Analyst: Apple has upper hand in iTunes Music Store licensing negotiations with music labels

“With that commanding lead in digital players and rave reviews for its new ultra-slim and sleek iPod nano, some have speculated that Apple will have the upper hand in negotiations over new licensing agreements,” Derek Caney reports for Reuters. “‘The launch of the iPod Nano continues to demonstrate why Apple is likely to remain the dominant force in digital music at least over the next 12 months, if not considerably longer,’ wrote Fulcrum Global Partners analyst Richard Greenfield in a recent note. ‘With Apple’s dominant market share, we believe music companies such as Warner Music and EMI have very little power to alter pricing from the current 99-cent level,’ he said, noting that Apple is more focused on selling iPods than increasing profitability of music sales for the labels.”

Caney reports, “Warner Music Group Corp. chief executive Edgar Bronfman downplayed Apple’s leverage. ‘iTunes needs our music as much as we need iTunes,’ he told Reuters on the sidelines of the Goldman conferences. One record executive who requested anonymity countered that Apple’s dominance is somewhat overstated. ‘The fact is that 50 percent of digital sales is ringtones,’ he said. ‘Mobile phones are going to get a bigger share of the download market over time.’ He also noted that subscriptions services, such as Napster and Yahoo will gain traction.”

Full article here.
Of course, the “anonymous record executive” meant to say that he “hoped against hope,” not “noted,” that subscriptions services, such as Napster and Yahoo, will gain traction. Studies and actual subscriber totals simply do not show that people want to rent their music instead of own it. Not many people seem to want to lose their music if they don’t pay their monthly bill.

[UPDATE: 10:00am ET: Fixed “own” typo in Take.]

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Report: Music labels delay Euro iTunes Music Store fearing Apple domination – May 05, 2004
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23 Comments

  1. hahahaah he tries to beef up the competition as a bargaining chip?

    since when have the phone companies had a freakin clue where the market was headed.. THATS WHY THEY WERE IN THE MP3 MESS TO BEGIN WITH!

  2. People download ringtones to use as, ringtones! They don’t download them to play on the subway. and, they don’t download them to play through headphones.
    The record company loser probably believes there’s no difference. Loser!

  3. Do these record executives not understand that the whole point of single prices for songs is that is makes everything sound simple, it gives non-technical people the confidence to use the music store knowing they won’t be paying more than they thought, it allows clear concise advertising to again make the service sound attractive and easy. I don’t think anyone is under the illusion that all songs will stay the same price for ever more but downloadable music is a new market, legal downloadable music is even newer (and smaller) they need to make it the norm for the majority of people before they start to tinker with it.

    You need to make it as simple for the man on street to use as possible. Don’t Fuck with a good thing.

  4. Everybody always claims subscription services don’t work, but that’s because so far buymusic.com, napster.com, yahoo music, et al
    haven’t been successful.

    I’ve got a feeling if Apple ever does offer an iTunes music store subscription program… it might work. the biggest problem with the other subscription services is they don’t work with iPods.

    If apple launched a subscription service for the ipod… it would be a hit.

    dn’t you think?

  5. “…the whole point of single prices for songs is that is makes everything sound simple, it gives non-technical people the confidence to use the music store knowing they won’t be paying more than they thought…”

    Regardless of whether it’s a good idea or not, people can understand variable pricing. Pricing is variable for virtually every other product we buy, and in the iTunes store, the price is listed right there next to the “buy song” button. It’s not that “technical.”

  6. “….If apple launched a subscription service for the ipod… it would be a hit.

    dn’t you think?……”

    Brian … uhhhhh I dunno ….

    Would you like to rent your music…then have it “go away” when you missed a months payment ??

    Or…would it be cheaper… just to pay the 99 cents… own the song…and be done with it ??

    MDN MW = “hit”… as in … the iTMS is ALREADY a “hit”…

  7. Ringtones are a novelty. Sure, they are selling a bunch of these to the under-30 crowd now, but novelty is going to wear off. And ringtone buyers are wise up and care. Eventually most people will realize that buying 30 seconds of cheezy renditions of songs is a total rip-off. A song I buy today from ITMS for .99 will still be delivering ROI several years from now. A ringtone has a shelf life of about 3 months and costs 3x as much. I read an interesting interview with some producers of ringtone songs. They said the process involves basically removing all elements of sound that make music pleasing to the ear. Record companies execs counting on ringtones to be the savior of their ailing industry are only deluding themselves.

  8. 50% of digital sales is ringtones? What is this guy talking about? iTunes sells major music artists per song and also by album and there are no ringtones on iTunes.
    And if you can buy the same song for 99 cents on iTunes why would you pay $2 for the same thing to download it to your phone when you could sync it at home with iTunes. Like Steve Jobs said if they try and raise the prices everyone will lose. iTunes won’t sell it and we the people won’t buy it and go back to the pirates I guess. So the record companies will also lose.

  9. mac dood,
    It depends entirely on each person’s personal music preferences. I like to listen to a lot of different types of music, depending on the mood I’m in. I have typically spent an average of $50 a month on music for the past six years. I would like to have a large selection of music available to me that I don’t have to commit thousands of dollars to, and most music is not something that I need to have a lifelong commitment with.

    Certainly there are songs that I would want to keep forever, but the majority of music I listen to now I probably won’t listen to in a couple years, let alone 50 years. In fact, like I said earlier, some music that I listen to now, I may not listen to next month depending on what interests me at the time.

    And if I don’t pay my bill and lose all the songs, I can just get them right back next month. In all seriousness, losing the songs once the subscription is over is really not that big of an issue. People are willing to pay for satellite radio knowing full well that they can’t keep any of the music they listen to.

    Subscriptions would be very nice if they could be used in conjunction with pay per download services.

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