“EMI Group PLC Chairman Eric Nicoli Tuesday rebuffed Apple Computer Inc.’s assertion that a single price for songs sold over the Internet helps prevent piracy in the music industry,” MarketWatch reports. ‘I’m not persuaded by the argument that a single price deters piracy,’ Nicoli said at a news conference. ‘I’m not persuaded of the fact that a lower price deters piracy. What I am persuaded of is that making music more convenient and better value is a deterrent to piracy.’ Nicoli was responding to comments from Apple Chief Executive Steve Jobs who last month called music companies greedy for seeking higher prices for downloads and who argued that this would encourage piracy.”
Full article here.
Advertisements:
• Apple iPod nano. 1,000 songs. Impossibly small. From $199. Free shipping.
• Liz Phair’s 5th studio album, “Somebody’s Miracle,” released October 4, 2005. Also includes bonus track, “Can’t Get Out of What I’m Into,” available exclusively on iTunes.
Try raising the price and let’s see how well that deters piracy.
Related articles:
Apple’s iTunes Music Store dominates as digital music sales more than triple – October 03, 2005
Dvorak: record companies’ biggest concern about Apple’s iTunes is clear and accountable bookkeeping – 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
99% of the people i know still dont buy music. and i havent seen any of them go to jail. paying 99 cents for a song is still a rip.
I’m surprised that more bands aren’t approaching Apple directly to sell their songs online!
Obviously they would have to be at a level where they could produce/record a song independantly of record label backing (so there’s no big advance to repay), and find some way of advertising the song and plugging it with radio stations to promote sales (maybe a collective effort between bands here…), but at the end of the day surely a larger slice of royalties would come to them directly from Apple (with fairly transparent accounting), rather than the hope that Fony, EMpie et all throw them a crust every so often…
They’ll say it would never work, but they said that about downloading tracks in the first place! All it would take is for a few bands to prove it can be done and the Majors will be cacking themselves….
Setting a higher price won’t deter piracy either??????
The jackasses never stop.
MW – front – as in, step to the front of the line to get your spanking.
The business model for music is changing. Record companies are in the promotion and distribution business. (I read that the Looney Tunes cartoons, Bugs Bunny etc, primary purpose was to sell sheet music.) With P2P systems and artists self-promoting and alternative distribution streams, the business model must adapt. The question is what would the new model be for the record companies? Since they do not have an answer, the are struggling to maintain the status quo.
BTW, most artists have always made more money from touring than they did from CD sales…why do you think they tour?
This is bull. Prices should be going down not up. This guy tries to sound like he knows what he is talking about when all the labels were just wringing their hands and had no clue on what to do about piracy until Apple stepped into the game.
thinking back to college econ., the record companies are just trying to maximize their profits. Unfortunately, not enough market research has been done to determine what the price point for digital downloads should be to maximize profits (ie. $0.99, $1.29, $2.99) In the the CD world, each of the companies compete and pick a price point they believe will maximize profits. When the demand begins to decrease, they lower their price.
This has not been done with iTunes in which the low price point was set as a marketing experiment. Probably, to the surprise of the record companies the experiment worked exceptionally well and now they are trying to tweek it. It might be too late now however.
BTW… whoever suggested that Apple license fairplay to the record companies is not thinking. If Apple were to do this, then every record company could pull thier collections off of iTunes and open their own stores that would be compatible with the iPod.
SJ needs to go to the next phase. Buy up a few music studios, use his music recording software and Apple publicity to remove the big 5 from the equation.
Who needs the money grabbing bastards anyway?
Apple offers recording deals, sets up promotional companies and distributes the lot via the internet.
Offer the artists a direct 50 cents and keep 49 cents ( 29 cents profit and the remainder overhead) – we all know SJ wants 25-30% margin on any product.
This is the weakest attempt at rationalizing raising music download pricing, yet.
“I’m not persuaded of the fact that a lower price deters piracy.”
I like how he calls it a fact. It serves to make him appear stupid. He might as well have said, “A lower price deters piracy. That’s a fact. But I don’t like to believe in facts.”
M says:
“thinking back to college econ., the record companies are just trying to maximize their profits. Unfortunately, not enough market research has been done to determine what the price point for digital downloads should be to maximize profits (ie. $0.99, $1.29, $2.99) In the the CD world, each of the companies compete and pick a price point they believe will maximize profits. When the demand begins to decrease, they lower their price. This has not been done with iTunes in which the low price point was set as a marketing experiment. Probably, to the surprise of the record companies the experiment worked exceptionally well and now they are trying to tweek it. It might be too late now however.”
I think it’s important to point out that raising prices is only one way of riding market demand. The other is to simply sell more product. You efficiently maximize profit in both circumstances, assuming supply constraints aren’t a factor. And this is where these music execs are falling over themselves in the ‘Supply & Demand’ debate; they are trying to get everyone to forgetting the former by overemphasizing the latter.
What I mean is that if you make a physical product – say, Apple computers – you have to deal with all sorts of real world limitations on just how much of something you can make in order to meet demand. For example, materials availability, parts pipelines, assembly/labor costs and availability, not to mention hopw fast you can physically ship the product from point A to B.
From this frame of reference, producers use the pricing mechanism to put the brakes on overheated buying activity that they can’t match for the time being, or to maximise profit in order to pay for the ramp up of the factories to meet demand, or to ride the wave of entreprenurial profitablility before lack of demand eventually sets in which will in turn require the shutting down of production capacity … etc. For physical goods (or even services which require a large degree of human involvement, or a large degree of risk on the part of the seller of the service), price is a necessary tool for keeping things managably provided to the consumer AND profitable for the supplier/producer.
Digital downloads – of any sort – have little-to-none of the physical world’s limitations. When demand goes up, your servers work a little harder. When demand goes down, they cool off. The product is a single, infinitely downloadable, and certainly non-physical bit of data. So, in this case, standard pricing is actually the more logical way to go. The actual supply is effectively infinite, so the pricing mechanism has no use as a brake to ensure supply and demand don’t get too far out of kilter. In fact, since supply is effectively unlimited, demand could theoretically be infinite as well. As long as you set a price that everyone makes any kind of profit from (i.e. above and beyond basic infrastructure & maintenance costs), almost any sort of demand (within reason) will generate a plus in the accountant’s book.
Thus, if one accepts that lower costs spur demand – and anyone who’s taken economics OR lived in the real world should accept that – then the lowest pricepoint possible is, in theory at least, the best one to set in a digital downloadable environment.
“BTW… whoever suggested that Apple license fairplay to the record companies is not thinking. If Apple were to do this, then every record company could pull thier collections off of iTunes and open their own stores that would be compatible with the iPod.”
Right. But at some point, assuming continued Apple success, that’s what’s going to happen anyway. If Apple gets so successful that they are the only game in town, fairplay becomes the default standard. And since Apple won’t actually own these titles, it seems almost certain that they would be sued into opening up the whole thing to the ones who do own it. To not do so would be akin to stealing their property, since they would no longer have control over what to do with it. That’s a far off projection, but logically (and given our legal system) that’s what would be expected to happen.
Apple at some point will play ball to avoid that headache. It’s just a question of when, or if another paradigm will crop up that mounts some competition.
” width=”19″ height=”19″ alt=”cool smile” style=”border:0;” />
@ m >
Well, you simply don’t have a good feel for history.
For decades, most artists toured simply to promote their albums and, by the time they’d paid for venues, promotion, PA, their own management and every other parasite, they made no money at all.
If you want to find out the real truth about most touring – as opposed to the top 5% of acts who do make a serious profit – try and find copies of Robert Fripp’s diary articles from International Musician in the early Eighties.
[B]——[/B]
As for Mr. Nicoli’s original point, I am coming to the conclusion that the music industry is a walking, talking demonstration on the dangers of mixing recreational drugs and in-breeding.
I find it unbelievable that Eric, Edgar and others seem to think that legitimate downloads will increase if they if raise prices for people like iTMS, Napster, Connect et al.
Yesterday, MDN carried news of IFPI’s latest reports which stated that digital music sales had reached $790 million for the first half of the year, presumably including ringtone downloads: Apple itself has probably moved around 400 million tracks this year so far (we haven’t had an update since 18/07, according to my records), and they are probably on track for 1 billion downloads for 2006: this is surely proof that Apple knows far more about the distribution of digital music than the record industry which failed miserably for years to establish a viable download industry.
And then we come to simple logic combined with elementary arithmetic…
Take 100 downloads – say that 20% of them are chart material in the first flush of popularity (small range, high sales), 40% are mid-range back-catalogue (larger range, medium sales), and 35% are real rarities from the distant past (huge range, residual sales).
Price them at $1.29, 99¢ and 79¢ respectively.
The total generated is $99.50, or 99.5¢/track; in other words, exactly where we are today – except with more complexity for the e-talier (iTMS) who will have to maintain different pricing for each track in every market dependent on the whim of the record company and less transparency for the customer.
Ever since the iTunes store came online, I haven’t download ONE illegal song. Period.
So, this idiot at EMI is wrong.
– Mark
m: To put it simply, the whales/artists swim to digital waters, the megalodons/labels can’t follow, and they go extinct.
Back in the bad old days of kings, if you wanted to print something, you had to go to the elite few who had special permission from the king (who held the only “copyright”, or right to publish) to print stuff, and do whatever the elite few asked to get them to print it.
The US constitution did things differently. They set up freedom of the press (publishing, not just journalists), and after much begging, established the copyright and patent as a short term reward for creators/inventors/etc. contributions to the public domain.
Unfortunately, this didn’t work for music. When records came out, only the label companies had the technology to reproduce songs, and they reverted to the old way it was done under the kings, if not worse. Artists were forced to sign with them, as there was no other way to gain access to record publishing or the radio stations. They sign away their copyrights, their use of their own voices (frequently not allowed to sing without label permission), and in return they stand a good chance of ending up bankrupt. The only “freedom of press” they had was which label to sign with, and sometimes not even that.
Once upon a time, Apple put the power of desktop publishing (everyone could have a printing press on their desk) in the hands of the people, creating finally what the founders of the US intended. Now iTunes Music Store, home studios and a variety of other technologies do the exact same thing for music artists (and getting close to it being there for movies too).
Now, finally, we can ditch the labels and put the artists in the driver’s seat of their careers. Now artists can subcontract for certain services (ITMS, web designer, etc.), and keep hold of their own copyrights. It has happened already in Japan, when Sony refused to join the ITMS there, their artists defected and made their own deals with Apple, leaving Sony to follow their lead like a reluctant child. It works in the US too, as there are quite a few indie artists on ITMS, enough that I have only bought songs from them, all of which I had never heard of before I encountered their songs on the store.
Do you want to speed this up? Avoid RIAA member songs, and buy independent artist songs instead. Vote for artist freedoms with your wallet.
I agree with variable pricing. 99 cents for the latest and hottest tunes down to a nickel for the crap they roll out. There not paying for any packaging or distribution costs, so their already making more money on average than a CD.
Go variable pricing!!!
DIE, DIE, DIE, RIAA!
we did have a variable pricing test last year. Real lowered prices to, what was it, 69 cents I think, and they sold a bunch more. We’ve not heard from them ever since they raised their prices back to .99.
so it’s clear that lower prices increase sales. now, did that increase in sales come from the .99 crowd or from the p2p crowd?
we also know that .88 wma at walmart is not a draw for anyone compared to .99 itunes.