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Thursday, April 16, 2009, 11:00 am PT (02:00 pm ET)

iTunes price changes deliver mixed results

Price increases that took effect on Apple's iTunes Store last week reportedly hurt unit sales of some of the most popular songs but ultimately managed to drive marginal increases in overall revenues for the digital download service.

For example, the 33 songs on the iTunes top 100 seller list that saw their price increase from 99 cents to $1.25 sold an average of 12.5 fewer units last week than the week before, according to an analysis conducted by Billboard [PDF], which has long served as a barometer for U.S. music sales. Meanwhile, the 67 songs in the list that remained at 99 cents saw an average unit sale increase just shy of 10 percent.

When grouped together, the 100 songs in the top seller list saw unit sales dip only half of a percent from 4.64 million units the week before the hikes to 4.62 million the week after. But with many of those tracks priced 30 percent higher, Apple actually witnessed an increase in iTunes revenues for the week.

Billboard in its report does not pinpoint this actual sales increase however, and it's not clear how precise the publication's estimates are. Instead, it presents a couple of theoretical scenarios, mainly because iTunes doesn't monopolize the digital music business entirely, leaving the possibility that some customers may have chosen to purchase some of their songs last week from an alternative service that didn't raise its prices.

For instance, if every other service raised their prices to mirror Apple's across the board, songs in the iTunes top 100 list would have generated 11.8 percent higher revenues due to lesser fluctuation in consumers' purchasing patterns. However, if other stores didn't instate the same increase, revenues from those same songs would brought in only 9.5 percent higher revenues, assuming iTunes' share of the market is 80 percent.

In the hours following the iTunes price increase, several other digital download stores — such as Wal-Mart and Amazon MP3 — did indeed reflect price increases themselves, but not to the same degree as iTunes. For example, 6 of the top 10 and 29 of the top 100 songs on iTunes saw their price increase to $1.29 last Tuesday, but none of the top 10 singles and only 10 of the top 100 songs reflected price inflation over 99 cents over at Amazon.

Still, a single week's worth of data isn't conclusive enough to gauge the impact of the price changes due to a number of other unrelated variables, such as the release timing of certain singles. Billboard notes that if the "expected second-week drop of Black Eyed Peas' 'Boom Pow Pow' is taken out of the calculations, the 33 songs [in the top 100] priced at $1.29 sold only 6.9 percent fewer units" compared to 12.9 percent fewer units.

Meanwhile, a few popular single tracks with fewer expected week-to-week fluctuations did show some adverse affects following the price changes, such as Akon's "Beautiful," which saw sales slide more than 8 percent compared to a 1.5 percent dip the week earlier. On the other hand, sales of Akon's entire album "Freedom" — still priced at $8.99 and representing a better deal given that 3 of the 4 songs fetch $1.29 by themselves — rose 18 percent.