“After finally discovering that money (lots of it) can be made from music downloads, the RIAA and some of its members are rethinking the entire concept, and the iTunes deal in particular. At least a few RIAA members think that Apple is double-dipping, because it makes most of its money selling the iPod and, well, that’s not fair! So the music companies are rethinking—uh, complaining about—the whole downloading model,” John C. Dvorak writes for PC Magazine.
“Let me make it clear. Apple sells a song on iTunes for 99 cents. Apple pays for the Net connection and the costs of running a huge server farm. It also pays for development costs and the design and maintenance of the Web site. Then it pays the record companies 70 cents for each song it sells for 99 cents. For their check, the record companies do not have to do any manufacturing, distribution, or pay any spiffs. And they don’t have to deal with returns. Piracy also seems beaten by the security measures built into the system. And they still complain. Now I’m getting suspicious,” Dvorak writes. “Let me tell you what I think they are up to. The goal is to kill iTunes and any online music service not directly owned by a label. The record companies don’t like these systems for a number of reasons, not the least of which is that they work, proving that downloading music was a good idea from the beginning. I’m sure that still irks them, since it represents a decade-old ‘I told you so!'”
Dvorak writes, “I’m not convinced that the record companies’ biggest concern is pride, though. I think it’s bookkeeping… When iTunes began, I doubt that more than a few record industry executives thought it would become a runaway success, dwarfing all other initiatives. It seemed like a lark, almost an afterthought. I’m certain that most were convinced it would be, at best, a middling, sketchy business they could point to and say, ‘Look, we tried that idea, and it’s not that big a deal.’ When it began to rock, the checks in the mail were great and everyone was surprised. Suddenly all sorts of other initiatives popped up, and someone woke up and noticed that all these middlemen with computerized numbers were surrounding the business. It wouldn’t be as easy to screw over artists with this independent accounting everywhere.”
Much more in Dvorak’s full article here.
Bravo, Mr. Dvorak! You don’t read that little exclamation around these parts much, but Dvorak’s written an excellent article this time out. Dvorak thinks we’re “going to see a slow shifting of the way music is downloaded, even if it means each label does it itself through some mechanism in which retail stores get a cut. They will do whatever they have to do to get those ‘numbers’ back in-house, where third parties can’t analyze them. In the meantime, expect more complaining.” An excellent article, very highly recommended.
Related articles:
Growth of UK ‘iTunes-style’ music services hobbled by ‘greedy’ record labels’ high prices – September 29, 2005
In 99-cent fight with ‘Looney iTunes’ labels, Apple CEO Jobs will get whatever Jobs wants – September 29, 2005
Warner music exec discusses decapitation strategy for Apple iTunes Music Store – September 28, 2005
Warner CEO Bronfman: Apple iTunes Music Store’s 99-cent-per-song model unfair – September 23, 2005
Analyst: Apple has upper hand in iTunes Music Store licensing negotiations with music labels – September 23, 2005
Steve Jobs plays high-stakes poker with greedy record labels – September 22, 2005
Record labels accuse Apple CEO Jobs of ‘double standard’ as they seek to force iTunes price increase – September 21, 2005
Apple CEO Steve Jobs to repel ‘greedy’ record companies’ demands for higher iTunes prices – September 21, 2005
Apple CEO Steve Jobs vows to stand firm in face of ‘greedy’ record companies – September 20, 2005
NYT’s Pogue to record companies: it’d be idiotic to mess with Apple iTunes Music Store prices – August 31, 2005
Apple CEO Steve Jobs prepares for pivotal fight on digital music prices – August 28, 2005
BusinessWeek: Apple unlikely to launch music subscription service – August 15, 2005
Record labels to push Apple for higher iTunes Music Store prices in 2006? – August 05, 2005
Study shows Apple iTunes Music Store pay-per-download model preferred over subscription service – April 11, 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
I heard you should only use an explanation point once a year. …
OK, who is he and what did he to to the REAL Dvorak?
“A rule I heard” begs the question: How many times should you use an exclamation point per year?
The record companies get $0.70 of the $0.99! They are just greedy!
What if someday apple create itunes subdivision >> digital record label?
you think its possible?
I spent 50€ – 150€ / month to the iTMS
Even some €uro´s to Michael Jackson
iTMS is brilliant!
OK and now I need my Project Management and Excel in iLike format!
It would be bad for Apple if the labels decided to sell downloads themselves. But then without Apple, they don’t have access to the most popular music player.
Would this expain why everyone else seems to be pushing for subscription downloads? There wouldn’t be any paticular need to keep track of an individual artist’s sales.
Then how would they pay the artists if they don’t keep track of the sales?
“Then how would they pay the artists if they don’t keep track of the sales?”
They’d like to not have to pay them anything, which is why I hope the labels all die a slow and painful death. The people that run these things have NO SOUL. They are devils and demons on their best day. They couldn’t think of a creative idea if someone hit them over the head with it.
DIE LABELS DIE!!!
I have spent nearly $900 on music from iTunes since it was introduced over 2 years ago. I did not spent even half of that in the prior 20+/- years of buying music. iTunes works – they should leave it alone!
If the RIAA f*cks with iTMS, I will never legally buy another album in my life.
Dvorak?! Where are you?! This substitute Dvorak is making way too much sense and creeping me out.
I think the record companies just like to whine and bitch. They’re really good at that. And maybe their masochists too, because they’re considering messing with iTunes. Seems like they don’t like making money.
I think we should email John Dvorak and thank him for the article.
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The “new” Dvorak is now a PRO Mac guy. I was listening to the TWiT podcast and he was suggesting that soon, Mac OS would be the prevelant OS on the market. I remember a Dvorak that was all “Macs suck” and all. Now he’s fully behind Apple.
Did someone slip him the cool aid?
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MW: john as in John C. Dvorak
That’s what I love about Dvorak above Endupyourear and Turdspot, the guy can think every now and then.
Aw, look the magic word is truth. How cute.
What we need now is for an artist to get their stuff on iTunes without a label and be wildly successful – then it’ll get interesting.
jeez…i have to take a break from busting people’s chops here and on insanely great mac to say THANK YOU DVORAK!
THANK YOU!
THANK YOU!
THANK YOU!
THANK YOU!
THANK YOU!
THANK YOU!
THANK YOU!
“If the RIAA f*cks with iTMS, I will never legally buy another album in my life.”
You and me both dude.
Japan rings a bell regarding artists bypassing Sony to List with iTunes- well that is my understanding.
Dvorak is one of the few tech journalists worth reading.
“If the RIAA f*cks with iTMS, I will never legally buy another album in my life.”
thirded.
The labels are fsckwits!
Dvorak has been much more pro-Apple recently. Actually he mentioned this in a Twit Podcast a while ago. Nice to see he wrote it up.
This is definately a dynamic that many people have not considered. The labels were black boxes and the artists had no independent third party numbers to confirm and were completely at the labels mercy. iTunes changes that and the labels can’t be happy about it (but of course can’t openly say anything since it would make them seem like liers – which they probably are).
As i’ve said before – it’s about the distribution channel. Since the record companies don’t own this (now very significant) channel, they’re pissed. They can’t bully the corner record shop any more.
that comes out of Apple’s .29 cents not out of the 70.
Also don’t forget that developing iTunes software isn’t free for Apple, and neither is customer service staffing. Which they do have–I have contacted them before.