Is this where Apple & EMI got the 30% number?

Apple and EMI announced DRM-free music options and there was much rejoicing! As we said earlier today, the DRM-free tracks are 30% more, i.e.: $1.29 a track. I've been wondering where that markup came from and found something coincidental thanks to some comments on our original post this morning. I was validating to Mike and John that if you owned a Beatles CD, for example, you could just rip the CD, move the files around and play 'em on portable devices.

I just added the Beatles first album to my Zune player at 192 kbps WMA format and I'm rockin' out as I write this post. I then wondered what the cost of a standard Beatles CD is on Amazon: turns out most of them are $12.97 or pretty darn close to 30% more than a digital album would cost from iTunes. Coincidence or not? Granted, the 30% non-DRM-tax only applies to individual tracks, not full albums, but the price difference and 30% markup are interestingly close, no? Many new albums on Amazon are priced at $9.99, so I'm thinking this explains why the 30% markup isn't on iTunes album purchases as well.

Comments

[DBL]

30% is one of those mathematical "sweet spots" that is created by the human perception of numbers. This perception puts a 'snapping effect' on prices, so that 40% sounds like 50%, which sounds like a hefty raise. "50% increase!" never sounds like a lowball, and 40% gets chucked in the same bucket because it's easier to think about it that way. So the perceived difference between 30% and 40% is a lot more than the perceived difference between 40% and 50%. Same thing happens with 10% (sounds like nothing, pocket change, sales tax, etc.)

20% and 30% tend to group together and people tend to perceive those as nearly the same as well, and think of them both as in the 'modest' range. So that's the sweet spot, and the manufacturer is going to choose the higher of the two numbers since it's a perceptual freebie.

As a result, 30% over-and-above price (above $10, above $1, above 100%, whatever) are disproportionately represented and I think this is a pseudo-coincidence caused by two retailers each playing out similar logic about user perception.