“Reports that Apple is discussing an ‘all-you-can-eat’ subscription music service with major record labels are overblown, say people in a position to know,” Arik Hesseldahl reports.
“According to a story in the Financial Times, Apple would charge enough for iPod and iPhone devices to cover the cost of licensing entire music collections. It would use that premium to create a pool of revenue, a portion of which would be divided among the major music labels, the newspaper said,” Hesseldahl reports.
“Trouble is, no such talks are under way, according to people familiar with Apple’s plans. An Apple spokesperson declined to comment. Insiders at major music labels were similarly dismissive. One person familiar with the matter said the idea of subscription plan has been “kicked around” for about a year, but said there have been “no meaningful discussions” on the subject,” Hesseldahl reports.
Hesseldahl thinks that “giving customers access to the entire iTunes catalog in exchange for a premium on iPod music players isn’t a bad idea—and it’s one Apple may need to consider,” because “growth in sales of the iPod is slowing. Despite having sold a record 22.1 million units in the quarter ended Dec. 29, the year-on-year growth rate was 5%, compared with 50% a year earlier. A new iTunes business model might appeal to a new batch of customers who have passed on the iPod-iTunes combo as currently offered.”
Full article here.
iPod sales might be slowing, but what Hesseldahl fails to even mention is that the old “iPod” is the walking dead. Apple is currently transitioning the old iPod model to an OS X-based, multi-touch-capable mobile WiFi platform. iPod touch. Higher margins from a vastly more capable device. While Apple may see a dip in the number of units sold year-over-year during the early stages of the transition (which hasn’t yet happened, by the way), the company is paving the way towards owning the mobile computing market while reaping strong margins along the way. People who fixate on iPod unit sales numbers are missing the real story.
As for Apple offering “all-you-cat-eat” iTunes service, 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.
As we’ve said all along about subscriptions, “Apple should offer it – if it makes business sense.”
The music cartels would love a subscription service from iTunes. That said, I don’t believe Apple wants one.
This headline from MacWorld UK:
“eMusic chief cries ‘foul’ on all-you-can-eat iTunes plan
Tying music sales to iPod sales could be a monopolistic action, eMusic warns”
Better to be overblown than underblown.
If it were $20 for access to all the music in the iTunes catalogue, as the original story said, I reckon it’d destroy the music-making business (as opposed to the music-selling business). Musicians’d earn more money begging in the streets of Calcutta during a recession.
Overblown? Shouldn’t the word “Spitzer” be in there in one form or another?….
If I eat too much does an icon of an angry chinese guy come on my screen and say “It’s all you can eat not all that we can cook!”.
Just wondering b/c it happens to me a lot IRL.
Just my $0.02
@TT
You bad!
Here we go again with the FUD that everyone misses or ignores when they say, “because “growth in sales of the iPod is slowing.”
You cannot Accelerate forever, it becomes mathematically stupid. PERIOD. However, after great accelerated growth, what you want is a great solid sales level. That becomes sustainable, its just not the super growth that wall street idiots would like to see cause they do not care about company growth, only short term profit on SELLING the GROWTH concept to make a profit.
Anyone with a brain (half a brain for some
” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> ) can tell that the number of iPods sold continues to grow. The number of iPods is still accelerating but at a more reasonable pace and I would expect the growth (er acceleration) to slow even more over the coming year. But keep in mind that I totally expect the growth of other mp3 players to grow even less or even shrink. I do expect they to continue to make up a solid portion of the bottom end of the mp3 player market cost wise.
Just a thought.
en
the “old” iPod is the “walking dead”? Then what’s the Creative Zen, the Rio or the Zune?
“If I eat too much does an icon of an angry chinese guy come on my screen . . . “
You might want to cut back on the prescription cough syrup.
” . . . but what Hesseldahl fails to even mention is that the old “iPod” is the walking dead.”
Sounds more like the Bush administration.
January 20, 2009: The End of an Error.
“You cannot Accelerate forever, it becomes mathematically stupid. PERIOD.”
and yet the entire current capitalist economy is based on the idea that the total economy must grow. forever. period.
an interesting problem that is…….
I couldn’t believe that Global TV News in Canada reported on this rumor yesterday, when the rumor first broke. First off, it’s probably not going to happen and purely speculation, so hardly newsworthy, but the major news outlets usually take a few days to report on a rumor like this, so it was surprising how quickly it was picked up.
“all-you-cat-eat”
Poor kitty.
BTW, if the labels want subscriptions so much, why aren’t they pressuring Amazon for them? Oh, yes… DRM.
If Apple sell 100M iPods yearly and pay the cartels $50 a pop that is only $5B. Hardly enough to go round all the interested parties. And that is assuming every iPod has the feature. Can’t see many people buying shuffles for $49 going for the deal.
As someone pointed out – how do the musicians themselves benefit from such a deal?
@Ray: the option key is your friend
just my 2¢
this is ALL ABOUT STOCKS people.
1. Apple announces WWDC 2008 and hints at “something big.”
2. rumors start flying. the rumor that Apple will be offering “all you can eat” downloads on iTunes is planted.
3. Steve Jobs’ keynote mentions nothing of any iTunes unlimited music for $n per month deal.
4. twitchy investors who have been listing to asshat “analysts” claiming Apple is doomed if they don’t change their iTunes store model have a major freak out. stock prices take a significant drop.
5. STOCK GRAB!
remember, you read it here first.
@jackspratt
I couldn’t agree more. I think you hit the nail on the head.
Apple can’t make a $20 premium fee on a device and have it pay for the licensing fees forever for a device. It would bankrupt the music companies, artists, and even Apple, who has to maintain the iTunes servers. Not a chance.
I’m sure this rumor morphed from some info regarding a possible subscription plan. I doubt Apple would want to give up its iTunes music sales revenue, even if it is not great, it’s got to be more than $20 per device, especially if most of that $20 would go to the music companies.
“it’s got to be more than $20 per device, “
Actually Apple makes no money from iTunes as it is, and sells only about 20 songs per iPod, so really this might be the shot in the arm that beleagured iTunes needs.
Hesseldahl things that because growth is slowing, apple should try to expand into the 2% of the market who like the subscrition model? Is the FT running out of good economics journalists?