An iTune

I've avoided iTunes. But there's a new Nirvana box set release with Butch Vig's original mix of Nevermind. And, StatChat gave me $40 in iTunes vouchers. So, off I went. After being unable to install iTunes for a couple of weeks because of some unfinished Apple install locked into my machine, I finally cleared things up. Then spent way too long setting up an iTunes account and re-logging in every time I turned around. But I first logged in as American. There, I saw the $1.29/song and $45 box set.

So I was surprised when my NZ account gave me a $2.39/song, $72 box set.

$1.29 US per song. Take a $0.75 exchange rate: NZ price then $1.72. Add GST*: $1.98. That's still a $0.41 price gap on an individual song. On a 70 song box set, that's $28.70 if you buy the tunes a-la carte.

What about the box set? $45 US = $60 NZ. Add GST*: $69. That's only $3 less! After you put in anything non-trivial for licencing fee differences or just the hassle of dealing with small market issues, the price is basically identical. [I only want the eleven Devonshire Mix tracks, so the box set doesn't much help me.]

If Bruce Hoult is right, things are worse: GST doesn't apply to iTunes because they count as an imported service rather than a good, and imported services are zero-rated. IRD suggests Hoult is right. The price gap is then $0.67 per song ($46.90 for a 70-song set) or $12 for the box set.

We'd always expect per-song pricing to be a worse deal than per album pricing. But I don't know why we'd expect the gap to be so much bigger here than in the States.

When I'd first seen the price gap per song, I'd figured price discrimination: maybe iTunes hits a richer part of the NZ demographic and so optimal price is higher. But surely it would be the high demanders who'd go for the box set over individual songs. It would be surprising for the bundle to sell for more than the components, but I wouldn't have figured a hefty box-set discount consistent with trying to hit the high demand high income cohort. Maybe those looking to buy a box set are more likely to engage in price search (setting up multiple iTunes accounts, comparison shopping with other online outlets) while those wanting individual tunes don't bother with those fixed costs.

Other candidate explanations:

• Less competition from other streaming sources in NZ than in the US.
• But we then require individual tunes are better substitutes than the box set for other streaming services.
• GST and licensing
• Definitely! But are there relatively more costly licensing arrangements for single songs than for box sets?
• Substitutes in form of physical media are way pricier here
• Sure. But why does that get us the box set for roughly the same price as in the States but not individual tunes?
• iTunes prices negotiated in $NZ, not $US, so currency fluctuations carry it.
• This one's pretty reasonable. If iTunes and the label have a set fixed per song price for everything, they'd just stick with that, but they'd need a separate price for a big compilation box set, and that could be negotiated in $NZ at more current exchange rates.
• High demanders have other options, like multiple iTunes accounts in different countries.
• That makes sense too - fixed costs in price search mean few would bother with the hassle for individual songs but might for a big purchase.
• Maybe the high demand, high income cohort, like me, only wants the Devonshire mix and doesn't need another set of mp3s of stuff they already otherwise have.

Other explanations?