MSN Store Opens Door To New Pricing Scheme.

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Author: Garrity, Brian

Dateline: NEW YORK

Increased price elasticity appears to be coming to the static 99 cent business model for downloads.

While some services like RealPlayer Music Store are experimenting with 49 cent downloads as a promotional tool, label wholesale strategies are driving others to tinker with higher prices.

Microsoft says that not all tracks for sale via its new MSN Music store will cost less than a dollar.

While 99 cents will be the predominant price per song on MSN, the company expects to charge more for some prerelease and exclusive tracks it will offer.

MSN also says some songs longer than seven minutes will cost more than 99 cents each. The price for tracks costing more than a dollar will range from $1.39 to $3.96, depending on the wholesale price from the label.

That differs from Apple, which has been adamant about offering each track for less than a dollar.

MSN isn't offering any exclusives for more than a dollar yet, but the pricing scheme is in effect for some longer songs. Tracks longer than seven minutes that cost more than 99 cents generally cost $1.98. Some extended jazz and classical tracks cost close to $4.

The MSN policy reflects a desire by some labels to move away from a one-size-fits-all model for downloads and charge higher wholesale prices for pre-street and exclusive content.

Publishing economics are also an issue. Under copyright law, the labels must pay the full, mandated per-track mechanical rate to publishers and songwriters for digital singles. Tracks longer than five minutes receive a larger publishing royalty.

Microsoft isn't the first to offer variable pricing on tracks. Most notably, buymusic.com has been offering downloads at a wide range of prices since its launch last year. And all services offer variable pricing for full-album downloads, which are subject to a wider array of wholesale prices.

However, most of the market has adhered to a 99 cent price ceiling for individual downloads.

The MSN pricing strategy marks the first time a major service has acknowledged the prospect of charging consumers more than a dollar for an individual trackā€"even if it's only a small percentage of the overall available catalog.

At the other end of the spectrum, services are finding that downloads selling for less than 99 cents can drive volume. RealNetworks recently reported that it sold a combined 1 million songsā€"through its RealPlayer Music Store and Rhapsody subscription serviceā€"ā€"in a single week after cutting download prices for the store and offering a free trial of Rhapsody.

Real dropped prices from 99 cents to 49 cents on its RealPlayer Music Store for a promotion that ran from Aug. 17 through Labor Day.

Meanwhile, Rhapsody sells tracks to its subscribers for 79 cents each. Users trying the service for free during a two-week promotion coinciding with the Olympics could buy tracks at the subscriber rate.

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By Brian Garrity