Last year Americans bought 325.7 million songs as digital downloads, according to Nielsen SoundScan–a major leap from the 2004 figure of 140.9 million. What was each of those songs worth? The easy answer is 99 cents, the standard price at the iTunes Music Store, and the price from which cheaper rates seem to be discounted: Wal-Mart charges 88 cents, Yahoo! Music Unlimited charges 79 cents, and indie-music site eMusic (which I write for) sells monthly packages of 40 MP3s for about $10.
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Those are just the prices to buy songs for your computer. If you want to download music onto your mobile phone too, it might cost more–Sprint Nextel, for instance, sells full-song downloads for $2.50 a pop–or it might not. A new wireless carrier called Amp’d–it markets to the Punk’d set, hence the terrible name–sells songs to its subscribers for the magic 99-cent figure, but as a loss leader. Amp’d pays the three major labels with which it’s made deals the standard wholesale price for mobile-phone downloads, which is around $1.25 per song. “Right now, Apple has set the market,” Amp’d chief executive Peter Adderton told Forbes.
The second difference is that while physical CDs can be resold, and often are, you can’t even transfer a protected iTunes or mobile-phone sound file, let alone sell it. Would anyone dream of charging money for a “used” MP3? Record labels backed off a short-lived anti-used-CD crusade in the early 90s, once a lot of conventional record stores made it clear that used bins were keeping them alive (since the profit margin on used CDs is so much higher than it is for new ones). But in the long run, labels have to prefer a format that can’t be passed along without bringing them income.
It’s not a great moment for the music business in general. CD sales are down around eight percent from 2004, and new releases have been doing particularly poorly. Everybody’s got their own explanation for that: labels have their all-purpose excuse of piracy, while record stores blame what Coalition of Independent Music Stores president Don VanCleave called “an absolute, gigantic cesspool of really bad bands” in a Wall Street Journal article. So it’s understandable that labels are looking to squeeze some more money out of digital music, the rare segment of their business that’s enjoying some growth. In a few months we’ll probably know if the value of a hit, plus the value of convenience, adds up to more than a dollar, or if three years of iTunes have solidly established the market rate.
