“Only recently Steve Jobs was seen as a saviour by the world’s largest music labels. Beset by internet piracy and slumping sales, the music industry was in need of salvation when Mr Jobs, Apple Computer’s chief executive, arrived with his iTunes online music store,” Scott Morrison reports for The Financial Times.
“The user-friendly service was an instant success, introducing millions of paying customers to the world of 99-cent digital downloads. Two years later, customers have bought more than 300m songs from Apple’s online store, giving Apple a 65-70 per cent share of the digital music market. Toss in 10m iPod music players and Apple has emerged as a giant in the marketplace,” Morrison reports. “But the world’s big music labels have mixed feelings about its success. They believe the computer-maker has become both so profitable and so powerful in this market that they should push to raise wholesale prices to capture a larger share of the spoils. Apple is understood to be angry at the move.”
“The record companies say introductory wholesale prices for digital downloads – thought to be 65-70 cents per track – were set low to stimulate demand for online music sales. Now, the success of Apple’s music store has prompted concern that digital download prices may be too low,” Morrison reports. “It is not yet clear by how much the labels hope to raise prices, but rates paid for mobile phone ringtones are roughly 10-15 per cent higher than digital downloads. Some executives would like to introduce variable pricing for online music sales so they can charge higher wholesale prices for top hits and other special tracks.”
“Increasing their cut may be only part of the reason why some labels would push for higher wholesale prices. There is also mounting worry in the industry over Apple’s growing clout in the digital music market,” Morrison reports. “Neither Apple’s music store nor its iPod player are compatible with other products and services and labels are concerned Apple will become too powerful if consumers continue to buy into its digital platform. ‘There is a real fear that Steve Jobs is the only one out there with any real traction,’ says one music industry official. ‘It’s got to a point where interoperability is vital.'”
Full article here.
MacDailyNews Take: Imagine a few years down the road with Apple still owning a dominating share of the download market and most people using iTunes on their computers and iPods in their pockets and vehicles. Who would need the labels then? Why wouldn’t artists go directly to Apple? Eliminate the needless middlemen, right?
As we said in our previous take on this subject: 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.
Related MacDailyNews articles:
Report: Apple CEO Steve Jobs ‘angered’ as music labels try to raise prices for downloads – February 28, 2005
MDN wrote: “Who would need the labels then? Why wouldn’t artists go directly to Apple?”
The record labels aren’t needless, but they aren’t necessary either. The record labels do provide a valuable function in marketing and promoting music and ensuring that artists get radio airplay.
Then again traditional radio will probably be better off without the record labels dictating playlists to them.
MDN Magic Word: “cent” as in what I’d like to pay for one downloaded track.
as in nothing speaks louder than the greed of the record companies.
for apple’s sake, i hope digital whole share prices go up… no no. hear me out. this theory has been introduced last time they thought about raising prices but what the heck, i’ll say it anyways…
if the labels raise the wholesale prices, i think apple would keep the .99c/track model. taking the hit internally. They are the only ‘complete solution’ and are the only company who has hardware to fall back on. if apple takes the hit and either just breaks even with music or even loses money, they will for sure make up for it in player sales. then when the rest of the market has gone to $#!t they can raise their prices to a more profitable level.
brilliance. sheer brilliance… i just hope apple sees it my way.
“There is also mounting worry in the industry over Apple’s growing clout in the digital music market,” Morrison reports. “Neither Apple’s music store nor its iPod player are compatible with other products and services and labels are concerned Apple will become too powerful if consumers continue to buy into its digital platform. ‘There is a real fear that Steve Jobs is the only one out there with any real traction,’ says one music industry official.”
Hmmmm. Works for me.
Tera Patricks
Mac360
They raise the price to over 99 cents and I go back to file swapping networks
Right now I wont download from any service because of the 128 bitrate. Sorry but 128 just isnt good enough for me. I have checked out all the services (web sites) and agree that the iPod iTMS combo is tops (I love my iPod), I just aint willing to pay for something at 128
PS Great site Tera. If you havent, check out the mac360
The first time I read about the fsking cartel wanting to raise prices, I picked up a couple of free tracks in protest. Off I go again.
My MDN MW is family, as in my family will share music before paying more for digital downloads than CD’s.
Ok, so the labels raise the prices…Apple doesn’t raise its prices and takes a loss on each download…other companies can’t compete and go out of business…Apple increases market dominance…labels raise prices…Apple becomes the only download service because of strong iPod sales…labels raise prices…
“history” as in history always goes in cycles
If the music labels raise wholesale prices for Apple, wouldn’t they have to raise them for all the services? If they focus strictly on Apple, I’m sure there’d be some sort of anti-trust issue. The entire pay for download model would be crushed.
Even the two or three PC users who actually pay for their digital music would resort to P2P. The music label execs must be on drugs if they believe they could get away with it. I just wonder where they buy their hallucinogens. It must be some good stuff.
“Why wouldn’t artists go directly to Apple?”
Careful MDN! You are getting perilously close to invoking the wrath of Apple Legal’s trade secret disclosure police!
<<<“There is also mounting worry in the industry over Apple’s growing clout in the digital music market,”>>>
The industry’s worry/fear is that, what, Apple will keep prices down?
It brings a tear to my eyes how the music industry is looking out for us! They should be worried, they won’t be able to bully the download industry unless they are scattered and powerless. They should also be worried because the public is getting use to Apple’s pricing.
unfortunately there is this thing called Karma
Apple is using its muscle to beat on some journalist and the music industry is about to rain on Apple’s parade. There ain’t no way around this one: screw someone = you’ll get screwed…I know, I’ve been there.
Ok, this is ridiculous, do any of you know anything about the creator of think-secret, other than he runs a mac rumor site and is in college.
No, didn’t think so, I know that he has made allegations against apple employee’s before that were completely biased, untrue, and without fact. Trying to make them out to be horrid people, when in fact they were nothing of the sort.
I feel no sympathy for Nick, and hope he gets what’s coming to him. Karma, perfect word choice.
He did it to himself.
Well.. the point of a record label should be to go out, find talented artists, sign them and offer them distribution..
Last I checked, Apple wasn’t –despite its hippy roots– qualified to go out and scout bands and sign them..
So the record labels will live on, though their roles may change.. the important stuff (finding great artists) is what they’ll continue to do
“Why wouldn’t artists go directly to Apple?”
YEAH!! Apple could start their own record company, call it ‘Apple Records’…
Um.
Oh.
Well.
Err, I’d better stop there, before Paul and Yoko’s lawyers can buy another Mercedes or two with the fees they’d pull in for THAT one!!!
p.s. Nick Ciarelli, a journalist?! HAW HAW HAW HAW HAW!!!! I drive a car; does that make me a Formula 1 champion???
mike:
Great artists? If the role of the record labels is to find talented artists, they haven’t been doing a good job. Hype and flash, yes. Talent remains (as always) not very common.
Magicword said it right. The record companies are so greedy you have no choice if you like music to pay the price for it or steal it. Cds go for $18.99 at Fye, $15.99 at Best By and Circuit City, $14.99 at Target. I was pretty shocked when I went to buy the new Kenny Chesney at Target and I saw the $14.99 price tag. I am going to buy it from iTunes tonight. If they raise the prices to let’s say $13.99 I will just burn cds from my friends or steal it when I can get it from my friends. I know its wrong but record companies could realistically raise their prices to $22.99 and the consumer would still pay that for Green Day, 50 cent, and Eminem. I call that stealing from me. If you havent noticed the consumer does not set the climate. Sales have been slumping for years now and the prices have not.
bill .. witty as you may be, (and pessimistic and negative), Apple has sold 300 million tracks on iTMS so far.. if those artists suck so bad they why are people picking them up.
Of course, you’re going to say that they aren’t talented, just marketable.. yawn…and we’re all being brainwashed by the dynamic duo of Christina Aguilera and Eminem.. okay.. next cliché, please?
Dobbie…
you must be smoking something to think that the music execs give a crap about Apples search for moles.
If Apple has to cave and raise the cost per track, I am back on Acquisition the same day they announce it. Heck, occasionally the Dude still has to fire up Acquisition to get a track that iTunes does not have.
The Dude abides.
If Apple licenced FairPlay/AAC for music sales now, they could kill WMA-based music players.
Especially if they found a way of importing encrypted WMA files into iTunes.
Just as Word has become the de-facto wordprocesing file format, Apple could really command the market utterly if they opened up a little. Technology is too fickle to stay in your own enclave.
Much as I love Macs, there are times I really get pissed with Apple for their ruthlessness. When Apple need you, they’re your best friend. But once they don’t really need you anymore, they just dump you aside without a second thought.
One example is when then first started .mac and said its free for life. But after a year or so, users needed to pay a yearly subscription to keep their account.
Can anyone say “retribution”?
I hope that Apple will start to license Fairplay, otherwise U hope that the record-companies will break the unjust monopoly practices by Apple by not extending their contracts.
Looking at how Apple have started to push people around lately I see why record companies would be worried…
Isnt it illegal to fix prices – how do the labels intend to go about raising prices? Surely, in the USA of all places – the land of the free no less – competition alone should decide such matters? Or has all the war abuse now made its way into mainstream culture too?