“The record industry may be on the verge of waving the white flag in front of Apple boss Steve Jobs, and abandoning its demand for iTunes to charge different prices for different songs,” Tim Arango reports for The New York Post. “Negotiations between Apple and the four major music companies – with which iTunes deals all expire in the next two months – have reached a crucial point as several record executives now say they are unlikely to convince Jobs to allow variable pricing, sources said. This marks a change of tune for the record industry as late last year several executives said they believed variable pricing – something the music companies have been pushing for – was imminent.”
“But Jobs has dug in his heels on the issue, creating the potential for a showdown between the mercurial Apple boss and the record industry should the labels continue to push for variable pricing. Some executives even mentioned to The Post the possibility that some labels may end up pulling their music from the service, which is by far the most popular of the digital download services. While sources say this is a remote possibility, the fact that it is even mentioned indicates the talks have been anything but amicable,” Arango reports. “One high-level music industry executive, who believes the record industry will ultimately abandon its push for variable pricing, blamed the labels for not standing up to Jobs. ‘Where in life does the retailer set the price of the content?’ said this person.”
Full article here.
MacDailyNews Take: The option of pulling music from iTunes Music Store came and went long ago. Steve Jobs has the power now and, if the past is any indication, he’ll wield it accordingly to “negotiate” a favorable outcome for Apple.
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If they want variable pricing eg new songs being more expensive, then why don’t they release new songs as packages? Rather than 99c per song pay $2.50 for the A and B side (as it were) and don’t make them available individually, make them album only tracks.
I personally see the value in variable pricing, however I know record companies would abuse it. One price for every song makes things simple.
When you get into buying albums or packages then fair enough, not each song will be the same quality/length/whatever so you won’t want to pay a simple multiple of the single song cost.
I don’t buy albums from iTunes, not because of cost but because I want the physical product, the quality, the artwork. For single songs I buy a lot, something I never did before. I do this because I know it will be one price and I can just click it and get it. I don’t want to think about it maybe being cheaper in 6 months. I would invariably wait and then ultimately forget and end up not buying it then they’ve lost a sale.
‘Where in life does the retailer set the price of the content?’
At theaters, you pay $10 to see a crappie movie or a good one. The price is the same.
You see this is the problem, if a theater charges $6.50 for a movie instead of $10, that sends a signal to people that it’s junk, so people won’t go see it. Then the little that do go see it pay $3.50 less than normal, which means more seats need to be filled to make up for that $3.50 lost. Since there is only so many seats in a theater, if you fill them all you lose money.
It’s better to try fill all the seats at $10 by advertising the junkie movie and taking advantage of the shear volume of the population which a certain percentage will either believe your advertising or never heard a review about it or actually may like the movie.
Now since the overwhelming amount of music online is just plain junk, there is a certain percentage of the population that will buy by albulm regardless. If the prices for the junkie songs are dropped, what is that going to motivate anyone to buy them if they don’t want to hear them in the first place? Why bother cloggin up a hard drive with crap?
Now the labels want to charge more for the good songs, but this will turn people off to buying them and turn to piracy, so the labels don’t make diddly.
The labels want variable pricing so they control the artists, then they can say “screw us and your song gets tossed into the bargin bin right away”.
It’s all about control, Steve Jobs vs the Labels.
Artists now know they don’t have to sign with a label, they can go to CDBaby or other places and get their stuff online and collect a larger percentage than what the labels charge.
If Steve could finalize this, finalize the Beatles thing (with an iPod and catalog deal for good measure) and release Leopard at the exact time best to kick Vista in the butt. We would be just on top of the world here.
Might have to throw a virtual party or something should all those planets align.
“Some executives even mentioned to The Post the possibility that some labels may end up pulling their music from the service…”
For some reason, the phrase, “Cutting off one’s nose to spite one’s face” immediately comes to mind.
“One high-level music industry executive…blamed the labels for not standing up to Jobs. ‘Where in life does the retailer set the price of the content?’ said this person.”
Answer: “In real life.”
Any retail establishment that has ever had a (discount) sale has obviously priced goods variably. And that means pretty much all retail establishments. In general, retail goods have an MSRP (Manufacturers Suggested Retail Price), not a MMRP (Manufacturers Mandated Retail Price.
What a dofus, even the motion picture industry recognizes this.
Steve wants single pricing because he thinks it makes it easier for users if everything is the same price. Ever go to WalMart or any brick and mortar store, nothing is all one price. It is not too hard to see that some songs are worth more than others. However some songs are not worth $.99. Remember the song “MacArthur Park” done by Richard Harris back in the late 60’s (great song). Well there are 37 versions of MacArthur Park on iTunes and none by Harris and none of them are worth $.99. How about Alice’s Restaurant, it’s almost 20 minutes long, you can only buy it as an album even though it is only one song, should this be $.99? There are some pieces on iTunes that are less than 15 seconds long, but they still sell for $.99 if they sell at all. Single pricing is not the end all. Variable prices can be good but not if the lowest price is $.99. Some songs would only sell if they were about $.25. Make an option for higher bit rate for an extra dime, one album for $10 two for $15. This is simple promotion. I think that if Steve were really smart he would use this as a bargaining chip to allow variable prices but extract something from the labels in return.
Apple also said that the download rate was greater now than last quarter. This means iTMS maybe close to 4 M DLs a day – that’s 1.5 B a year.
For sure they will get 2 B DLs by the end of this year and maybe a lot more.
Fact is that the model is working and the Music labels are making a lot more money from Apple than with anyone else. And with the pod sales increasing in the ROW, iTMS sales will pick up there more too.
So perhaps the labels would like to dictate the terms of the deal, but when it comes to giving up an exponentially growing revenue stream are they really that stupid?
Neil
“If Steve could finalize this, finalize the Beatles thing (with an iPod and catalog deal for good measure) and release Leopard at the exact time best to kick Vista in the butt. We would be just on top of the world here.”
Who is this “we”? Are you an Apple executive?
.99¢ pricing for singles is a great price.
Back when I was a teenager and buying a single 45 vinyl record (which typically had two songs) was the way most music was sold, a “single” was about 99¢. In the fifties they were about 49¢.
Accounting for inflation, c.o.l., and a few other factors, paying 99¢ today for a single is a pretty good deal.
Not to say that I think paying more, for any reason, is a good idea. I simply won’t pay more than 99¢ for a single. If it goes higher 99¢ is my threshold and I suspect it’s the same for a lot of other people as well.
iTunes is the reason I started buying music again. FWIW, I never got involved in the PTP file sharing thing. Before iTunes, I hadn’t bought any music for years, probably for almost two decades.
IMHO, if they introduce variable pricing, online sales will go down.
You can’t compare music like you do with items at, say, WalMart. Obviously underwear can’t cost the same as a blender.
But how will you decide what song gets to be different prices? You may like Richard Harris’ MacArthur Park and think it’s worth .99 but someone else may prefer Donna Summers’ version. Should her version be less because someone (who…you…Steve Jobs??) thinks it’s not as good? Music is very subjective. What works for one person is garbage for another.
Then there’s the slippery slope of equating the price by song duration. So songs up to xMinutes are one price and up to yMinutes are another price. So that single you want that’s 4:01 secs is .25 more than that other single that’s 3:59. You’ll hear an uproar over that and you better believe the record labels will make sure that their singles are in the higher price bracket.
The single price is what makes it easy and helps the success of iTMS. Variable pricing would needlessly complicate things. I usually buy full albums anyway and usually the price ends up being less than .99/song. So I guess there already is variable pricing. A bulk discount. A la carte, one price for all
idiots. don’t they get it? iTMS sells a track for .99¢ for several reasons. But one that nobody talks about is the quality of what you are downloading. The quality of an iTunes track is not the same quality as what the record label sells on a CD-ROM. It is compressed. The product is for portability and convenience of taking your music with you wherever you go. You can’t ask more than .99¢ for a highly compressed song. Also Apple may have initially set the price but only based on tons of research and development. Consumers decide whether the price is right or wrong. If people weren’t buying tracks from iTMS, then the price would be lower or the pricing model would change.
Except Britney Spears, Starland Vocal Band, William Hung, and few choice others should be no more than 1¢, if that much.
rasterbator: Only geeks care about “compression” to most normal people AACs sold on iTunes sound just fine and nobody is living under the illusion that 99cents is because the music sound worse. Compression is a non-issue to all but Audio Geeks, which make up probably less than 1% of the iTunes customer base (maybe even less, because they would avoid iTunes in favor of CDs).
Here in the UK, the supermarkets like Tesco, Asda (the UK arm of Wal-Mart), Sainsburys sell chart CDs for £7.99 – way less than the so-called MSRP. In fact, a manufacturer of any item in Europe is prohibited by law from setting a retail selling price as that has the ability to lead to cartels which is deemed to be anti-competitive.
In fact – in this country – supermarkets have so much buying power (and, more importantly, distribution power) that they pretty much tell everyone from farmers to book publishers how much they’re willing to pay wholesale and how much they’re going to sell at retail. If you want your packet of cereal or your carton of ice-cream in their store, you play the game.
Dennis:
“Who is this “we”? Are you an Apple executive?”
Ah yeah…one can only dream…
No, I was using the “we” as in Apple fanatics, stockholders, and those of us who never want to see Monkey Boy Ballmer dance again kinda “we.” ; )