Report: Apple CEO Steve Jobs ‘angered’ as music labels try to raise prices for downloads

“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.

62 Comments

  1. Well that’s what he gets for pointing out how easy it is to bypass the DRM – in Napster to go, but also in iTunes.

    I’m not surprised, but I do sympathize with Steve. Having a standard price is very beneficial to the industry. I applauded when Apple agreed to pay the extra $.51 per song for that Tsunami relief song earlier this year, rather then allow a precedent to sell a song at $1.50 to be set.

    I know from personal experience that the commercial popular music industry is a very dirty, greedy business. It’s amazing that iTunes success hasn’t weathered challenges like this before now.

  2. MDN,

    I only partly comprehend your point about Apple being uniquely positioned to benefit from an increase. Are you speculating that Apple would use iPod revenues to subsidize iTunes prices as they did with that Tsunami relief song, so we could still by our music from the iTMS for 99 cents while music shoppers at Walmart or wherever else would be paying higher prices?

    If that is your take, I really doubt that would happen. The tsunami deal was 1) to prevent a multi-tier pricing from being implemented (where new hit music costs more than older, less popular songs), and 2) for charity.

    If you are suggesting something else entirely, please update and elucidate!

  3. Raise them too much and people will go get them the old fashion way, forcing the record labels to spend more money on trying to stop illegal sharing. Why mess with a good thing, artists are getting paid again.
    Now if the labels started paying artists more of what they deserve now that there are virtually no packaging costs, that would be a great thing.

  4. Typical capitalist dogs. Find a resource and exploit it to death. These scum sucking record companies are the apex of all that is wrong with the world. They produce nothing, and ride other people’s creativity to finance their incredible egos and expensive cars. Then discard the poor artist who they’ve let burn themselves out to try and please them. Damn record companies are as shorted sighted as ever. I HATE them. I FUCKING HATE them.

    ITMS or no ITMS, Music should be free.

    </soapbox>

    Meanwhile, if Apple is forced to raise the price, who will the consumers blame? Apple of course.

  5. Hey, ‘PCs Rule’: Kindergarten called, you’re supposed to come in from recess now. Hey, look — I keed. No, I mean it, I’ve seen kids write better jokes with crayons. No but seriously, I haven’t heard commentary that funny since Rather started signing off his newscasts with ‘Courage’! Talk about a PC blowhard. Or blow ‘soft’, as the case may be! Really though, the story was up at 12:10 and you posted that at 12:29. Wow. That’s stunning. Nineteen minutes and that’s the best you can do? Carrot Top can be funnier than that in 19 minutes. Yesssss. Even Leno is funnier than you — and everyone pretty much knows that Leno sucks.

    Come onnnn, you know I don’t mean it. I mean, of course I expected your material to suck. You’re a PC user. All PC users suck . . . well, until they see de light, that is. Yessss. The light from using a Mac. Yes, a Macintosh, ‘PCs Rule’. Here, I’ll spell it for you: Y-O-U S-U-C-K. Oh, and I just heard your mother calling you. She wants you to log off AOL now ’cause dinner’s ready. And you know, I think it’s probably something really tasty, like cream chipped beef. You know, a typical PC-user dinner . . .

    FOR ME TO POOP ON!!!!!

  6. Even if it benefits Apple in some way, I do not want the labels to raise prices – not now and not for a very long time. The angry backlash could very well kill legal downloads. I know I would be pissed, and contrary to the normal situation in a price increase, very easily implemented alternative sources (P2P = Free, AllofMP3.com = very cheap) are available.

    Stealing is bad karma but the labels getting greedy is bad karma too.

  7. I actually have to disargee with you MDN! this would benefit no company I know I would stop buying from iTMS, Apple doesn’t own the records how will they keep prices down?? So this is a very bad thing all around and yes Steve has every right to be mad, cuz I’ll be equally as mad if this goes through!

  8. Wow, had my first pop under at MDN. I sure hope Apple can upgrade the Safari pop-up/under blocking soon. I am not used to the things and don’t want to get used to them.

  9. Higher download prices would definately backfire on the music labels.
    There just starting to get people used to the idea of getting music online at only 99 cents a track or less sometimes for entire albums.
    Steve Jobs wants prices even lower but it’s the record labels that prevent him from doing so. That’s why he’s mad. This would upset the entire download market for sure. MDNWS is right though, Apple could keep going and possibly keep prices as they are now because they make most of there money on the iPod sales not the music sales.
    Also there cost to run the store is next to nothing compared to the others in the business.

  10. In tangential news, congratulations to “The Incredibles” for winning best animated feature at the Oscars.

    And about the record labels, killing the single is what killed their profits. They didn’t learn then, they obviously haven’t learned now. The record labels are a bunch of pigs – too damned greedy.

    Come on. What is it costing the labels to let iTunes et al dig into the vaults, digitize the music, put it up for sale and then pay the record company? All the labels have to do is sit back and collect a check.

    The minute the singles cross $0.99, no more iTunes for me.

  11. These record companies are truly disgusting. They are given a free ride with iTunes, and then think they deserve more.

    I can only speak for myself, but 99 cents is the magic number for me. At that price point, I have bought numerous songs out of curiosity and exploration that I otherwise never would have. The iTunes Verve vault also caused me to buy a few $9.99 albums I would not have found otherwise.

    If they force a price raise, then they have lost me as a download customer. It’s back to CD’s for me, which means LESS sales for the filthy greedy record companies because I very rarely go CD shopping. And I would like to emphasize VERY RARELY!

  12. The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side. -Hunter S. Thompson

    See, what the music industry doesn’t understand is that overpriced music is the reason people don’t like to buy music to begin with. We give them a taste of greed and they can’t help but want more, the filthy pigs.

  13. What you guys aren’t realizing is that they WANT to damage online music sales. It’s a serious threat to their income streams. As legal downloads hit 10%, 15%, 25% of their revenues they steadily become the hostages of Apple. Imagine a time when Apple’s combined sales surpass any individual label’s sales. What do they do when their largest distributer starts jerking their chain? The writing is on the wall and they will fight digital music sales all they can. They want Janus, they want unrippable CD’s with DRM’ed tracks included on the disc so that their old model never goes away. This iTMS thing was NOT supposed to happen.

    Thing is, the music companies have already lost price-fixing cases. Playing these games is pushing them into the realm of conspiracy and they cannot do whatever they want anymore. Hopefully the pro-digital labels will refuse to raise their prices and screw things up for the old fashioned ones.

  14. The greedy, multi-national, record subs of Fortune 500 conglomerates want to raise the price of internet delivered & DRM-laced music. They seem to have quickly forgotten how bleak the outlook was for their whole industry prior to the launch of the iTunes Music Store.
    When Steve Jobs and the team at Apple Computer launched the iTMS. the record companies were so thankful that they then signed contracts with anybody and everybody who wanted to jump in. That would include Cocoa-Cola and Wal-Mart. How’s that for partnership, risk-sharing and gratitude?
    If the labels want to increase revenue they should experiment with offering higher bit rate music at a higher price. For example, how about 256 kbps Symphonic and Jazz content for $1.49? The only additional costs are server space and bandwidth. Reward rarely comes without risk. Oh, I’m sorry- that would require cojones and imagination and we ARE talking about the recording industry.

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