Universal chief Doug Morris’ quest to defang Apple’s iTunes Store

“Relationships in the entertainment world can be famously fraught. And few are more so these days than the one between Steve Jobs and Universal Music chief Doug Morris. You may recall that Morris recently refused to re-up a multi-year contract to put his company’s music on Apple’s iTunes Music Store. That’s because Jobs wouldn’t ease his stringent terms, which limit how record companies can market their music,” BusinessWeek reports.

“Now, Morris is going on the offensive. The world’s most powerful music executive aims to join forces with other record companies to launch an industry-owned subscription service. BusinessWeek has learned that Morris has already enlisted Sony BMG Music Entertainment as a potential partner and is talking to Warner Music Group. Together the three would control about 75% of the music sold in the U.S. Besides competing head-on with Apple Inc.’s music store, Morris and his allies hope to move digital music beyond the iPod-iTunes universe by nurturing the likes of Microsoft’s Zune media player and Sony’s PlayStation and by working with the wireless carriers. The service, which is one of several initiatives the music majors are considering to help reverse sliding sales, will be called Total Music,” BusinessWeek reports.

“This isn’t only about Jobs; Morris badly needs to boost his business, and Apple is the one to beat. The iTunes store has grabbed about 70% of downloads in the U.S. And the iPod–well, what’s left to say about that juggernaut? Plus, music companies have been here before. A few years ago they launched services with the aim of defeating Napster-style file-sharing–and failed miserably. And let’s not forget that existing subscription services have signed up only a few million people, vs. hundreds of millions of iTunes software downloads,” BusinessWeek reports. “While the details are in flux, insiders say Morris & Co. have an intriguing business model: get hardware makers or cell carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that’s essentially free.”

“With the Total Music service, Morris and his allies are trying to hit reset on how digital music is consumed. In essence, Morris & Co. are telling consumers that music is a utility to which they are entitled, like water or gas. Buy one of the Total Music devices, and you’ve got it all. Ironically, the plan takes Jobs’ basic strategy– getting people to pay a few hundred bucks for a music player but a measly 99 cents for the music that gives it value–and pushes it to its extreme,” BusinessWeek reports.

“The big question is whether the makers of music players and phones can charge enough to cover the cost of baking in the subscription. Under one scenario industry insiders figure the cost per player would amount to about $90. They arrived at that number by assuming people hang on to a music player or phone for 18 months before upgrading. Eighteen times a $5 subscription fee equals $90,” BusinessWeek reports.

Full article here.

The devil’s in the details when it comes to the Total Music concept. Will it work with all players, including Apple iPods? Will it work reliably? Do you get new releases the day they’re released? Will it require ‘Net access and leave subscribers without music if a ‘Net connection is unavailable? Will the music carry DRM? If so, how will that limit the subscriber’s ability to move the music among devices? Etc.

Some of these music cartels are obviously very threatened by Apple. Jobs played them perfectly. They now make too much from iTunes Store to pull out, but they are driven to dent iTunes Store’s dominance, so that they can wrest back the control they see slipping away to Apple.

So, there are lots of questions, but the bottom line is that competition is good, but the competition has to be good in order to compete. Do this “Total Music” thing right and we say “bring it on!” Who wouldn’t want to buy an iPod and get all the music they want for free – even if it costs $90 extra upfront? If it includes Apple iPods, we can’t see how it hurts Apple, as they make the best players and will only sell more iPods and iPhones. Do “Total Music” wrong (too many restrictions, crappy formats and quality, limited catalogs, and the rest of the usual B.S.) and it will die like so many others.

On a related note: We’re left to imagine what if Apple’s Mac had the benefit of entire industries working for years on various methods of toppling Microsoft’s Windows hegemony? We guess it’s okay to build entire industries (anti-virus, for example) around Windows’ deficiencies and support Windows no matter what while ignoring or even denigrating Apple’s superior Mac solution, but when Apple creates the best player/jukebox/music store combo all of the two bit also-rans must be propped up with higher bit rates, lower prices, DRM-free music, etc. for everyone but Apple’s iTunes Store,. Is that sort of stuff even legal? It sounds like collusion or something to us. Of course, we’re not lawyers – thank God!

It’s weird; almost like the world requires inferior solutions and products to dominate. Perhaps because there’s more money it in? Think about it: if everyone’s computer just works, then Best Buy wouldn’t have a Geek Squad employing unnecessary people, VW wouldn’t sell extra VW bugs with “Geek Squad” logos to Best Buy, the advertising firm wouldn’t need to make “Geek Squad” ads, the ads would run on the TV networks, the “Geek Squad” logo decal maker wouldn’t get paid, and so on, and so on, and so on. It would follow that, if everyone gets a Zune or some other piece of junk, maybe consumers have to buy players more frequently as they break, meaning the music cartels get a more frequent replenishment of subscription cash to fund their coke habits, and entire leech industries can perhaps be created to “fix” problems that don’t exist in the superior solution.

Maybe, in order to really grab market share and garner more support from companies, Apple should make Mac hardware that breaks more often and work to screw up Mac OS X, so that it requires a wipe and reinstall every six months in order to properly function?

64 Comments

  1. Sorry, but basically this is asking me to pay my subscription fee up-front, and I’m not into ANY subscription model.

    At some point, perhaps right from the start, if you don’t re-up, or buy a new player within 18 months the service will kill you off.

    No company is going to stomach the bandwidth costs for people to get free music – not a chance.

    MDN: Who wouldn’t want to buy an iPod and get all their music for free – even if it costs $90 extra upfront?”

    You have already contradicted yourslef. You say “free” and then “pay $90” in the same thought? Hello? That’s not FREE it’s $90!

    I, and millions and millions of casual music listeners (which are the bulk of us), do not come close to buying $90 worth of new music in 18 months – more like $20 – may be. After that, we already have what we want via ripped CD’s, or casually listen to the radio here and there.

    The labels are simply trying to hide the subscription service in device costs, or in cell carriers monthly’s. Either way, like “businesses paying taxes” it always ends up with you the consumer fitting the bill. You pay taxes for businesses in increased product costs, and you fit the monthly music service in your higher priced gadget or cell phone rate plan – its that simple – and stupid.

  2. from Wikipedia
    A cartel is a formal (explicit) agreement among firms. Cartels usually occur in an oligopolistic industry, where there are a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion is to increase individual member’s profits by reducing competition. Competition laws forbid cartels. Identifying and breaking up cartels is an important part of the competition policy in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to collude on paper.”

  3. If it’s a subscription service the music will be DRM restricted and most likely restricted to the point on that one device.
    Which will be no transfers to a computer and dies after 18 months.
    This will be an attempt by the music industry to keep ripping off the consumer. iPods will be excluded as the industry will go to MS for the DRM. The files will also be WMA formated and a low bit rate to keep their bandwidth and infrastructure cost on the cheap.
    But as the real Musical Artist find they don’t need a record company more and more will defect and become independent artists.
    This is were new companies are going to replace record labels they will be recording artists promotion companies like a new company that will be launching next year called Indie HD.

  4. Also from Wikipedia;
    “Price fixing is an agreement between business competitors to sell the same product or service at the same price. In general, it is an agreement intended to ultimately push the price of a product as high as possible, leading to profits for all the sellers. Price-fixing can also involve any agreement to fix, peg, discount or stabilize prices. The principal feature is any agreement on price, whether express or implied. For the buyer, meanwhile, the practice results in a phenomenon similar to price gouging.
    Methods of price fixing can include selling at a common target price; setting a common “minimum” price; buying the product from a supplier at a specified “maximum” price; adhering to a price book or list price; engagement in cooperative price advertising; standardizing financial credit terms offered to purchasers; using uniform trade-in allowances; limiting discounts; discontinuing a free service or fixing the price of one component of an overall service; adhering uniformly to previously-announced prices and terms of sale; establishing uniform costs and markups; imposing mandatory surcharges; purposefully reducing output or sales; or purposefully sharing or “pooling” markets, territories, or customers.
    Generally, price fixing is illegal, but it may nevertheless be tolerated or even sanctioned by some governments at various times, particularly among those whose countries are developing economies.”

  5. What the record companies really fear are their top rated acts going solo and singing deals with Apple directly to cut out the middle man. Several bands are doing just that with rumors that Madonna may be next.

    A big name artist like that telling music labels to go screw themselves could encourage other artists to do the same. What is Warner and their ilk going to do when their big name acts don’t renew their contracts?

    That being said, I still think subscription models are the future. But, if the cost is absorbed in the price of the player, whether it be an iPod, PS3, ect., then what if you own an iPod (or several) a PS3, an Xbox360, a digital home stereo, ect? You would be paying that subscription fee many times over. Good for the recored labels, but not good for consumers.

  6. MDN nailed it, but let me rephrase this:

    ” Competition is good, but the competition must be
    good enough to actually compete ” – maclover

    for the whiners who can’t comprehend that everyone who
    enters the game, isn’t necessarily competition, but often waterboys for Apple.

  7. Why for god’s sake don’t the music companies make this simple, simple, simple little deal that would do more to mend relations between the music industry and their customers than anything else that can be imagined: go to the broadband providers. Offer them this–for a $3 per subscriber surcharge per month each subscriber is paid up to the music business in full. They can then download through the cable service, bittorrent, p2p, whatever, who cares what they do they are paid up.

    In 2000 the US census shows 100,000,000 US households. Broadband subscribership is currently at 53% of US households. That means 53,000,000 monthly charges, and comes out to $1.9 billion in revenue a year, and would be well worth it to subscribers to be free of any risk of RIAA suits and to have ready access to whatever music is out there.

    Subscriptions are unpopular because of the idea of your music collection disappearing in a puff of smoke if you terminate your subscription. Connection of a broadband-based surcharge to such a wide based population would make DRM unnecessary–sure, tracks might float out there to people not paying the surcharge but so many are paying that it doesn’t matter, particularly with 92% of internet users in the US using broadband. And since there would be no fear of losing a music collection people would be happy with the subscription idea, and it piggybacks to things–broadband and cable TV–that people already accept on a subscription basis.

  8. “…Apple is the one to beat.”

    Let’s see, Apple has a model that consumers want and like. I’m sorry, but you cannot “beat” that. You might be able to offer another service that other consumers will like, but it is not going to diplace people that obviously like buying by download. In the long term, like 10+ yrs? Maybe.

    Also, the music labels act as if Apple is making all the money while they watch slack jawwed and wide eyed. Apple’s profit margin is very thin – the profit margin for the labels should be very high. They don’t even have to encode the tracks. Their only goal is to make more money. One way is to charge more per track or to do subscriptions. The other component is to maintain some semblance of the current paradigm of superstar acts. They understand how to work within that paradigm. They do not understand the idea of having to have high quality acts in many genres and subgenres.

    The music labels might as well just call their service Clusterfuck. If anyone really thinks that the service is going to be as simple as it sounds, they really need to pull their head out and get some oxygen. Aside from the fact that these fucktards cannot resist the temptation to charge as much as possible, the tech aspect of this is going to be a PlaysForSure-ian nightmare?
    Actually, I suspect that Microsoft is just the corporate slut to be the tech brains in such a scheme.

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