View Full Version : Digital vs. Physical song media
01-04-2009, 11:28 AM
Why would Amazon.com charge less for a physical CD than the digital download of RUN DMC's Greatest Hits or any other album?
If they charged the same for both, wouldn't they make more profit on the digital copy? If they they charge less for the CD, aren't they making even less money?
I was about to buy the digital version, then saw that the CD version costs less (and has FREE Super Saver Shipping). Since I am buying other things at the same time, it's not encouraging me to buy more right now (to qualify for Super Saver Shipping).
01-04-2009, 03:22 PM
My only thought is that it might cost them to house (inventory, store, track, etc.) a physical copy, making it a monetary sink.
01-04-2009, 03:58 PM
My only thought is that it might cost them to house (inventory, store, track, etc.) a physical copy, making it a monetary sink.But that is an argument for why the CD would cost more, not less. If selling the CD rather than the file costs them more, surely they would try to create an incentive to buy the file.
Perhaps Amazon does not have full control over the file price (negotiations with record companies, etc) and is not free to set it as low as it wants, whereas it can set the price as competitive as it can with the physical CDs?
I was about to buy the digital version, then saw that the CD version costs less (and has FREE Super Saver Shipping). Since I am buying other things at the same time, it's not encouraging me to buy more right now (to qualify for Super Saver Shipping).Just because you did not end up buying more to meet the $25 free shipping total in this case doesn't mean that it doesn't happen. For a roughly $10 item like a CD I can fully see it happening that people will buy more items to get the free shipping, which means that Amazon may have an interest in steering people towards CDs rather than files. I've done that often enough myself.
01-04-2009, 04:08 PM
But that is an argument for why the CD would cost more, not less. If selling the CD rather than the file costs them more, surely they would try to create an incentive to buy the file.Not if you look at it from a supply chain POV -- if it costs them $1/month to house the CD, but only $0.01/month to house the file, any CD they keep on hand is a monetary sink that they'd best get rid of. Granted, that ignores various complicating factors (e.g., CDs are in high demand, no one is buying digital downloads, their "housing" costs are near zero, etc.).
You make a good point about lower bound pricing -- IIRC, it's recently been tested in court (for things other than CDs) and found to be legally binding.
01-04-2009, 04:28 PM
My apologies -- I just realized a much more succinct way to state my point: they could be attempting to reduce their (physical) CD inventory.
01-04-2009, 04:36 PM
My WAG is simply that they don't necessarily take the price of the CD into account when setting the price of the digital download, and/or vice versa, so that sometimes the CD just turns out to cost less.
That is, they set the price of the CD according to various factors, such as how much their suppliers charge them for the CD, how much their competitors are charging for that CD, and how well that CD or others similar to it have sold at various prices in the past.
Now copy and paste that last paragraph, but replace "CD" with "MP3" or whatever.
In each case, they charge what the market will bear.
01-04-2009, 04:36 PM
Amazon prices its products to make the most money possible. I don't see why there necessarily must be any relationship between the price Amazon chargers for a digital album versus the physical album.
01-04-2009, 04:39 PM
Prices are not necessarily based upon costs when the supplier has a monopoly on a product. The CD may cost more to produce and ship, but for marketing and business reasons, the record company charges more for the cheaper product. Even in small quantities (1,000 copies), CDs are very cheap to make, so media production costs aren't a very important component of the retail price. They may have decided that digital customers have more money to spend and are less price sensitive than their traditional customers.
01-04-2009, 05:16 PM
Prices are not necessarily based upon costs when the supplier has a monopoly on a product.
. . . or ever really.
01-04-2009, 05:53 PM
They want the CD out of their inventory. So they sell it for a lower price. It's called a clearence.
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