Tim Lee

Steve 2, RIAA 0

It seems that Steve Jobs has once again won his battle with the music industry:

Record labels have for months been calling on Apple Computer (nasdaq: AAPL - news - people ) Chief Executive Steve Jobs to reform the pricing of songs on his online music store iTunes. In particular, they want the billionaire to jack up the price of newer hits from the regular flat rate of 99 cents. But alas, it all seems to have been to no avail. On Tuesday, we learned that after finally renewing its contract with Warner Music Group, EMI, Bertelsmann and Sony joint venture Sony BMG, and Vivendi’s Universal Music Group, Apple Computer has had the final say on pricing–and it’s staying at 99 cents.

I wonder if it’s beginning to dawn on the music industry that they created a monster when they insisted that Apple develop a DRM scheme. As more and more music fans become locked into Apple’s proprietary platform, Steve Jobs will be able to dictate terms to the labels, and may be able to cut them out of the loop entirely by dealing with artists directly.

May 2, 2006 | Comments |

Viewing 4 Comments

    • ^
    • v
    Your good intentions notwithstanding, I resent the implication that I am a mindless sheep when you say that "more and more music fans become locked into Apple's proprietary platform". I bought my first track from Apple only after I ascertained that I could burn all my music into AIFF and walk away at any point with my fair use rights intact. They were then the only ones to offer this, and they still are the only game in town. Granted there is some inconvenience in removing the DRM, but it's far from a "lock in". And if you don't know what I mean, you're ill-informed and maybe the "created a monster" hyperbole should just stop already. Perhaps a fairer assessment will tell you why all other services are failing, such as subscriptions and downloads that are tethered to a relationship with the distributor.
    • ^
    • v
    AT: I meant "created a monster" from the labels' perspective: that they've handed the keys to their industry over to a guy who's not likely to give them back.

    And yes, I realize that it's possible to burn the music to CD and then convert it to an open format. However, that's a hassle, and since it's illegal for third parties to distribute tools to help users do that, it's unlikely that very many of them will. So I think most of Apple's iTunes customers are effectively locked into Apple's platform.
    • ^
    • v
    Tim, you will admit that some songs are worth more than others, and that some songs are worth much more than 99�¢, right? If so, I have a question. If iTunes tracks ever stop being a loss leader to sell iPods, won't Apple have every incentive to do variable pricing? The iPod's success doesn't have to disappear for this to happen. Once they obtain sufficient lock-in, as you suggest, so that the iPod is so entrenched as the standard that they can worry less about ensuring its continued sales, why wouldn't Apple switch to variable pricing, which will probably result in higher revenues?
    • ^
    • v
    Jerry,

    I don't have any particular opinion about how music should be priced. Certainly, there are some songs that could be sold for substantially more than 99 cents, but on the other hand, the simplicity of the 99-cent pricing scheme is a major selling point. My guess is that Steve knows most of any price increase would go into the labels' pockets, and so he prefers to hold the price down in order to help build market share.

    My point was simply that the labels are already finding themselves in a weak position at the negotiating table, and that their position will get even weaker as the digital download market grows. They desperately need to find a way to sell music that doesn't lock them into any one vendor's proprietary technology so they can retain their ability to play one vendor off another. So far, they seem to be failing to do that.

Trackbacks

blog comments powered by Disqus