Apple friend or foe to music industry?

20 years ago

“As new models develop for the music industry, it could increasingly find itself at odds with Apple, which arguably brought the RIAA and its members into the digital age, says Wharton marketing professor Peter Fader Indeed, the music industry’s relationship with Apple gets more curious as the music industry branches out,” Knowledge@Wharton reports.

Knowledge@Wharton reports, “The paradox: Currently Apple doesn’t buy into the subscription music model, which would provide the industry recurring revenue. In that light, Apple, whose main goal is to sell iPods, could hamper the industry. While RIAA CEO Mitch Bainwol says the RIAA is ‘thankful for the vision of [Apple CEO Steve] Jobs,’ other analysts have doubts. Kendall Whitehouse, senior director of information technology at Wharton, for example, notes that the industry’s failed efforts to get Apple to change its iTunes pricing to reflect different levels based on demand illustrates the tension between the two parties. Then again, the music industry has little choice, says Whitehouse, who notes that Apple controls pricing power because the industry failed to create its own digital distribution effort earlier. ‘Apple helped start legitimate music distribution with its simple 99 cent-per-song model. While the industry has pushed for variable pricing (say $1.99 for a hit song and 50 cents for an older tune), the fact that Apple hasn’t budged shows who has the upper hand.'”

“Others, including former musician Jeffrey Babin, India global country manager for the Wharton Global Consulting Practicum, Inside Digital Media senior analyst Phil Leigh and Wharton business and public policy professor Joel Waldfogel, downplay any tension between Apple and the music industry. While acknowledging an ‘interesting symbiosis’ with Apple and the music industry, they claim it’s in both parties’ interest to maintain long-term ties,” Knowledge@Wharton reports.

“Fader, however, doesn’t buy it. He maintains that Apple is a foe — or at least will become one. Apple’s dominance in the music industry means that one model — downloading music — rules the roost when there may be better options, such as subscription-based businesses. ‘Apple gave the industry a wake up call, but it has taken away the flexibility on pricing and promotion,’ says Fader. ‘The iPod is a killer device in more ways than one,'” Knowledge@Wharton reports.

“Leigh says that if the music industry is truly worried about Apple, it should help Microsoft become a stronger competitor. Microsoft could offer a counterbalance to Apple and boost alternative business models. That day may be coming. On July 21, Microsoft confirmed that it had plans to develop a new digital music and entertainment brand, called Zune, that could compete with the iPod,” Knowledge@Wharton reports. “Given that it’s not clear what online music formula ultimately wins, it only makes sense for all involved with the music industry to try a little bit of everything, says Waldfogel. ‘Since we don’t know how [things] will play out, this is a good time to experiment.'”

Full article here.