The Beshers Rapport
By: Greg Beshers
As I’m the account manager for Amazon, I get this question a lot from labels. Since Amazon is the “new kid in town” in the digital world, labels want to know what variable pricing is and how it works. I tell them this: First you need to look at IODA’s deal summary in the Rightsholder dashboard, you will see all of the Wholesale prices for each pricing tier and how they relate to Albums, EP’s and singles.
The next question I get is: What do the different tiers represent? Well, we have 4 basic tiers which are: Frontline, Midline, Back/Catalog, & Special. Frontline is pretty obvious I think. This is for brand new titles that are being released. Midline is for titles that are not quite new but are not quite old either. I usually tell labels this is for content that has been out for at least 4 – 6 months but usually no longer than a year and that still sells somewhat robustly. Catalog (or Back) is for catalog titles. Titles that have been out for longer than a year and that are not new. The Special tier is for titles that may not be selling as much as catalog titles or even at all, or that have been out for a long time in the marketplace. Think of these as “budget” titles.
Now, usually after I explain all of this to labels, the inevitable question I get is: Why should I do this? Now there’s a couple different ways to answer this question, but the simplest and most direct answer is that this is Amazon’s business model. This is the fundamental idea that their entire store, not just the MP3 store, is based around. But hold on, let me go further into my explanation. Amazon is not asking you to lower prices JUST to lower prices. They’re asking you to realistically price titles that are in your catalog in order to spur more sales. Now what this means is that they’re not asking you to lower a price of a title that is selling well, on the contrary, if it is selling, then Amazon feels it’s at the correct price point, no argument there. But what Amazon does want is for labels to lower prices down from Frontline on titles that aren’t selling well or even at all, in order to spur sales at a lower cost to the consumer. They want labels to find the “sweet spot” in pricing that spurs sales across the board.
Here is a very basic explanation as to Amazon’s logic and how variable pricing can work. Take for instance a title that you’ve had no sales on whatsoever and it’s at Frontline. You have earned $0.00 dollars on this title. Amazon would ask you to lower the price tier. So you do that, and maybe you don’t lower it just one tier, but you decide lower it two tiers, down to Back/Catalog. Again, why would you do this? Well the logic goes a bit like this: You’re not making any money at Frontline, and if the title still doesn’t sell at Back/Catalog, you’re not making any money there either, BUT, more importantly, you’re certainly not losing any by marking it down and trying the lower price tier. NOW if you do happen to sell some copies of the record at Back/Catalog, you’ve just made some money on a title that’s never earned before. So just think, someone saw this title at a lower price and bought it. Thus in finding the “sweet spot” in pricing, you’ve just spurred sales on a non-selling title. That’s Amazon’s goal, to find the sweet spot in pricing.
So if a title is selling at Frontline, why change, there’s no need. But if it’s not selling at Frontline, take an honest look at what the title is (Midline, Catalog/Back, Special) and mark it down appropriately. And the great thing is, is that you can go in and change these prices just for Amazon in your RH Dashboard and an automatic XML update goes out to Amazon and the pricing change is reflected as soon as they ingest it. (usually about 1-4 days max.)
Now this is the part of the conversation with labels that they usually ask me this: “so will I get featured if I mark down titles”? Because let’s be honest, at the end of the day it’s about getting featured someplace. I answer that question by saying that I can guarantee that they won’t get featured if they don’t mark anything down and have their entire catalog at Frontline. That much I’m sure of. And Amazon is more apt to feature titles in their pricing modules that are marked down (these modules are the “Featured albums for $6.99, $5.99 etc that rotate throughout the store). But I also tell labels that even if they do mark down titles and they don’t get featured but those titles sell, they’re making money on stuff that maybe didn’t sell before. So they win. But at the end of the day, if labels don’t make any money and aren’t getting featured, then I tell them to go ahead and mark everything back up to Frontline. No fuss, no muss but more importantly, nothing lost. So go ahead, try it. You know you want to.
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