Apple CEO Steve Jobs prepares for pivotal fight on digital music prices

“Two and a half years after the music business lined up behind the Apple Computer chief executive Steve Jobs and hailed him and his iTunes music service for breathing life into music sales, the industry’s allegiance to him has eroded sharply,” Jeff Leeds reports for The New York Times. “Jobs is now girding for a showdown with at least two of the four major record companies over the price of songs on the iTunes service.”

“If he loses, the one-price-fits-all model of 99 cents a song that iTunes has adopted could be replaced by a more complex structure that prices songs by popularity. A hot new single, for example, could sell for a $1.49, while a golden oldie could cost substantially less than 99 cents,” Leeds reports. “Jobs in the past has cast himself as a David-like innovator battling media Goliaths like Disney and Microsoft. But these days, allies and adversaries both agree, he is an 800-pound gorilla, with more clout online than Wal-Mart Stores has in the brick-and-mortar world.”

“Apple commands an estimated 75 percent of digital music sales, and roughly 80 percent of sales of MP3 players, with its iPod. While many still admire Jobs’s seeming Midas touch – iTunes quickly established a market for paid downloads after the industry wasted years on misfires – he also inspires enmity or jealousy from others in the industry, which is back in a slump after a modest rebound last year,” Leeds reports. “Jobs’s vision of simple, uniform pricing for songs and policy of limiting Apple’s music to Apple’s devices are increasingly under attack.”

Full article here.
Fight the good fight, Mr. Jobs, but, in the end it doesn’t matter if prices vary now, since enough people understand how to use iTunes Music Store (iTMS) and own iPods. Uniform pricing was very important in the beginning to simplify the mesage. The message is out now. Note that the recent iTMS Japan has varied pricing. The iTMS would survive and, in fact, continue to flourish. Still, we’d like to see how close to uniform 99-cents per track pricing Jobs can achieve; he’s got lot of leverage with the amount of iPods out already and the projections for future iPod sales. It still amazes: could the music labels be any stupider and greedier?

Related articles:
Record labels to push Apple for higher iTunes Music Store prices in 2006? – August 05, 2005
Record labels look to raise iTunes wholesale prices, music industry fears Apple’s market domination – March 05, 2005
Report: Apple CEO Steve Jobs ‘angered’ as music labels try to raise prices for downloads – February 28, 2005
Report: Music labels delay Euro iTunes Music Store fearing Apple domination – May 05, 2004
Greedy Big Five music labels looking to jack up iTunes songs to $2.49 each? – April 22, 2004

57 Comments

  1. You can always count on the music industry to do something stupid that just winds up screwing them in the end.

    If they force Apple into some bizzaire pricing scheme on iTunes (and everywhere else), online sales are going to drop. People will revert to P2P to get the songs rather than spend the extra money.

    Likewise, if they pull their music from iTunes, again they’ll go to P2P since they’ll have nowhere else to go.

    Apple did it right with iTunes. Keep it simple. Charge a fair price. Integrate seamlessly with awesome software and hardware.

    Don’t fsck it up. It’ll only destroy what made it succeed.

  2. The labels could well screw things up if they get to run the show. They had better remember people have a free alternative. I was bummed about the Japan ITMS having 2 tier pricing but the Japanese consumer is so used to getting screwed over on prices it did not seem to have a major negative affect. Anyway, I hope Steve can keep things simple and the current system in effect for the rest of the world.

    The one thing I might agree on is that at some point it might behoove Apple to start licensing out Fairplay and sew up the market entirely. As long as it is Apple against everyone else people are gonna be gunning to push Apple off the pedestal and just by the law of averages someday it will happen. I would like to see everybody who wants to get into digital music online for the next 30 years to have to be on Apple’s side of the fence but you have to give them that alternative before that can come to be.

  3. Since when has Microsoft been a media goliath?

    Also, Steve didn’t want tiered pricing in Japan. That’s why he was sure to note that 90% of all songs were at ¥150.

    Lastly, to the NY TImes: Why would you think ‘a hot new single…could sell for a $1.49, while a golden oldie could cost substantially less than 99 cents’ given how greedy the labels appear to be? In a system where the only cost on the distributor is a ‘one-time’ cost for storage and another nominal fee per download, shouldn’t prices be able to go down from the current 99¢ as demand drops? While the storage and (per-download) transfer fee remain the same for Apple regardless of what kind of song it is isn’t possible to lower the price on ‘golden oldies’ without negatively effecting your bottom line? Besides, if they were to lower the price on some of those older songs, it might inspire some people to buy them at the lower cost (and may lead to more revenue in the long term).

    Of course, that would be the logical thing to do and if the record industry has taught us anything, it’s that they’re illogical. ” width=”19″ height=”19″ alt=”confused” style=”border:0;” />

  4. Go Steve, Go! I would be for cheeper songs but higher priced songs, I’m pretty sure everyone, except the record industry, would want to avoid that. And BTW Steve, stop doing ”Album only” song just because selling them at 99-cents isn’t profitable (I take it that’s why).

  5. If you read the article there’s a music exec who resents Apple making money on iTunes and the iPod.

    Who’s fault is that?

    Apple spends money to develop the iPod and promote it.. the labels sit on their asses and collect millions for OLD MATERIAL. They’re complaining that SJ is making digital music mainstream…

    And what is their solution? Raise prices on popular songs?

    Gah.. what a bunch of dorks.. why not ask for a bigger cut of $$ from artists and concert revenue.. see what they say…

    BTW.. just because Apple sells iPods for about $200 does not mean they make a HUGE profit margin.. I think the labels are disproportionally obsessed with the iPod.

    6 million iPods in a quarter vs. uh, 150 million songs…

    The labels are making tons of money off iTunes, dont worry..

  6. A point of interest from the article:

    “Hilary Rosen, the former chairwoman of the Recording Industry Association of America, agrees on that point [opening up iPod].
    “If Apple opened up their standards, they would sell more, not less,” Rosen said. “If they open it up to having more flexibility with the iPod, I think they’d sell more iPods. On the other hand, I don’t think its their fault that nobody else has come up with something great.

    I’m glad she gets it.

  7. it’s not just that the RIAA will raise prices to $1.50 a song, it’s that they won’t stop there. two years from now, i’d bet my left testicle that they will raise every to single to $2.50-3.50

  8. It’s funny to see what the labels are hoping is going to beat iTunes… ” width=”19″ height=”19″ alt=”LOL” style=”border:0;” />

    “Even some music executives who favor altering the iTunes service doubt that they will be able to force Mr. Jobs’ hand by withholding their music. Instead, they are counting the months until the major wireless phone carriers enter the business of selling songs to mobile phone customers. Since there are many more mobile phones in use than there are iPods, the industry thinking goes, the arrival of a broad mobile music market will erode the leverage Mr. Jobs now holds.”

  9. If this is the same article that was in the New York Times, I would disagree with the sentiment that the word is “already out”. There are still millions of songs downloaded illegally through file sharing networks. Other songs are transferred through networks via MyTunes and similar programs. So what we’re seeing is that Digital Music is coming of age, but it’s still quite the toddler.

    For example, while recent numbers showed that legal downloads are gaining on illegal downloads, has the illegal download quantity decreased significantly? Or are people switching from CD’s to iTunes? Because if it’s the latter, then it is way too soon to start introducing variable pricing.

    Until file-sharing takes the massive plummet, pricing has to stay low. This isn’t just about fighting the good fight; this is about keeping the digital market viable. Record executives need to consider the future rather than living in the present. And while currently people are forced to buy $18 CD’s, they are quickly finding new sources that are multiple times cheaper (or even free!), and that just goes to show that pricing needs to reflect long-term goals rather than immediate profit.

  10. ” And BTW Steve, stop doing ”Album only” song just because selling them at 99-cents isn’t profitable (I take it that’s why).”

    It’s probably because the dumbass labels won’t let Apple sell them individually. Reading this article only appears to confirm this in my mind.

  11. This is just more playing the fiddle while Roman burns. This obsession with music, celebs, artist, etc has gotten out of hand. Artists are supposed to be starving while alive and worshiped only when dead. In the not to distant past live performers were considered low class people.

    I’ve decided to only listen to and buy music from dead performers. “What’s Going On” Marvin Gay

  12. Frankly, I don’t care…. I have my music library and if the record label companies want to raise their prices, I’ll just buy CD’s once in awhile. The price should be headed downward as more move to this “low cost” model of distribution…. But the Record EXECs don’t get it!! To hell with them!!

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