Why Sony 'Accidentally' Tried to Gouge Whitney Houston's U.K. Fans

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WhitneyLet's call this "the greatest flub of all."

This weekend's death of Whitney Houston found nostalgic fans rushing to buy the music icon's catalog of digital works. Houston's I Will Always Love You rose to the top of the singles' chart on Apple's (AAPL) iTunes, just as her Whitney -- The Greatest Hits was the top digital album until Adele's 21 reclaimed that spot after her Grammy-studded night.

After several rough quarters and a CEO shuffle at the top, Sony (SNE) finally has a bittersweet victory. The surge in popularity for Houston's works will serve her label Sony Music well.

Unfortunately, a poorly handled gaffe overseas is making Sony out to be a greedy opportunist.

Didn't We Almost Have It All

Whitney HoustonOn Sunday, just hours after Houston's tragic death, two of her "best of" compilations were marked up substantially on iTunes in Britain. The Ultimate Collection saw its price marked up a jaw-dropping 60%, going from the dollar equivalent of $7.85 to about $12.50. The Greatest Hits was treated to a 25% increase, jumping from $12.50 to $15.67.

The move was only limited to iTunes in the U.K., but the opportunistic price hike quickly made headlines. Companies don't get away with much these days when any blunder can go viral on Twitter, Facebook, and blogs.

Some may argue that Sony was simply responding to the laws of supply and demand. Houston items spiked in value on eBay and other exchanges, just as Jeremy Lin rookie cards have seen their value skyrocket this month after his fairytale run with the New York Knicks. Prices aren't permanent, and news events can and do change what consumers are willing to pay.

However, we're talking about digital distribution here. Supply is infinite. You didn't see Adele's label trying to push through a digital hike just because her hands were full with Grammy awards earlier this week.

Where Do Broken Hearts Go?

Sony quickly succumbed to the outrage, marking back down the two compilations. However, it took an embarrassing two days -- an eternity these days -- to crank out a public apology and explanation.

"Whitney Houston product was mistakenly mispriced on the U.K. iTunes store on Sunday," Sony said in a statement on Tuesday. "When discovered, the mistake was immediately corrected. We apologize for any offense caused."

Mistakenly mispriced? That would imply that the move wasn't deliberate, which it clearly was. Some reports indicate that it was a single employee who chose to make the advantageous pricing move, perhaps believing that the opportunistic gesture would result in corporate accolades from his parent company, which is coming off a brutal loss in 2011.

Well, that's not going to happen. The employee blew it, and Sony is blowing it if its digital catalog can be repriced on a whim that way.

Longtime Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of eBay and Apple. Motley Fool newsletter services have recommended writing puts in eBay. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.


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thedragonclaw

I'm insulted that, knowing full well it was a manual over ride, they would flat out LIE and claim it was an accident...it wasn't. The fact that someone did it intentionally by definition means it wasn't done by accident. I've come to expect big companies acting like greedy vultures when someone dies. Years ago we were out shopping when we heard George Carlin had passes away only to walk into Barnes and Noble and see them scrambling to put up a display of everything they had with his name on it, and marking the DVDs and CDs higher right in front of us. And how many issues of People are already 90% written and just waiting for a death so they can add the date, maybe cause of death and rush to the newsstands with it?

February 16 2012 at 6:38 PM Report abuse rate up rate down Reply
snjpage1

Its OK for the oli companies to do this so why not Sony? Supply and demand are what rules the market place.

February 16 2012 at 6:20 PM Report abuse rate up rate down Reply
1 reply to snjpage1's comment
abcdc1925

The available supply of an item of digital music is limitless. You can produce as many copies as you want. If supply increase with demand, price should not change.

February 23 2012 at 11:09 AM Report abuse rate up rate down Reply
thedragonclaw

I'm insulted that, knowing full well it was a manual over ride, they would flat out LIE and claim it was an accident...it wasn't. The fact that someone did it intentionally by definition means it wasn't done by accident. I've come to expect big companies acting like greedy vultures when someone dies. Years ago we were out shopping when we heard George Carlin had passes away only to walk into Barnes and Noble and see them scrambling to put up a display of everything they had with his name on it, and marking the DVDs and CDs higher right in front of us. And how many issues of People are already 90% written and just waiting for a death so they can add the date, maybe cause of death and rush to the newsstands with it?

February 16 2012 at 6:18 PM Report abuse rate up rate down Reply
pbgardenpet

More power to them. Make while you can.

February 16 2012 at 6:17 PM Report abuse rate up rate down Reply
jim9726

'Accidentally'..........my a$$...they knew what they were doing......Greed........

February 16 2012 at 6:13 PM Report abuse rate up rate down Reply
str00ntz

So what's the problem? When there is no demand, prices drop, and no one bitches. If the demand goes up, they have every right to charge whatever fools will fork over. If you don't like the price, don't buy it. You'll be able to buy all you want for pennies on the dollar in six months anyway.

February 16 2012 at 6:08 PM Report abuse rate up rate down Reply
str00ntz

So what's the problem? When there is no demand, prices drop, and no one bitches. If the demand goes up, they have every right to charge whatever fools will fork over. If you don't like the price, don't buy it. You'll be able to buy all you want for pennies on the dollar in six months anyway.

February 16 2012 at 6:08 PM Report abuse rate up rate down Reply
Tony

Just another over hyped Junkie.

February 16 2012 at 5:14 PM Report abuse rate up rate down Reply
3 replies to Tony's comment
genesinbox

It is call supply and demand. Even if the supply is unlimited, if the demand increases for it, you should be able to raise your prices.

The same plane flies everyday from ATL to LAX. The guy that purchased his ticket 30 days ago gets to fly for $240. The guy who purchased his ticket yesterday pays $578. The same supply (the plane flight) was there, yet the demand for it by the guy who purchased his ticket at the last minute was more.

I have a car that needed a new timing belt. Quotes from all Lexus and Toyota dealers in my area ranged from $1100 to $1400 for the job. I called a dealer 120 miles from my home in Augusta, GA. I didn't tell him about the quotes I had already. He quoted $800 for the job. I negotiated $700 for the job. That is almost half off of the highest local quote. AFTER the dealer did a great job, I asked the service manager why did he agree to such a great price. His response was simple. "You are a customer I normally would not get". In this case I was the supply yet his workload (demand) was based on local Augusta competition for this type of work, which is not as strong as Atlanta with a much larger car population. I spent $40 in gas, yet saved more than $400 in cost.

I need the same thing done on another car, after checking locally, I checked with the Augusta dealership. Yes, he is willing to do it for the same price.

February 16 2012 at 4:39 PM Report abuse rate up rate down Reply
1 reply to genesinbox's comment
abcdc1925

Supply on the plane is not unlimited. There are only a finite number of seats on a plane that is why price increases as availability of seats decrease.

February 23 2012 at 11:07 AM Report abuse rate up rate down Reply
Jc2009USA

Accidentally my butt...greed, greed, and some more greed...

February 16 2012 at 4:13 PM Report abuse rate up rate down Reply