Monday 3 October 2011

An iTune

I've avoided iTunes. But there's a new Nirvana box set release with Butch Vig's original mix of Nevermind. And, StatChat gave me $40 in iTunes vouchers. So, off I went. After being unable to install iTunes for a couple of weeks because of some unfinished Apple install locked into my machine, I finally cleared things up. Then spent way too long setting up an iTunes account and re-logging in every time I turned around. But I first logged in as American. There, I saw the $1.29/song and $45 box set.

So I was surprised when my NZ account gave me a $2.39/song, $72 box set.

$1.29 US per song. Take a $0.75 exchange rate: NZ price then $1.72. Add GST*: $1.98. That's still a $0.41 price gap on an individual song. On a 70 song box set, that's $28.70 if you buy the tunes a-la carte.

What about the box set? $45 US = $60 NZ. Add GST*: $69. That's only $3 less! After you put in anything non-trivial for licencing fee differences or just the hassle of dealing with small market issues, the price is basically identical. [I only want the eleven Devonshire Mix tracks, so the box set doesn't much help me.]

If Bruce Hoult is right, things are worse: GST doesn't apply to iTunes because they count as an imported service rather than a good, and imported services are zero-rated. IRD suggests Hoult is right. The price gap is then $0.67 per song ($46.90 for a 70-song set) or $12 for the box set.

We'd always expect per-song pricing to be a worse deal than per album pricing. But I don't know why we'd expect the gap to be so much bigger here than in the States.

When I'd first seen the price gap per song, I'd figured price discrimination: maybe iTunes hits a richer part of the NZ demographic and so optimal price is higher. But surely it would be the high demanders who'd go for the box set over individual songs. It would be surprising for the bundle to sell for more than the components, but I wouldn't have figured a hefty box-set discount consistent with trying to hit the high demand high income cohort. Maybe those looking to buy a box set are more likely to engage in price search (setting up multiple iTunes accounts, comparison shopping with other online outlets) while those wanting individual tunes don't bother with those fixed costs.

Other candidate explanations:
Other explanations?


  1. One obvious suspect you are missing is the record label. Licencing deals for records/moives/tv shows etc are done on a country by country basis, and it could be that Nirvana's label is demanding a higher cut outside of the US than in.

    One way to test would be to compare prices in other countries such as Aust, Canada, UK etc...

    I wouldn't rush to blame Apple and iTunes pricing - often it is the content owner - the artist's label that is calling the shots...

  2. @Horace: That just pushes the same problem to a different agent: why would it be optimal for the licence holder to charge a higher price here than elsewhere?