What is Price Discovery? Ask the Music Biz

I was listening to a really interesting story about variable pricing in the music industry on NPR’s Morning Edition this week. The price discrepancies on Depeche Mode’s new album perfectly illustrated the concept of price discovery.  

The new album by Depeche Mode, “Sounds of the Universe” is priced at a low $3.99 on Amazon, and $9.99 on iTunes. Because of iTunes recent switch to a Digital Rights Management-free delivery model (enabling downloaded songs to be played on any type of play, not just the Apple  iPod), this is the same product.

So what’s it really worth?

That’s what Price Discovery aims to determine. Technically, the term refers to the process of determining the price based on supply and demand factors. Throw it all out there and see what sticks.

That’s exactly what’s happening now in the music industry. The ability to purchase music instantly online has also created a realtime, accurate flow of supply and demand information. Well, because the supply of digital downloads is virtually limitless, it’s really just demand information.

This realtime data will enable producers and marketers to adjust pricing moment by moment if they wish. They can boost the price of the most popular songs or give a boost to sleepers with a few keystrokes.

Today the music industry, tomorrow – who knows? One thing’s certain: the world is operating at a faster pace every day. As technology continues to evolve, I suspect we’ll see more of this highly variable, and expertly manipulated, pricing in all kinds of industries.

Image Credit: XirranisX, Flickr