It's stunning: Apple Inc. (Nasdaq: AAPL) has sold 100 million iPods since November 2001. A look at the stock chart for this period tells the whole story for investors. Of course, part of the success was having good content and selling it for $0.99 a pop. But why this amount?
I had a chance to interview Rafi Mohammed, who is an expert on pricing. He runs a consulting firm, Culture of Profit, and is the author of the book The Art of Pricing.
He admits that having a fixed-price system is a bit strange. After all, some people would rather spend a couple bucks for some music – while practically nothing for other music. Why not have a dynamic pricing system?
Then again, it seems that Steve Jobs can do just about anything. In fact, Rafi considers him kind of like Wal-Mart Stores Inc. (NYSE: WMT). That is, if you want to make it in the music biz, you have no choice but to deal with Jobs. It's that simple.
According to Rafi: "It's interesting that analysts haven't picked up on the fact that as long as the iPod remains popular, Apple's pricing policies are going to be a thorn to the music industry. With digital music forecasted to account for 25% of all music sales by 2010 (it's 10% today), a growing percentage of the music industry's revenue will be subject to Mr. Jobs' decision on what he thinks the 'right price' should be for iPod owners and potential customers."
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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