The success of the iTunes Application Store proves that a vibrant economy can be built from low priced products, and that the traditional price margins are not always the best format to follow. We have been used to mobile games and applications retailing for between $5 and $20 and upwards, but the sudden realisation that developers can make a lot of money from close to zero priced software, and that the consumer would pounce on the titles available proved a roaQring success.
We have to factor in the general success of the iPhone and iPod Touch of course, but could this theory not be taken further and expanded into other parts of iTunes? Film rentals are an obvious example and there is already evidence to suggest that pricing makes a big difference. For example, at the time of writing Monty Python and the Holy Grail is number one in the rental charts because iTunes is offering it for 99p. Every single film that has been offered at a 99p rental goes to number one in the iTunes charts, and most of them have not been that good. Monty Python would probably not break into the top 50 if it was not 99p and I am guessing that it makes more money when on special offer.
So, Apple has persuaded the distributors to rent films at 99p on occasion, and thus it may be able to do so on a more permanent basis or more often? There will obviously be a certain amount of profit protection because there is a lot of money to be made from DVDs and the retailers rely on such things to get them through the lean times. If the economy worsened and DVD sales bottomed out there could be reason for both sides to want to try the volume sales trick and see how it goes.
Of course not much of this is likely at this time, but if you asked me 6 months ago if 100,000’s of copies of one game would be sold in the Application Store I, like almost everyone else, would have said no. There is potential for film sales and rentals to rocket in iTunes if the prices are set very low. We have to be cautious though because this could have far reaching affects on the film industry and the economy in general.
