Apple, music labels discuss ‘all-you-can-eat’ iTunes with premium-priced iPods, iPhones

“Apple is in discussions with the big music companies about a radical new business model that would give customers free access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone devices,” Andrew Edgecliffe-Johnson reports for The Financial Times.

“The ‘all you can eat’ model, a replica of Nokia’s ‘comes with music’ deal with Universal Music last December, could provide the struggling recorded music industry with a much-needed fillip, and drive demand for a new generation of Apple’s hardware,” Edgecliffe-Johnson reports.

“Apple would not comment on the plan, but executives familiar with the negotiations said they hinged on a dispute over the price the computer maker would be willing to pay for access to the labels’ libraries,” Edgecliffe-Johnson reports.

“Nokia is understood to be offering almost $80 per handset to music industry partners, to be divided according to their share of the market. However, Apple has so far offered only about $20 per device, two executives said. ‘It’s who blinks first, and whether or not anyone does blink,’ one executive said,” Edgecliffe-Johnson reports.

Apple, which is thought to make relatively little money from the iTunes store compared with its hardware sales, is also understood to be examining a subscription model [which] would work only for its iPhone devices, where it has a monthly billing relationship with customers through the mobile phone operators offering the device, while the ‘comes with music’ model would work with iPhones and with iPods,” Edgecliffe-Johnson reports.

Full article here.

Obviously, we need more details, but our initial response is that if it’s optional, we’re all for it. If it’s not, meaning that everyone who buys an iPod and/or iPhone must pay the premium, regardless of whether or not they will ever listen to music from the participating labels (or even listen to music at all – believe it or not, some people use, for example, iPod touch, sans music, for things like email, surfing the ‘Net, TV shows, etc.), then we’d be markedly less enthusiastic.

45 Comments

  1. why are they visiting this rental model again? it has never worked.
    as for the entire library of music, sounds good, but who gets payed with a scheme like this? how are musicians compensated? additionally, does driving up the price of an ipod by 80.00 ( ie. nokia) make sense to Apple when they create a new device? $320 instead of $240, $129 instead of $49? And how do you account for families with multiple ipods? Will there be a special serial number that makes itunes access a whole library only if the new device is in or will Apple charge its customers the $80 or $20 additional due to the infamous “ACCOUNTING RULES,” to get everyone up to speed?

    Interesting.

  2. hmmm…if I spend 80 bucks buying 80 songs and then drop my iPhone in a bathtub, I still have my 80 songs. If I spend $80 (added to the price of my iPhone) and lose the phone, what do I have…besides a big hole in my wall that will also need to be fixed?

  3. The article says Apple “is also understood to be examining a subscription model [which] would work only for its iPhone devices, where it has a monthly billing relationship with customers through the mobile phone operators offering the device, while the ‘comes with music’ model would work with iPhones and with iPods,”

    Why the iPhone only subscriptions? I have a Netflix subscription that has no hardware tie in and they seem to be able to get my money just fine. They have my payment info and each month they deduct the subscription amount. Apple could do the same. They already have my payment info for iTunes purchases as it is.

  4. This is rubbish.
    It WONT work – music isnt a ‘commodity’ like pork bellies or orange juice – its much more personal and comes in many different packages and delivery systems.

    The music biz hit the high point of their existence a while back – its all downhill for them from here. Their model is dead/dying.

    Also, in case anyone hadnt noticed, there is a limited number of songs/melodies that can be used before we get blatant plagiarism of music (actually thats already happening).
    Music is limited, and eventually will decline somewhat.

    Listening to music is at a peak – in the 1950’s people simply didnt listen to as much music as they do today.

    There is so much of it out there, especially if you have any friends(!), you could listen to a ton of stuff without ever buying or downloading any more at all.

    Families are a great source of music – kids can play their parents CD’s or even records. No sale for the music biz there.

    Anyway, no matter what the biz model, the iPod will be the player to listen to it on.
    Why should Apple care if music is sold in different ways – what you going to play it on – a zune?
    Didnt think so.

  5. $20 per iPhone & iPod touch for unlimited tunes for the device’s life. I’d buy that. The Labels get $20 X 20 million sold per year = $400 million, very conservatively speaking. It would probably be closer to $1 Billion per year.

    As far as I know artists get nothing on rentals or radio play. Not in their contracts.

  6. @ bollocks

    Loads of good points. What is missing is how to hear new music.

    Point in case. I’m bored with my current library. I would like to hear / explore new stuff. Most CDs that I buy have few good songs on them. I want to be able to hear new music and buy stuff I like.

    Best place to hear is the radio. But most stations plays the same stuff all the time. Even the new music alternative stations plays stuff I know and heard of.

    HD tagging obviously make sense, but it has to go hand in hand with stations playing new music not just the same stuff for years.

    There are thousand of songs that I would like. I just need the right medium to hear them. iTunes / streaming / tagging makes the best approach to provide open access to new music.

  7. “As far as I know artists get nothing on rentals or radio play. Not in their contracts.”

    ————

    That is completely false. An artist gets paid EVERY SINGLE TIME their song is played on the radio, television, cable, etc.. Of course, that is assuming that the artist wrote the song and has not sold off their publishing rights.

    The song play activity is tracked by BMI and ASCAP, which in turn collect the money for the artist and pay them their royalties quarterly.

  8. Des Gusting’s comment is right on: subscription music is a bad deal for the artists.

    iTunes pays the artist 70 cents of each 99-cent download. The subscription models pay 1 cent per downstream or 2 cents per download. I would have to get 70 times the subscription listeners to equal Apple’s royalty.

    Jim Swan
    “None-Too-Great Hits”

  9. @rickw

    Thanks for your question.

    I can only speak as an indie using the TuneCore uploading service. Apple’s 70 cents comes directly to me thru TuneCore’s accounting, which takes no percentage. Instead I paid them a small initial set-up fee to deliver the album to iTunes and to as many of several other download services as I desire, for 99 extra cents each. Each subsequent year I keep the album current with an annual storage fee (about $9).

    The advantage of a commercial record deal is the access to big-bucks advertising. It’s hard for indies to get found by the average mainstream listener. In return for that advertising advantage, the signed artist sacrifices most of the royalty to the record company. You just have to hope that the scale of the sales outweighs the percentage cut, I guess.

  10. Since the Napster deal most musos haven’t received one lousy cent. This model would screw them further. Frankly, I don’t use the iTunes store and will not use it because of their pricing model. Also this is just another form of DRM to protect a dying industry model (as previous posters have already said) and I won’t have a bar of it.

    The new music model increasingly being embraced by savvy musos is to release songs and albums (which are also dying) and directly marketing the products to their audience. This is achieved via web marketing and direct sales to the public via tours. And touring is the new cash cow for exploited musicians.

    Let me also say that copyright is stupid, dated and anachronistic. I mean, maybe the next research I do for my class should be copyrighted and I should receive a royalty for it. Give me a break.

    Say No to all forms of DRM and copyright!

  11. Such great reporting, NOT: “Apple, which is thought to make relatively little money from the iTunes store compared with its hardware sales,”

    Apple make relatively little margin from the iTunes store compared with its hardware sales, but makes a huge profit because of volume, volume, volume.

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