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

21 years ago

“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.