CNN: Music download prices rising?

Just as legal music downloading is taking off in earnest, the major record labels are in talks to raise the price they charge online retailers for song downloads, a newspaper reported Monday.

The Financial Times, quoting unnamed music executives, said wholesale music prices, thought to be around 65 cents a song, were originally set artificially low in a bid to stimulate demand. The executives noted the success of Apple’s hugely popular iPod digital music players, the report said.

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“If you’re looking to have this market develop, this is a really bad time to increase rates,” said Michael Goodman, senior analyst for The Yankee Group. “You need to be careful about killing the golden goose. If they do raise rates, they’re just getting greedy, and they’re running a very significant risk of seeing those rates decline significantly.”

But greed and ethics are not the issues — supply and demand are, according to Forrester’s Bernoff, who noted the music labels have been battling illicit downloading services for years.

“The right price has nothing to do with greed,” said Bernoff. “It has to do with demand.”