“Some leading music labels are in talks with online retailers to raise wholesale prices for digital music downloads in an attempt to capitalise on burgeoning demand for legal online music. The moves, which suggest the labels want a bigger slice of the fledgling market’s spoils, has angered Steve Jobs, the Apple Computer chief executive behind the iTunes online music store,” Scott Morrison and Tim Burt report for The Financial Times.
“But music executives expressed caution about their ability to push through unilateral price increases. Among the biggest groups, Universal Music and Sony BMG are known to be particularly reluctant to disrupt the market for downloads,” Morrison and Burt report. One top label said it would not raise wholesale prices now because the market was not yet mature enough for an increase. The three other music labels – which also include EMI and Warner – refused to comment. Michael McGuire, analyst at Gartner, said the move could backfire because consumers who buy music over the internet are accustomed to paying 99 cents or less for downloads. Wholesale prices are thought to be about 65 cents. ‘It seems to me to be singularly bad timing,’ he said, adding that an increase could send fans back to underground services where they could get illegal music tracks free.”
Full article here.
MacDailyNews Take: Raising wholesale prices for music downloads might anger Apple CEO Steve Jobs, but Apple is uniquely positioned to benefit should such an unfortunate increase happen. Such a price increase by the music labels (5-15% wholesale price increase) would serve to clean out the also-rans from the online music business and Apple could continue to keep iTunes Music Store prices at 99-cents while still profiting handsomely from iPod sales. The other online music services have no such hardware component upon which to rely. And the hardware makers that sell players that don’t work with Apple’s iTunes will end up with also-rans players that only work with financially-strapped music services that are struggling even more than they are today.