online or off.

This may require some new flexibility from record companies and other license holders, who have typically received about 65 cents of every 99 cents spent on digital music.

Apple's U2 bundle, which includes an extra 25 unreleased tracks such as demos and live songs, costs $149. At ordinary $9.99 album pricing on iTunes, the collection would cost about $185. If purchased by the individual track, it would run more than $425.

Apple executives said Universal Music, U2's record label, had worked closely with the computer company in creating the package.

As yet, the digital box set is a standalone promotion. Jobs and other executives declined to say whether other bundled albums were planned. But it's likely a safe bet that more are on the way. Jobs called the idea a breakthrough that uniquely took advantage of digital music's strength.

CD box sets top out at seven or eight albums, Jobs said. But "we can just break through those limitations...and do something that has no physical limitations."

 

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