The Great Digital Sales Experiment
On May 23 and May 26 Amazon offered digital downloads of Lady Gaga's new album Born This Way for 99 cents, presumably in an effort to draw attention to its new Cloud Drive music service, which offers customers who purchase an album 20 gigabytes of free storage space. That spurred what seemed like a digital music bonanza when two weeks later the online retailer sold digital copies of the original Broadway cast recording of the hit musical "The Book Of Mormon" for $1.99 from June 9–12.
Amazon ate the cost of the price cuts while boosting album sales, maintaining artist and label revenues and also drawing bargain-hunting customers to its site. But a controversy lurked underneath: Was such a radical price point encouraging people to buy more music, or simply devaluing it further in an era of rampant illegal downloading?
There is little doubt that Amazon's digital promotion of Born This Way helped Lady Gaga achieve first-week sales of 1.1 million units, marking the largest sales week since 50 Cent's The Massacre rung up sales of 1.14 million units in 2005, according to Nielsen SoundScan. And on the digital sales front, Born This Way earned the highest sales week for a digital album and became the eighth best-selling U.S. digital album of all time with 440,000 units sold.
But Lady Gaga told The Wall Street Journal in June that, as far as digital music was concerned, her album was not worth more than the 99 cents Amazon charged. "It's invisible," she said. "It's in space. If anything, I applaud a company like Amazon for equating the value of digital versus the physical copy, and giving the opportunity to everyone to buy music." Lady Gaga also noted that Amazon graciously covered the price difference on the sale, ensuring that she would not lose money on the deal.
Thanks to Amazon's $1.99 promotion, The Book Of Mormon — which garnered GRAMMY-nominated composer/lyricist Robert Lopez, Trey Parker and Matt Stone an award for Best Original Score (Music and/or Lyrics) Written for the Theatre at the 2011 Tony Awards in June — reentered the Billboard 200 at No. 3 during the promotion, becoming the highest-charting Broadway cast album, and the first Top 10, since 1969. With 61,000 units sold during the week ending June 12, the album also notched the largest sales week for a cast album since Nielsen SoundScan began tracking data in 1991. That more than doubled the high estimates of 25,000 units that Amazon representatives offered to musical producers Anne Garefino and Scott Rudin. For the duo, however, the promotion was not about getting ahead in sales or profits.
"We're a live experience, not an album," says Rudin, "So for most people who don't live in New York, and for the many people who want to see it right away and are going to have to wait a while, the cast album is meant to be kind of an ambassador of the show. We basically broke even on it, and it was a way for people to sample the show."
It was also a way to give back to those who already supported the show.
Amazon selling digital albums at low cost is not a new trend. In April 2009 Apple moved from selling all songs in its iTunes Store at 99 cents each to a tiered pricing model that includes songs priced as low as 69 cents. That same month Walmart's online music store began selling songs for as low as 64 cents. And earlier this year Amazon lowered its song prices to 69 cents each. Amazon's monthly discounted $5 albums, some of them massive classical compilations or catalog rock and pop releases such as Prince's 1999, Radiohead's Hail To The Thief and Joni Mitchell's For The Roses, are also commonplace.
Other online retailers such as eMusic offer subscription-based services that offer the customer an allotment of downloads for a monthly fee. EMusic subscriptions start at $11.99 per month with individual song prices starting at 50 cents each.
In an effort to offer customers a wide variety of choices and help introduce them to new music or artists, Amazon is also offering deals on indie music, with more than 400 digital albums on sale through July. There is even an occasional deal on new releases such as the Airborne Toxic Event's All At Once, which was on sale for $4.99 for a limited time in June, and Them Crooked Vultures' self-titled debut album, which received a daylong $2.99 promotion in 2010.
Silvio Pietroluongo, Billboard's director of charts, notes that the Lady Gaga promotion was obviously larger in terms of the artist and the scope, but says its positive effects are dubious.
"It's certainly not sending a great message as to what the true value of an album is, and when I say album [I mean] physical," says Pietroluongo. "It doesn't help. I think everybody has a good idea of what they are willing to spend, if anything, on music, but if there are some that are still casual consumers, they may dive in at 99 cents but not pay $3.99, $5.99 or $9.99. It would be worse if we saw this consistently. It would send more mixed signals if the price started to vary day by day. If we start seeing albums priced a certain way on Tuesday [for instance], [and] then lowering the price on Friday or Saturday, that's really going to start to set things in a negative way in terms of music consumption."
Amazon seems optimistic at this point.
"We strive to offer the very best price, selection and convenience," Amazon said in a statement. "We are pleased to offer customers music at a very low price, and ultimately, by offering the product at such a compelling price point, we believe it will actually generate more sales for artists in the long run."
For the digital retailer, the benefits of ultra-low pricing seem clear, at least for the moment: more customers drawn to the site for potentially additional purchases. For the music industry however, low-priced promotions may be a mixed bag of greater exposure on one hand, but a detrimental effect on music's perceived value on the other.
Will such promotions ultimately prove to be a boon for music, or a risky proposition for its bottom line?
(Bryan Reesman is a New York-based freelance writer.)