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U2 and the $3.99 album: Great marketing or financial folly?

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U2_lThey’ve got 22 Grammys and 140 million in record sales, not to mention their own U2 Way in New York City (the street, it has a name!) and a current week-long residency on Letterman. So why is Ireland’s biggest rock export selling an MP3 version of their new album, No Line on the Horizon, for roughly the cost of a Happy Meal? Even a big chain like Best Buy, which prices many discs at $6.99, would be hard pressed to beat Horizon‘s $3.99 digital price on Amazon.

Granted, Bono probably needs another castle in Ireland like he needs the name his mama gave him (when’s the last time anybody actually dared to call him Paul David Hewson?), so maybe it’s just the band’s way of reaching out to the people in tough economic times. Or maybe it’s a super-canny marketing trick. Brit Lily Allen, who garnered cult love and critical accolades with her 2006 debut Alright Still but never quite broke through to the mainstream Stateside, pulled the same under-four-bucks deal on Amazon.com several weeks ago for the debut of her second disc, It’s Not Me It’s You — and promptly landed at No. 5 on the charts. Why shouldn’t it help established (but, in the age of Grammy godzillas Coldplay, not exactly spring-chicken) superstars like U2 power their way to a half-million-unit opening week, as some industry number-crunchers project?

Horizon‘s release is also part of a new tiered selling paradigm: The physical CD is selling for $9.99, the limited-edition boxed set with poster and film download is $64.99, and the digi-pack with the same perks is $22.99. Radiohead found great success with their “pay what you like” offer for the 2007 digital release of In Rainbows; then again, they were free agents, without the heavy yoke of physical overhead and label percentages. Here, U2’s label, Interscope, kind of gets the shaft, if the bulk of Horizon‘s first week sales go towards that $3.99 buy. And while you may not cry for them, a change in profit margins in an industry already so shaky can’t help but have a trickle-down affect on the smaller, more indie acts the label has on its roster, from Feist (on subsidary Cherrytree) to M.I.A. and the Yeah Yeah Yeahs.

On the third or fourth hand (which one are we up to now?), U2 may just be acknowledging the pervasive age of piracy. Back in the Joshua Tree days, P2P file-sharing sites like Lime Wire were but a gleam in some baby techie’s eye; today, that stuff spreads like, well, Lime Fire.

So what do you think, PopWatchers? Which price is right for you?

More U2:
U2’s third night on ‘Letterman’: ‘Crazy’ for the Top Ten
U2’s second night on ‘David Letterman’: ‘Magnificent’
U2’s five-night Letterman stand: Will you be watching?
‘No Line on the Horizon’ will premiere on MySpace Music