Stop the Noiz

Apple Saves Everyone Money

Frank Fox - 2010.01.21 - Tip Jar

Talk about turning traditional wisdom on its head: Apple has done a better job than even Walmart at delivering lower prices to millions of shoppers!

Apple's approach to music, games, and applications saves consumers money every year.

Before Apple released the iPod, CD prices rose from an average of $13.04 in 1999 to $14.19 in 2001. The iPod came out in October 2001, and by 2004 the average price of a CD had dropped to $12.95. Prices were no longer increasing - how could they when you could spend less than a dollar and get the one song that you liked from the album?

Even if you wanted the whole album, at 99¢ per track you could buy an album with 10 songs or less for under $10. If an average album has 12.26 songs, you would pay $12.14 on average for an album.

That's still less than the $12.95 average in 2004.

What would have happened without Apple?

Inflation from 2001 to 2009 was 21.2%, so unchecked, the average CD price might have increased to $17.20. Compared to that, Apple saved you $5 per album by lowering the price to 99¢ per song for a 30% savings.

Sure, the price of a single has changed, and Apple now has three prices: 69¢, 99¢, and $1.29.

I checked iTunes Top Hits list, and this is what I found. The album price for the artists with the top three songs were as follows:

  • Taylor Swift, Fearless, $11.99
  • Ke$ha, Animal, $9.99
  • Justin Bieber, My World, $7.99

Although buying just the hit single will cost you more than it used to, the price for a new album is less than the average CD price was in 2004.

What about Walmart? Don't they match or beat these prices?

Yes, they beat prices - often by as little as 3¢. This shows that Walmart is following Apple's lead, not taking the lead. Where the prices on iTunes have gone down, Walmart has dropped to beat them by three measly cents. Not exactly what I call the price leader, and considering the cost of gas to drive to the store, not exactly savings worth chasing.

Apple is the clear consumer champion here.

What does all this translate into for total savings? According to Nielson SoundScan, in 2009 there were 373.9 million albums and 1,159 million downloads (94 million albums at 12.26 songs/album) = 468.4 million CDs. Using a $5 per album saving, that is $2.3 billion saved.

Those numbers can't include iTunes, which sold more than 2.5 billion downloads in 2009 according the Wikipedia. That's an additional 203.9 million albums, for an extra $1 billion in savings. The total effect is to save consumers $3.3 billion a year on the price of music.

Thanks Apple. You guys really know how to save us money. LEM

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