Japan music labels look to impose ‘iPod Tax’ while Sony, Warner still not signing with Apple iTunes

“In the United States, recording labels want a bigger slice of Apple’s success in digital music by seeking higher prices on downloaded songs. Japan’s music industry has a different idea: putting fees on iPods” Martin Fackler reports for The New York Times. “The industry has asked the Japanese government to charge a royalty, to be added to the retail price of portable digital music players like Apple’s iPod, which has been explosively popular here. Money earned from the fee, likely to be 2 percent to 5 percent of the retail price, would go to recording companies, songwriters and artists as compensation for lost revenue from home copying… The proposed fee would affect portable digital players that store data on internal hard-disk drives and flash memory computer chips – which include not only iPods but rivals like the Sony Walkman and other portable devices.”

“The recording industry has already succeeded in slowing the arrival of Apple’s iTunes music download service to Japan by its reluctance to negotiate licensing deals, people in the industry say. Apple finally opened a Japanese version of iTunes in August, two years after its introduction in the United States, and without the songs of major Japanese labels like Sony Music Entertainment and Warner Music Japan, which still have not signed licensing agreements,” Fackler reports. “The service got a warmer welcome from Japanese consumers, who bought one million songs in the first four days, according to Apple.”

Fackler reports, “All this comes at a time when the U.S. music industry also appears to be eyeing Apple, whose iPod and iTunes dominate their respective global markets. U.S. record executives have said recently that they want to renegotiate and raise prices of songs sold by iTunes, when licensing agreements expire next spring.”

Full article here.

“The industry doesn’t want to repeat a history of undervaluing itself. In the days when its business plan was simply to promote and peddle music, it footed the bill for producing videos, and initially was only too happy to give them to MTV to help build buzz. For the Viacom-owned network, the videos drew huge audiences, building MTV into a multibillion-dollar asset. ‘We watched people make fortunes and create valuable assets off of our music,’ says a former top exec who feared risking his role, if he were identified by name, as an industry consultant,” Johnnie L. Roberts reports for Newsweek.

“The industry considers Steve Jobs the latest incarnation of this problem. He used songs to sell iPods, and Apple’s iTunes site now sells 80 percent of all downloaded songs. The labels get 60 to 70 cents of each 99 cent iTunes download (the same songs digital pirates often stole, which is why the industry initially saw Jobs as its savior). But now labels have started agitating for a more creative approach to pricing, in which new releases would cost more than 99 cents, oldies as little as 60 cents and recent hits somewhere in between. Jobs disagrees and publicly labeled the industry “greedy” last month, arguing that it’s pushing for price hikes in a still-developing market. Record executives expressed shock, noting his dominance in the MP3-player business. The dispute has gone beyond name-calling. Two major labels, SonyBMG and Warner Music, have refused to license their music for iTunes in Japan. The stakes are much higher in the United States, where the two parties have to negotiate a new license by next year.”

Full article here.
Fackler reports that in Japan, “a fee of 2 percent is already imposed on devices using earlier digital recording technologies, like compact disc and minidisc recorders. Japanese manufacturers have been longtime opponents of such fees.” So, the “iPod Tax” is one issue that can be debated. Of note, Canada’s Supreme Court recently ruled against an “iPod Tax” in that country. However, the music labels like Sony and Warner that continue to hold out on iTunes Japan and Australia look desperate. The music industry at large is deathly afraid of Apple eventually controlling what they consider to be too large a stake in the music business. Sony lost the device race to iPod and Warner must think that they can use their signature as a bargaining chip for upcoming iTunes Music Store negotiations as they try to change Apple’s 99-cent per track model. Hopefully, consumers will remember Sony’s, Warner’s, and EMI’s sour grapes tactics, which also include foisting copy-protected CDs that are iPod incompatible upon the market.

Related articles:
Why aren’t Sony, BMG, Warner, Victor making their artists’ music available on Apple’s iTunes Japan? – October 06, 2005
How to beat Apple iPod-incompatible Sony BMG and EMI copy-protected CDs – October 04, 2005
Dvorak: record companies’ biggest concern about Apple’s iTunes is clear and accountable bookkeeping – September 29, 2005
Sony and Warner holding out on Apple iTunes Music Store Australia – September 08, 2005
Sony Connect President in wake of iPod nano: ‘we will accelerate our challenge’ to Apple iPod – September 08, 2005
Apple close to deal with Sony for ‘online music download service for Japanese iPod users’ – September 05, 2005
Bad news for Sony: millions worldwide choosing Apple iPods – August 22, 2005
Musicians stage mutiny against Sony, defiantly offer music via Apple’s iTunes Music Store – August 10, 2005
Apple’s Japan iTunes Music Store debut more bad news for Sony – August 04, 2005
Supreme Court of Canada: No levy on Apple iPods – July 28, 2005
Sony BMG and EMI try to force Apple to ‘open’ iPod with iPod-incompatible CDs – June 20, 2005

38 Comments

  1. This is total hokum. 99% of iPod users don’t spend all their time on p2p networks bilking the record companies. We rip our CDs (bought at exhorbitant prices) or buy from iTMS (providing an even higher return). And now they think that we should line their pockets this way. The attitude of the record companies right now actually makes me WANT to steal their music!!

  2. “Japan’s music industry has a different idea: putting fees on iPods” Martin Fackler reports for The New York Times.

    In the mid 1760’s to early 1770’s, England tried this kind of crap with the American colonies; the result was later referred to as ‘The Boston Tea Party’.

    Recently, Canada tried imposing tarriffs on iPods going there. The decision was later rescinded and they are now in the process of issuing tax refunds to Canadian iPod owners.

    Japan’s music industry is afraid of the iPod, iTunes, and the ITMS. Like their American counterparts, they want to maintain a stranglehold on their Japanese ‘market’. It’s all about money, power, and their keeping it. They don’t care about ‘letting the CONSUMER decide what they want’. It’s about control and them not losing any of it.

    Even if they do manage to get the tarriffs imposed, I believe Apple’s Juggernaut will continue to sell well in Japan, much to the chagrin of Japan’s Music Industry ‘leaders’.

    MaWo, ‘higher’. As in, ‘That’s where Apple’s iPod sales are going…’

  3. “The industry doesn’t want to repeat a history of undervaluing itself.”

    If this isn’t the greatest joke ever, I’d like to know what is! The recording industry has always waaaay overvalued itself. They somehow like to think that they have some part in the creative process, but as-often-as-not they are the lead belts that the musical swimmers have to wear. The MTV comparison isn’t at all valid: the companies were giving free advertising and promotion material to a for-profit company, in the greedy assumption that it would sell more records, which didn’t really happen, and that company made a lot of money charging people to watch free content. If they had gotten together to create a free TV channel showing music videos, and not sold any more records, they would have just written it off to experience, but it was nice to be able to blame MTV for their own failings. Now they want to do the same with iTMS. With iTMS, they are selling product to a distribution channel. They make (relatively) a lot of money out of that, and Apple uses it as a “loss-leader” to sell a successful product that helps ensure the distribution channel’s continuing strength. But they would rather cut off their nose to spite their face.

  4. fandango, you need to learn a bit more about history, and not just parrot the jingoistic crap.

    In the late 18th century, brewers were worried that the new beverage, tea, would eat into their profits. Therefore, in response to their lobbying, Parliament imposed taxes on tea. As most American colonists were pissed off at the prospect of having to pay any taxes, much of the tea imported to the American colonies was being smuggled, at lower prices than “official” tea. In 1773 the British Parliament passed a law which allowed the East India Company to import tea to America without tax, undercutting the American smugglers. A brewer in Boston, Mass., by the name of Samuel Adams, saw a chance to kill two birds with one stone. Inciting general opposition to British jurisdiction, tax-free tea being imported into Boston by the East India Company was destroyed by vigilantes. Ironically, it is probably the only case in history in which Americans have protested against the abolition of taxes.

  5. This is totally bogus. If they are charging a tax for pirating songs then pirating become legal, right? I mean, you would have paid for pirating bit, wouldn’t you have? It would be interesting to see how this would hold up in a court of law, but if anything it would seem to me that this would be the kind of thing that would drive people TO pirating rather than away from it. I mean, if I have to pay a 5% fee to cover pirating costs I would be losing out if I didn’t do any pirating, right? I certainly wouldn’t want to be the honest sucker who pays just to cover someone else’s crime.

    I think Sony and Warner withholding their songs also drive people to piracy. Imagine this scenario: Someone gets into downloading music for the first time thanks to iTunes and it’s ease of use. However, not all the songs they want are on iTunes. Since they have started downloading and the ice has been broken, they search for a way to get the songs not on iTunes off the internet and what they come up with is pirating. Once they know how to handle the slightly more complicated pirating procedure, it becomes much easier to blow off the legitimate iTunes and just get everything for free.

    The Music and Movie industry has to find a way to embrace the new technology and make money off it. We all know that even though the Movie industry fought the VCR tooth and claw, it ended up making them more money once they had lost and instead had to devote their energies to figuring out ways to take advantage of the situation rather than to fighting it.

    Here is an idea, offer new movies on the internet as a download as well as physical DVD sales. Make it quick, painless, and cheaper because you don’t have the physical product distribution costs or risks of overstocking. Heck, you could even include some advertising that people could fast forward through if they want or which they could edit out if they want to go to that much trouble. (However, if you make the advertising interesting or have it include special deals or contests, a lot of people would not mind watching them)

    Screw the wasted effort of trying to produce uncrackable DRM. First of all it’s an impossible battle. Secondly, if you make it convenient enough, cheap enough and the DRM lenient enough, most people will not expend the time and effort to crack it (as witness iTunes). Some will of course, but the situation would be a heck of a lot better than it is currently. And if more people get exposed to and and can purchase the products easily, they you will sell more and make more money.

    THAT is what these companies should be spending their time and effort on, NOT all this enforcer style, let-get-the-genie-back-in-the-bottle Bullshit. Work on making things value added so people WANT to give you their money, NOT trying to force them to.

  6. How come the music execs are not whining about supermarkets like Tesco, Asda etc here in the UK, and the online stores selling CD’s for £7.99 delivered. This is the same price as a typical iTMS album download here. I’ll bet they get less margin from the supermarkets too. And doesn’t it it still cost more to press, print and package and distribute a physical product than a download in the real world (as opposed to the one where these worried execs live)?

  7. “Imagine this scenario: Someone gets into downloading music for the first time thanks to iTunes and it’s ease of use. However, not all the songs they want are on iTunes.”

    Interesting point Jack A.

    There are a lot of songs on iTunes that I want to buy. However they ar not available to me because they are only available in the US not the UK. I either get them from Amazon or give up. Most of the time I just give up. I can’t be bothered getting into p2p either because of the virus/spyware/malware risks.
    I can understand the music industry not distributing physical albums in markets where demand would not justify distribution costs. But why do they impose this on the digital distribution channel?

  8. Jeff: go home.

    Apple is on a huge HUGE home run in many areas, not just music. I just discovered a section of their website dedicated to student-created media project (the “student gallery”). They are an enabling company going after the hearts of people rather than their wallets. Because at the end of the day, you can’t put a price on a great experience.

  9. In the next 48 hours, we’re likely to discover that Apple has reached a cumulative total of around 27.5 million iPod units since launch in 2001, probably with a theoretical capacity of 55 billion songs.

    In comparison, Apple has probably sold around 650 million tracks which equates to around 23 songs/iPod. And many territories, including Australia, continue to see iPod as the dominant portable music device despite not having an iTMS store, and the UK – the number two market for iPod for a considerable time – managed to sell huge numbers of iPods for nearly three years before the launch of its iTMS.

    The vast majority of music in people’s collections is in physical CDs, and this is a problem for much of the recording industry who a) believe it should be illegal for private consumers to rip their legacy collections (witness the UK’s version of the EU’s Copyright Directive) and b) can’t bear the fact that digitising into MP3/AAC effectively divorces the consumer from purchasing music in new physical formats (why should the majority of “vanilla” customers buy SACD, when all they’re going to do is rip it down to 160 kbits) and c) reduces physical handling of CDs which means they never get damaged and never get replaced.

    An iPod tax is the greatest thing for the music industry: $600 million a year for making nothing, shipping nothing and selling nothing is a terrific deal, especially when the artists – the alleged reason for the “outrage” will only ever get around $30 million of that windfall.

  10. As a reformed p2p user I’ve purchased upwards of 300 songs from Itunes in the UK which at 79p a track I consider to be a fair price. (although considering the DRM & profit margin to the record companies the the bit rate could be better.)

    However in the face of the shamless greed being exhibited by the recording industry I have turned to the “grey area” of purchasing music from allofmp3 and similar services.

    Now I still get the my music fix and these greedy chumps have lost 90% of their “revenue stream” from this customer….

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