Now How Much Would You Pay?

Category: Random Observations Bin

Wednesday, December 8, 2004

This is interesting.

Magnatune is a small record label. They sell music from the artists they represent. Unlike the majors, they are very Net-savvy and offer the tunes as both CDs and digital downloads.

There's another interesting twist -- when you buy from Magnatune, you set your own price. When you click to buy an album, it asks you how much you want to pay for it -- the suggested price is $8, but you can choose any value from $5 to $18. So it's up to you what each album will cost you.

Magnatune founder and owner John Buckman has a blog where he periodically talks about various aspects of his (very interesting) business. Today he's posted an extensive analysis of what people choose to pay for his music, along with some thoughts as to why.

He finds some interesting things. Here's a few of them:

• The average buyer chooses to pay $8.20 for an album, even though they could go lower
• More than half (56%) of customers choose to pay the recommended $8, while 14% go down to $5 and 14% go up to $10. However, since one $10 purchase is equivalent to two $5 purchases, the 14% that buy at $10 account for a disproportionate share of Magnatune's revenue stream
• Buyers who choose delivery on physical media (i.e. a CD) pay almost $1 more, on average, than buyers who choose to download

Lots of food for thought here for anyone who's interested in doing business online...