“Three years ago, Apple Computer Inc. chief executive Steve Jobs persuaded major recording companies to buy into his vision of a simple, one-price-fits-all online music store. As Apple’s iTunes grew into the undisputed king of digital music sales, recording companies welcomed the revenues to cushion a five-year decline in CD sales,” The Associated Press reports. “Now, however, some labels feel hamstrung by Jobs’ insistence on pricing all tracks at 99 cents. With the labels expected to enter into music licensing discussions with Apple this year, any moves by Apple to abandon uniform pricing will test whether music fans are willing to pay more to download music that many only a few years ago acquired for free.”
“Recording labels make about 70 cents per download but could pocket significantly more by increasing retail prices by just a few cents,” AP reports. “Last fall, Warner Music Group Corp. CEO Edgar Bronfman Jr. suggested Apple should allow different download prices for songs and even give the labels a cut of iPod sales. EMI Group PLC CEO Alain Levy agreed that songs by top-selling bands should be priced higher while tracks by lesser-known artists should be discounted — essentially the same approach to wholesale pricing in place for CDs and most consumer goods of varying quality. Jobs has argued that recording companies already make more profit by selling a song through iTunes than on a CD, which carries extra marketing and manufacturing costs. ‘So if they want to raise the prices, it just means they’re getting a little greedy,’ Jobs said at the Apple Expo in Paris in September.”
“Today, according to Apple, iTunes has roughly 80 percent of the U.S. music download market, running well ahead of rivals like Napster Inc. and RealNetworks Inc.’s Rhapsody, both of which remain focused on subscriptions,” AP reports. “Apple does sell albums at different prices. And some online music retailers offer song downloads as low as 79 cents. But the bulk of single download sales remain at 99 cents, a price seen as a key threshold for music fans… As the labels and Apple hash out their differences, Apple’s market dominance likely puts it in the best position to dictate terms, analysts said. ‘The power balance at this point is probably still going to be on the side of Steve Jobs and Apple,’ Kleinschmit said. ‘Can the record labels really afford to pull their catalog from iTunes?'”
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