“The gloves are off in the battle between Apple CEO Steve Jobs and the music industry over the price of downloaded songs,” Red Herring reports. “On Thursday, one of the music industry’s highest-profile executives responded publicly to Mr. Jobs’ charges, made earlier in the week, that they were ‘greedy’ when they requested a price hike for downloaded songs.”
Red Herring reports, “At an investors’ conference in New York, Warner Music Group CEO Edgar Bronfman Jr. said the price of downloaded songs should vary depending on the popularity of the songs and the artists. He called Apple’s across-the-board $0.99-per-song charge unfair. ‘There’s no content that I know of that does not have variable pricing,’ said Mr. Bronfman at the Goldman Sachs Communacopia investor conference. ‘Not all songs are created equal—not all time periods are created equal. We want, and will insist upon having, variable pricing.'”
Red Herring reports, “Mr. Bronfman’s remarks came in response to Mr. Jobs’ statement on Tuesday blasting the music industry for pushing for an increase in the price of downloaded music, saying their demands, if met, would serve to encourage piracy, which has eaten into the industry’s profits. ‘We are selling our songs through iPod, but we don’t have a share of iPod’s revenue,’ he said. ‘We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only. We have to keep thinking how we are going to monetize our product for our shareholders,’ added Mr. Bronfman. ‘We are the arms supplier in the device wars between Samsung, Sony, Apple, and others.'”
Full article here.
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So at 99 cents I bet per song they make a better percentage than in a record store.”
Yes, but only per song. Overall they are making much less. The reason is because with CDs they can sell the consumer one song for $18. Now that the consumer can buy only the song he wants, they are making much less in overall sales.
I think this variable pricing is stemming from the fact that they can’t get Jobs to sell only complete albums.
This just exposes their method of creating one or two hit songs per album and trying to capitalize on that. The obvious solution would be to produce better music, but that probably won’t happen. In either case, the labels own the music and so they have all the power.
If Bronfman thinks I’m going to pay $12.99 or $14.99 for an album on iTunes he’s nuts. I can get an actual CD for that price at Best Buy or Target… and now they’re starting to add annoying copy-protection on the CDs which makes me not want to buy those either. It’s almost as if they want people to go back to bootlegging. Brilliant!
Not all songs are created equal. That’s true. Most of the songs the record companies are throwing out there right now suck major… they should be giving the crap away…
Max,
“Don’t forget the ipod plays MP3 – you can get that format anywhere -free”
Not from an online store, only through CDs.
The record industry argument is right in some respects, but flawed in others. They should be able to dictate their sell price, but at what cost? The cost of digital sales and back to piracy? Are these guys morons? There is no two ways about this, it’s greed. They can’t get their snouts out of the trough.
My2bitsworth is right! the law of supply and demand will dictate that if either the quality or time of the music are not equal, they will sell more than the next. There’s your extra profit for popularity!
Get it through your heads RIAA…..it works because it’s simple.
It’s become absolutely evident that these people add nothing to the process anymore. The model’s outdated and their ideas are outdated. They need to go so that distribution channels like Apple and Napster can deal direct.
“All the labels need to do is raise the amount they receive from Apple for each song sold.”
Sigh. That’s part of the negotiation, too. The companies can’t just demand Apple pay more, anymore than they can just demand Apple raise the prices.
It comes down to one thing: Who needs who more? Right now, the recording companies need Apple a heluva lot more than Apple needs them. Apple can happily sell iPods to illegal downloaders and CD-rippers, but to the recording companies, Apple is the only realistic avenue into the digital market.
Robin,
“The content providers will pull their content from iTunes?! HA!! Right! With one stroke, they will wipe MILLIONS OF DOLLARS in annual revenue off the books!”
If this happened, many of the online consumers may turn to illegal file sharing, but there would also be a good number of honest people that would go buy their music from the traditional CD store. With CD prices anywhere between $14 – $18, millions of dollars in losses can be made up pretty quickly.
Apple controls the market. That is simple. And yes a company can decide how much they want to charge for something, and the company selling it can. But it’s the company selling it that can decide if the product is worth selling. And sense Apple is in control Apple set the price. They can tell the record companies to jake a hike. But Apple can only do that for a while, if there is no product to sell then there is no point in having a store, and it’s the companies who choose to sell the product at the price set by the record companies which will profit and win. This is driven by greed, no doubt. The iTMS is proving the companies with a potential profit greater than they ever seen, and a lot of this potential profit is showing light. The the record companies have to make a choice, do we stick with apple or do we allow for the competition to split up among various web companies willing to sell the songs and create a large market of incompatible music, in which case Apple will loose because of their lack of computability with other products (even though I agree that the iPod is superior and so is the iTMS). I think this is looking in favor of Apple at the moment, but eventually might cause a huge split in the market if Apple doesn’t get what they want with the 99¢ model. It all depends on how scared the record company gets, and how powerful Apple really is (or appears to be). I think it will be interesting what everyone decides.
On a lighter not, think about this, the iTMS has an unlimited supply of the product, removing the possibility of shortage, and sense there is no production costs other than costs of running the servers the profit is much larget and so is the potential for profit. And sense they are selling more music than they did with CD in stores, it makes you wonder what more they could want. Then again 10¢ more could translate into thousands. 1$ more into millions. So I guess the true potential is in what the customers are willing to pay. People are happy with the 99¢ model. Let’s say a song was $2, and a album $20. Now that is about the price of a new CD, on the more expensive end. But sense they didn’t need to pay for the CD to be printed, and the CD case, and the printing of the cover etc, and for the shipping, and for the boxes, packing material, or have to worry about the stores needing to make a profet to pay for the employees to restock the music etc. You see where I’m going with this. The CD is no longer needed to be sold for $20 to make up for all that. Now I don’t think that it would go down to $10 either, but you get my point.
1) Online music sales will account for a mere 3% of the $36 billion global music market this year – possibly less. And Apple will be responsible for around 75%-80% of that 3%.
That means the vast amount of music is still being bought as a tangible product – which means that iPods will still have content.
2) The growth of legal downloads has turned around several years of declining sales in many major music markets. And Apple has been responsible for the vast majority of that turnaround.
3) The last thing I remember of Edgar Bronfman Jr. is that he sold his birthright in order to acquire Universal & Polygram, before discovering that he was an idiot and having to sell up to Vivendi. If I were a Warner artist, I would be starting to get worried having this fscking no-nothing parvenu responsible for my career – but then again what do I care?
4) Edgar, please try and understand before one of us – preferably you – dies: you are getting a better return on investment through online sales than you are through tangible sales, where you have real production and distribution costs. Putting the price up to $1.29 will simply force people to AllOfMP3.com – are you really so coked-up that you don’t understand that music is a discretionary purchase to every one of your customers.
[B]What is the difference between the music industry and the Mafia?[/B]
One is a cartel comprised of people who speak unintelligibly in a language of their own. They have strange haircuts and loud clothes and extract money from their “customers” with threats of menace.
And the other is an Italian criminal fraternity.
JadisOne hit the nail on the head – “If they want variable pricing, then allow the 99 cents to be the maximum price and lower the prices of the older songs”
iTunes should still charge .99 to keep it uniform, but pay the labels less for those less popular songs. OK – have it your way Bronfman.
The music industry better be careful. Apple is on route to become the next Sony, and all they have to do is start to pick up content. It would be real easy to begin signing artists and sell product on iTunes.
What do they think people are more likely to steal… a new, fresh track they heard somewhere and want to own, or some old RHINO music of the 60’s track?! If they think variable pricing is going to work out for them, they’re in for a big surprise.
Robin,
“Sigh. That’s part of the negotiation, too. The companies can’t just demand Apple pay more, anymore than they can just demand Apple raise the prices.”
You’re condescending act is growing tiresome.
The point is that the labels have more power than Apple at the moment. They do not need Apple in order to make money. Their real threat is piracy, but if they can limit that, then they don’t need Apple at all.
“‘We are selling our songs through iPod, but we don’t have a share of iPod’s revenue,’ he said. ‘We want to share in those revenue streams.”
What? What? That doesn’t make sense. There is no physical medium here. No CD. Nothing. They are basically selling us the rights to play a song on whatever we want. How much more “pure profit” do they want?
“Say what you want about how “evil” these guys are for trying to make a buck on their product. But they’re simply insisting on a normal arrangement. Is there any other circumstance where the retailer even gets to say a WORD about the wholesale pricing of the product?”
Most industries do. The easiest example is Wal-Marts ability to dictate pricing.
“…We have to keep thinking how we are going to monetize our product for our shareholders,’ added Mr. Bronfman….”
first, it isn’t your product, it is the artists. You are just the middleman distributer/promoter…and in the digital age, you not doing much distributing.
second, here is how: get an o-chart your company; draw a line under everyone who is making $100,000/yr or more. Cut out half of them and then cut the remaining salaries (yours included) by 10-25%. Give half of the savings to the artists and half the saving to your shareholders. Presto! You are wizard and never had to change the price of itunes.
It is called reducing expenses — less expenses means more profits. Of course, then there is the increased productivity method….
Eric,
“How much more “pure profit” do they want?”
That’s not pure profit. There are many different types of expenses involved in creating and promoting an artist. If it was pure profit, you would see a lot more artists skipping the music label altogether.
caddisfly
“first, it isn’t your product, it is the artists.”
Actually it is their product. They have full control over it. Not even the artist as much control.
Bronfman is a fool. He screwed-up trying to run a movie company, now he’s going to do the same thing with his record company. Anybody see what happen when they tried to make a public stock offering, they misread the investing public and didn’t quite make what they thought they would, lost millions. What makes him think he knows his music public any better.
Guy’s like this exec are the reason artists like Jay-Z, Prince, Pearl Jam and others won’t even mess with the big labels anymore. In the information age, major labels are needed for only one thing and that’s high-priced marketing, and even that is going by the wayside. Watch more artists join other artists labels or start their own and the big labels start to become more and more obsolete. That will happen regardless of the pricing scheme on the ITMS, but variable pricing will speed that along even faster. Gordon Gecko was wrong; greed is not good. It can spell the death of your business entirely if it runs unchecked. Reality is about to hit these record labels in a big way, despite Steve Jobs trying to save them from themselves.
<< added Mr. Bronfman. ‘We are the arms supplier in the device wars between Samsung, Sony, Apple, and others.'” >>
What were you before there were MP3 players? You were a supplier of CDs for retail music/stereo stores. You don’t get a cut of the stereo business, why should you get a cut of the iPod business?
The real issue here is that you couldn’t make digital work (the industry was a complete failure), and Apple did. Now you want Apple to “share” its iPod revenue with you. Bullsh*t. Sony didn’t share its Walkman revenue and you didn’t complain then.
One thing nobody has mentioned, and I’m sure the record companies haven’t thought of, is that if they pull out of iTunes, their music no longer counts in the on-line download charts, which in most countries are being incorporated as part of the national music sales charts.
Seeing as iTunes sells 80% of legal downloads, not being part of the iTunes chart could potentially knock a new release down a rank or two in the real world charts, and obviously send it to the very bottom for just the online chart.
I don’t think record companies would like that. Steve’s holding more cards than people realise.
“Is there any other circumstance where the retailer even gets to say a WORD about the wholesale pricing of the product?”
Uh, yeah, that 800 lb. gorilla is called “Wal-Mart”.
Edgar Bronfman…the latest individual who is definitely stuck on stupid.
Variable pricing? Okay! Let’s start and $0.99…and down!
Bronfman may think he has the upper hand, but I have a feeling that Jobs is holding all the aces. Bronfman think that Jobs is cornered and will be forced to renew the license on Warner’s terms. But I have a feeling that Jobs would rather drop the Warner label from iTMS when the contract expires in April 2006….that’s the equivalent of firing a cruise missile over the industry’s bow.
And Warner’s a fool if he thinks shareholders are going to overlook and immediate 5% loss of revenue (and a proportinally bigger drop in profits).
The result?
1) No one is going to dump iTMS just because music from the Warner label is no longer available. Because doing so would mean dumping your iPod, and Bronfman is stuck on stupid if he thinks people are going to throw their iPod nanos away to get Warner music on Napster.
2) The labels that do remain on iTMS will grab a bigger marketshare of the online business simply because Warner started crying and went home wth the game ball. Bronfman is stuck on stupid if he thinks Warner isn’t heading down the path of irrelevancy by withholding his catalog from the only online music store that generates serious revenue. Sure, Napster and Real are going to be happy about this, but it’s like asking for that street person to help pay for your mortgage.
3) Bronfman is stuck on stupid if he thinks artists won’t begin to start abandoning the Warner ship. Who needs to be represented by a music company that’s more interested in trying to pad its own pocket instead of representing the musician? The music business what it is today, without iTMS, Warner will be stuck in the pre-digital age for all realistic purposes. That’s going to make a lot of artists as well as shareholders very unhappy. The result? Apple’s going to make more exclusive arrangements like the Madonna deal.
A lot of artists gotta wondering why Madonna can get sweet terms by dealing directly with Steve Jobs instead of going through the middle man who ends up taking the vast majority of your money as a “fee”….
Edgar Bronfman Jr. Translation Guide:
“‘We are selling our songs through iPod, but we don’t have a share of iPod’s revenue,’ he said. ‘We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only. We have to keep thinking how we are going to monetize our product for our shareholders,’ added Mr. Bronfman. ‘We are the arms supplier in the device wars between Samsung, Sony, Apple, and others.'”
Translation We let Apple take all the risk. Now they are making money. We want to make all of the money. We don’t want Apple to make the money, we want to make the money. MoneyMoneyMoneyMoneyMoneyMoneyMoneyMoneyMoneyMoneyMoney…..