Digital competitors are ready to take bite out of Apple. “That is the message to Apple Computer CEO Steve Jobs from almost every other company in the digital music space vying for consumer attention after several years of domination by the iPod and iTunes,” The Arab Times reports. “Apple’s successful combination of sexy design and elegant usability has propelled the iPod to the top of the digital music market as the undisputed king.”
“Every move Apple makes these days results in victory. As the rest of the flash-player market floundered, Apple took over the category in a day with the release of the iPod Shuffle. It turned podcasting from a cool-sounding technology that nobody used to a legitimate format by adding it to the new version of iTunes — and generating 2 million subscriptions in less than a week,” The Arab Times reports. “Today, Apple commands 80 percent of the MP3 player market and 75 percent of online music sales. But even as analysts predict another massive holiday sales season for the company this year, many believe Apple’s reign will last only another 12-18 months before the playing field levels out. ‘It’s inevitable that over time their market share declines,’ Piper Jaffray senior research analyst Gene Munster says. ‘It’s safe to say that nobody can sustain an 80 percent market share in a consumer electronics business for more than two or three years. It’s pretty much impossible.'”
“Privately, record company executives say they can’t wait. Not because they want to see Apple stumble, but because a less dominant Apple means a more robust market for digital music. The company by itself cannot bring digital music to account for 25 percent of all music sales, as labels hope it will by 2009,” The Arab Times reports. “Label sources say Apple stubbornly disregards their suggestions for drawing in new digital music customers. They say they would like more flexibility on track pricing and promotions. But more than anything, labels want to see the iPod become interoperable with music services other than iTunes. ‘It’s a monologue with them,’ one label executive who asked not to be identified says. ‘They pretty much say, ‘This is what we want to do,’ and if you disagree with them you’re an idiot. It’s like dealing with a cult.'”
Full article here.
The “monologue” and “cult” comments come directly from the standard anti-Apple talking points memo that’s been circulating for years. That’s about as creative as music label executives can get, which should tell you that they ought to listen to Apple’s “monologue” for as long as they can. Apple showed them the way, yet inexplicably, some of these music executives can’t wait to bend over and grab their ankles for Microsoft. Why?
Most likely, the music label execs are trying to knock Apple down a peg or two or three and split the online market up between multiple successful distribution points. After all, if Apple ends up owning the online market with iTunes Music Store, who would need the labels? Apple could buy The Beatles’ pesky Apple Corps to remove that issue and artists could eventually go straight to Apple and eliminate the middlemen. This is why the middlemen are biting Apple these days.
Apple has 70-80% market share and THEY have not abused it by raising prices or decreasing services to earn more profit. Apple has continued to expand and offer more to THE CUSTOMER. The record labels truly are the most contemptuous of any business. They always have been. They make nothing and find the most vile ways to exploit the artist. And hide royalties from the artist to line their own pockets.
Us music folks just want to make music (it’s why we have been exploited of the years by labels), but we are ever so slowly moving away from the major labels. ITMS allows this. And say what you want about Steve Jobs, he has more respect for music people than any record label. But again, intellectual property he does understand. No talented music people become record label executives.
Hang tough Apple. Allow the record labels truly destroy themselves. A 10% price increase on the ITMS will translate into a 35% jump in p2p downloads. AT least 35%.
I agree with MDN’s take on the fact that Apple could end up eliminating record labels. I also believe this is their strategy. They have focused on music from the beginning and have put in place software, hardware, distribution, ect.- all necessary items to become a “Recording Studio”
Think different. Wouldn’t the artists make more money if they adopted this new form of distribution?
All music should be banned. Music is mental dope.
Lets bring this down to the numbers. The iTMS has sold more than 500,000,000 (that’s 5 hundred million) songs world-wide. At an average of ten tracks per album, that’s 50 million cds. How many million CDs were the record company not selling during the P2P days when that’s all there were?
Most CDs here in Canada cost $15-$17. That $750 million that the iTMS has sold in two years (or so). Not a small chuck of change for the record companies, even if they don’t get it all. Not bad for the once ‘beleagered’ Apple.
MW=’amount’ as in ‘What amount of CDs would they have sold without iTMS?
[I]Label sources say Apple stubbornly disregards their suggestions for drawing in new digital music customers. They say they would like more flexibility on track pricing and promotions…[/I]
So, before iTMS, how had the Music Industry’s combined intelligence fared in creating a digital music market?? Not so well as far as I remember.
But surely Sony/BMG are closely related to Sony’s CONNECT service, so presumably the music industry could experiment on its own turf. But then again, nobody goes to CONNECT so there’s probably no point. And let’s face it – The Industry would like Apple to continue taking all the risks whilst they take all the proceeds, so that’ll never happen.
And what I don’t understand here is the lack of consistency: at the turn of the year, an IFPI report claimed that the music industry was delighted at the growth of digital music and since then Apple has increased the rate of sales by nearly 100%. Where is Napster’s equivalent contribution to the growth of digital music, or Microsoft’s. Let’s be a little closer to home, where is Sony’s contribution.
The arrogance of these people is truly staggering and it’s hardly surprising that some Japanese artists are breaking ranks with their labels when they are displaying such breathtaing stupidity.
Well I look at it this way, I hate record labels but I love Apple. I love the iTMS, and I love being able to buy a song from the confort of my living room for $1 a song or $10 an album. I dont need bulky CD’s, cases, and other crap piling around my house. I can click, own, transfer to iPod, listen.
FRAK the labels, I will be glad when they are all finally gone. Just think of all the new music we will get to hear with the labels not choosing who we think will be good or not, I like choice, and Apple gives that to us. Bring on the new artists of tomorrow Apple and let me check em out for a $1!
Long live Apple, I love my cult
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P.S. Hey music labels, I will never buy a CD again, you cant stop that no matter what you do, you no longer get my money, so give up.
To: iDon’t
Maybe you should!
The Taliban banned music and look what happened to them.
Sing along now! Hey Mister Taliban ban Bananarama!
Macaday –
Careful. If popular opinion is right, then Windows is the desktop OS to use.
MDN are right, the labels are afraid of losing their control.
I am also a Windows XP user (for years I’ve used Windows 95/98/2000) who will soon be buying my first Mac with Mac OS X Tiger!
I am SOOOOOO ready and psyched about the switch!
Even though I can afford to buy more music than ever before, I choose not to do it. I am tired of hearing the same trollish whinging from the record companies. They wonder why sales are down? Tell me why I should spend $20 on non-redbook compliant CDs? I’ll buy used when I can, and new when I want. Discounted is preferable.
The hubris of these companies is appalling, and their greed is astounding. They certainly have products that I want to purchase, but it is not a need by any means. Perhaps they forget this.
While iTMS may never replace the record label, it very well may be a catalyst for changing the way artists can be discovered and appreciated. It may even give some of the artists wider exposure that normally have been passed over by the music industry.
This will put more music choices into the hands of the consumers, and be disruptive to an industry that requires mega-hit songs. Because of their reliance on this business model, and their belief that every negotiation is a zero-sum-game, they choose to attack Apple’s success. It is really their PR games over the past few years that lead me to believe that distruption is coming to this industry.
Whatever happens, without ‘pricing flexibility’ that is favorable to me, I will be providing little additional money to the record companies.
PC Apologist:
Windows didn’t become the dominant OS because of popular opinion.
Windows broke the rules to become as ubiquitous as they are. They didn’t have many competitors which allowed them to corner the market,
and the public didn’t have any other choice, until the public is locked down to their technology.
Anybody old enough remembers The Dave Clark Five. Well, during the early ’70s Dave Clark went to his producer and bought all the rights to his music for $50,000. At the time, the number of people playing oldies was very small.
Anyway, Dave Clark has since been quoted as saying that purchase was the best thing he ever made. He doesn’t share radio station royalties with the label anymore (not for 30 years) and has made a fortune.
Now that’ws before the advent of digital music. Imagine what happens as more and more artists discover that they only need the labels to establish their brand (music). Once its established, they no longer need the labels to keep the money rolling in.
Kind of like the relationship between Disney and Pixar. In the beginning, Pixar needed Disney very much and agreed to a very lopsided distribution deal. Now the tables have turned and it is Disney that needs Pixar.
I don’t think the label execs want more money for themselves. They want more for the artists, in order to keep them for bolting directly to iTMS.
Let me give you folks a little insight into how a record company works – and how they totally rob all of their artists.
First, the record company decides which studio you will record in and which producer you will use – and they pay for it up front. They then pay to have the CD reproduced and all of the subsequent marketing.
However, once the CD is released, you must pay the studio back for ALL of the costs incurred in producing the CD (studio, engineer, producer, etc.) as well as all of the marketing costs. So, in other words, if it cost $100,000 to do your record, before it even hits the streets you are in debt to the record company for $100K. On top of that, the record company will demand a certain percentage of your publishing rights (if not all of them – see John Fogerty). They will also demand a percentage of your touring ticket sales, merchandise, etc.
All of these costs are incurred for one reason – so you can get radio play and mass media attention.
When it comes right down to it, the record companies are no more than legalized loan sharks – and legalized extortionists (see the term payola).
With the advent of digital products, IMHO, it will not be very long before record companies are put out of business – which would be the best thing to ever happen to music and musicians.
Any band starting out today would be wise to learn ProTools, record the album themselves, have it reproduced by any number of CD dupe houses (at roughly $1.10 per CD – based on 1000) and use the internet as much as possible to promote themselves. Not only do they save money up front, but they will always own ALL of the rights to their music and any licensing fees will be paid directly to them – not the mafia record companies.
Can ya tell I gots no love for the record companies? LOL!
Chris: Great post – you’re absolutely right, and your information makes the previous post by JulesLt look even more ridiculous than it already seemed.
JulesLt says: “The MDN take in this case fails to understand what music labels actually do. Apple are not going to start giving unknown talent money to spend in recording studios or subsidise tours, etc, etc. While bands remain unwilling or unable to spend thousands in the studio, and happy to sign their life away for cash now, there will be labels. Oh, I forget, they’ll be able to do everything at home on Garageband.”
Frankly, I think this is exactly why Apple released Garageband. I’m not a musician, but friends have mine who have used it say that app singlehandedly turns the whole process of recording distributable quality music on it’s head. If you’ve got the musical will, Garageband gives you the affordable way. And if Apple starts signing independent acts and distributing them directly over iTMS … well, it clearly will be the end of ‘the way we’ve always done it’.
I love the way things look on the audio side of things right now. Although Apple acting as gatekeeper could be a double edged sword (trading one monopoly power for another), because the whole structure is software based, the consumers AND producers of music can find any number of ways to ‘fight the power’ if they have to. I just hope the upcoming hardware based TPM modules of the future Macintels don’t tip the whole thing back in favor of monopoly power. There’s really no garauntee Apple will always do what’s best for the consumer, or worse that they will always be in the driver’s seat.
As Revenge of the Sith & The Empire Strikes Back demonstrated, you never know when an evil overlord will reassert itself … or even if it will be someone you never expected!
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The labels complain about Apple, saying “and if you disagree with them you’re an idiot.”
Is there any evidence to suggest that the labels are not idiots ?
Left to their own devices, the labels managed to let single sales slide to pathetic proportions, they created a situation where P2P flourished and when Apple offered a brilliant solution to those problems they try to mess it up because they don’t understand the technology, the economics or their customers.
If anything, the word ‘idiot’ is too polite.
P2P was growing out of control. The only response that the labels could devise was to sue individuals. That raised very little income, cost a lot in legal fees and generated huge adverse publicity.
Apple’s solution was to make the process of downloading music so cheap and simple that it wasn’t worth messing with the alternatives.
People don’t photocopy entire newspapers, it’s easier to buy another and the cost isn’t going to put you off. It’s the same with iTMS.
All the labels have to do is to provide the audio file and Apple does the rest. The labels have no investment, no overheads, no effort and yet they still get 90% of the income to share between themselves and the artists.
That sounds like a very advantageous deal to me, but the labels are too stupid to see it that way.
The ‘experts’ say that Apple can’t cling onto an 80% market share for more than 3 years.
Maybe it will be the labels who can’t continue as they currently do for three more years.
Dinosaurs might have once been huge and powerful, but they had tiny brains and weren’t able to compete with more versatile, intelligent and fleet-footed mammals.
It might end up that the labels decide to attack Apple. By the time that they get their act together and work out what to do, Apple will be so dominant that Apple will be able to offer artists a much better deal than their labels do.
“It’s safe to say that nobody can sustain an 80 percent market share in a consumer electronics business for more than two or three years. It’s pretty much impossible.”
Well, I guess that proves Microsoft doesn’t exist.
If the music labels really wanted to solve their problems with the digital music middlemen like iTMS, it’s easy.
All they have to do is get themselves a bunch of servers; install them in the basements of their corporate headquarters; digitize their libraries into standardized format files without any DRM; set up online store fronts; sell those music files for 25 to 50 cents per song; and give at least fifty per cent of each sale to the artists. The artists will make more money and stay with the labels. The labels will stay in business. They won’t make nearly as much money as they used to, but they’ll still be around to continue making money. Which will beat the alternative. Not being in business at all.
Of course, within a short period of time (well within five years), most brick and morter stores, as well as iTMS, and other non-label/non-artist music download sites would be out of business. I’d even say P2P music sharing would pretty much be history as well.
Before you accuse me of being unrealistic with my imaginative little scenario, let me say I’m fully aware it will never come to pass.
The music labels/industry is just too stupid and short-sighted.
MDN word “find.” As in the music industry couldn’t find it’s ass from a hole in the gound.
Arabe Time…. Is there any Arab ITMS?
Hey, calling record execs “pimps” is an insult to b*tch slapping thugs everywhere. They’re not nearly as nice as pimps.
Those music execs are just pissed that Apple execs decline when they offer coke and whores in exchange for more promotion on iTunes. Go figure
Just like Apple put it them selves : ”The biggest story in music keeps getting bigger.” If Apple can get Apple Corps, nothing will be able to stop them. I’m starting to think that the iPod’s out-of-this-world performance isn’t even half of what Apple and the music industry will become. Call Apple buying Apple Corps. a dream but, then again, we are talking about Apple here…
Labels can hope for consumers’ habits to change, but in the end the public will vote with their wallets.
Thank goodness :p
“I have been using apple computers since 1978 and the Mac since 1984; there have always been articles and predictions that Apple would go under “soon” or “in XXX months.”To paraphrase Mark Twain: Reports of Apple’s Death have been greatly exaggerated.
I noticed that in Japan already, after the iTMS was open less than a week, at least one artist was ready to jump the Sony ship and sign up with Apple directly. In the old days, the record labels were a necessary evil as somebody had to press the vinyl (and later CD’s) and distribute them to consumers. Moving atoms around costs money and requires distribution channels, etc.
But in the digital age, all that is obsolete. Moving bits around, instead of atoms, costs nearly nothing. The record labels have become superfluous. They no longer perform a service, other than promoting artists and providing recording studios. The latter is now really of marginal value, since prosumer gear is of such high quality and becoming affordable. To the extent that it’s not, i can envision small recording studios or coops springing up to meet artist demand.
Regarding artist promotion, the truth is the record labels provide no value here as they pass over many truly creative and talented artists to promote artists of lesser ability but with marketable qualities other than musical proficiency. As a result, we get a lot of mediocre artists.
I for one think the record labels have served their purpose in the past, but abused their position. And they should have been clever enough to see a storm on the horizon and to mend a few of the bridges they had burned along the way. They didn’t and now the storm is nearly upon them. Did they simply fail to see that their role in the digital millennium would be superfluous? Or did their greed simply blind them? Either way, i don’t feel much sympathy for them.
These are the same dopes that turned down every Rock megastar
2 or 3 times before the persistance and drive of the artist led to success.
These are the same dopes that resisted any move to new media in the
first place–and these are the same dopes who push MP3 as if it was
the Bible Code and trash Apple Lossless. If only Jobs wasnt hypnotized by
Intel inside Id feel more comfortable joining the cult. Oh and If these
people are predicting an 80 % market share over the next 18 months —
that together with the growth of some thing called PODcasting—well let
me just say–its the wave of the future.
Isn’t it strange for “Arab Times” to talk about “cults” when their people are blowing up other people at the urgings of religion?
Music executives don’t like having to say please. They so used to naming their terms they have no idea what to do when someone has the power to say no.
Bozos.