Price Is Wrong

Principles of Small Business and Entrepreneurship

The Price is Wrong Case Study

21 Oct 2015

The Price is Wrong Case Study

1. Danny Stein faces several problems with eMusic, some with conflicting ends. What problems do you see?

One of the problems that Danny Stein is facing is that by teaming up with Sony, his music genres have become more mainstream which is appealing to a bigger customer base and this has increased his competition against bigger music conglomerates such as Amazon and Apple music. Since his download site, ‘eMusic’ is no longer just a site to discover independent artists he has to compete for market share in the area of mainstream music against larger music companies.

Another large problem is his lack of pricing strategy. Stein is charging 25 cents per track and although this is cheaper than Apple, Stein was charging the same price for all tracks whereas Apple’s pricing varies across the range of music available. While a significant amount of the itunes music catalog is still sold at the original price of 99 cents, they now charge $1.29 for more popular tracks and 69 cents for less popular in a more flexible pricing strategy tracks (yourbusiness.com, 2015). With Stein, maintaining the price he charges for each track, he is keeping customers happy, but the record labels supplying the music to the site will not be happy as lower prices means lower payments to the labels and their artists. This has led to Stein losing prominent labels from his site.

In addition to this, Stein did not implement his price changes across all customers. Customers who had joined before 2003 continued to pay lower legacy prices which decreased his overall sales revenues.

Lastly, Stein has poorly managed eMusic. He has been tentative about ways to respond to change, for example, whether to remain a site that discovers independent music or take on a major label to increase their customer base. As stated above he has failed to implement a successful pricing...