Apple faces off with record labels over iTunes pricing | iLounge News

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Apple faces off with record labels over iTunes pricing

According to the New York Times, two major record companies are pushing for an increase to Apple’s 99-cent per song pricing on the iTunes Music Store.

“Two and a half years after the music business lined up behind the chief executive of Apple, Steven P. Jobs, and hailed him and his iTunes music service for breathing life into music sales, the industry’s allegiance to Mr. Jobs has eroded sharply,” the Times’ Jeff Leeds reports. “Mr. Jobs is now girding for a showdown with at least two of the four major record companies over the price of songs on the iTunes service.”

“If he loses, the one-price model that iTunes has adopted could be replaced with a more complex structure that prices songs by popularity. A hot new single, for example, could sell for $1.49, while a golden oldie could go for substantially less than 99 cents. Music executives who support Mr. Jobs say the higher prices could backfire, sending iTunes’ customers in search of songs on free, unauthorized file-swapping networks.”

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41

i’ll bet all my music in my ipod that what u have there “Mooseroo” are p2p files or cd ripped illegally, compiled and sold to rip off guys like u.

Posted by ThatsMyJazz on August 28, 2005 at 8:40 AM (PDT)

42

What Mooseroo illustrates is that there are not so legal alternatives to iTunes and the labels should be glad for it success and not try to choke it. 

As for the idea of selling music direct from the artists, that’s nice in theory but few artists have the rights to distribute their music at all, let alone behind their label’s back.

Posted by Jeffery Simpson on August 28, 2005 at 9:30 AM (PDT)

43

“Why should the price be higher or the same as CDs? The labels have no pressing or distribution costs.

As for the price having to go up because of inflation, then what about computers. CDs are technology and easier to mass produce and cheaper. The only place that the money from CDs is going to is the label (read: execs only) and distributors.”

(Caution: Devil’s Advocate Warning)

That’s a simplistic world view you have there. Just because the TECHNOLOGY has gotten cheaper doesn’t mean the PEOPLE side of things have also, regardless of ‘Made in China’ and jobs sent over to Bangalore, which in the entertainment industry hasn’t happened nearly as much.  In technology it’s easy to realize savings when advancements come as fast and furious as they do.  In other industries all the rest of their business costs, however, are not so easy to control or take account of. Just because the music comes on CDs doesn’t mean the CD-making process controls the final price of that CD, and in fact, it doesn’t.  During the reign of CDs, almost from the very start the actual manufacturing cost have been negligeble even when the price of materials were supposed ‘expensive’; when you makes products that allows you to buy raw material in bulk measured by the HUNDREDS OF MILLIONS (if not more), the material price per CD isn’t going to be all that much, period, whether it’s today or twenty years ago. It might a cost a few more pennies back then to make these things becaue of the initial investment in manufacturing equipment, but it’s still measured in pennies regardless.  The price of that album is really dictated by the rest of the album’s production costs.

Even as cheap as these costs are, those costs still exist, regardless of whether it’s a CD or a download. Why? Because downloads as they are now don’t eliminate the need for them; the B&M stores and outlets like amazon.com still sell physical CDs.  The record labels are STUCK with many of these costs, period; they still have to ramp up the manufacturing plants, and pay for creating the album art and all the rest of the packaging that’s associated with CDs. Any one album amortizes those costs across all copies of that album sold. The problem to the record companies with download sales is that the pricing structure doesn’t take that into account. Every download album sale made takes away one of the typically more expensive CD sale, which IS priced to cover all these costs. It may seem unfair that a DRM downloader has to—in essence—subsidize the CD buyer, but the economics of producing an album is predicated upon TOTAL album sales, regardless of source.  In fact, the typical DRM downloads are a bit cheaper than their CD counterpart, but it can be argued that’s because that price does indeed reflect removing some of the middleman distribution costs.

But I suspect that REAL REASON for the major record companies wanting to raise rates is this: the ability that iTMS allows its customers to cherry-pick an album for ONLY those songs that the buyer wants.  Here in the U.S., everyone pretty much knows that iTMS typically charges $9.99 per album download. But if a saavy buyer only really likes four of the songs, he or she is ultimately paying for ONLY those songs, or $3.96, and kisses off to the rest. Well before the advent of digital downloads, if there were as many as four songs on an album that a person liked, that person more than likely would’ve paid full price for the entire CD album. Now giving the consumer to buy only what he/she likes is great and all that, but it obviously also changes the economics of making that album in the first place because ultimately there’s less money coming back in as a result.

As for pricing in the U.K.: I’m not sure how or why the pricing structure go so weirded out over there as opposed to here in the U.S. You guys always seem to pay more in taxes and hidden fees for just so many things when compared to us; maybe there’s something to that when it comes to media content.  Doing business over there means greater governmental bureaucratic costs, perhaps?  I mean, if the price you pay for petrol is any sort of example…

Posted by flatline response on August 28, 2005 at 10:00 AM (PDT)

44

I think the root cause is that everything from airline tickets to iPods is priced according to demand so businesses (including Apple) charge more for a hot new product and drop the price as demand tails off.

The iTunes pricing model prevents record companies from discounting their back catalogue so they have to try and make all their money on the limited range of hot new tracks everyone is downloading.  If I could download Little Feat and Joni Mitchell for 10p a track I’d be happy to let you guys pay over the odds for Coldplay!

Posted by Andrew C (UK) on August 28, 2005 at 10:40 AM (PDT)

45

“Here in the U.S., everyone pretty much knows that iTMS typically charges $9.99 per album download. But if a saavy buyer only really likes four of the songs, he or she is ultimately paying for ONLY those songs, or $3.96, and kisses off to the rest. Well before the advent of digital downloads, if there were as many as four songs on an album that a person liked, that person more than likely would’ve paid full price for the entire CD album. Now giving the consumer to buy only what he/she likes is great and all that, but it obviously also changes the economics of making that album in the first place because ultimately there’s less money coming back in as a result.”

Not necessarily so. When it comes to an artist I’m a genuine fan of I am going to buy the whole album because these are quality artists that, to my ears, produce albums not just four singles and some filler. On the other hand, there are artists that I am not an out and out fan of and if it comes down to purchasing their music I’m only going to buy what I know I want.

With an ala carte purchasing scheme that makes sense they get *more* sales from someone like me. Assuming I found iTunes a reasonably priced model, they would get the $10 on an album from one of my favorite artists AND the $1 and $4 from liked but not loved artists. Those $1 & $2 & $4 purchases are all money they would never make off of someone like me in the absense of ala carte sales because I can count on one hand the number of albums I’ve purchased in my life based upon only wanting to hear a few songs. If you’re not talented enough to make a complete album and your song wasn’t hot enough to be distributed as a single, you didn’t get my money. By turning 100% of the music out there to singles they potentially capture a huge number of sales they couldn’t make otherwise.

Of course, I still return to my original point: they are completely missing the potential of digital downloads. When I can download it sitting on my butt at home and the sale incurs essentially zero overhead for the seller, their goal should be to drive pricing down to the point that I don’t think about it at all, just treat it like a pay-as-I-go self made radio station. If I were pricing things, singles would be a max of $0.25 and albums a max of $2.50. They need to drive the cost down to the point that these DRM lossy files are so cheap and convenient that no one considers P2P and nobody worries overmuch if they only sort of like song X by artist Y. That’s how they’ll reinvigorate the music industry, not this doomed scheme of trying to make us pay more for less.

Posted by Code Monkey in Midstate New York on August 28, 2005 at 10:50 AM (PDT)

46

I think it is stupid to say “if they raise the price, I will go to P2P.” If they raise a price of a CD, does that mean you can just go and get it for free? I do think it’ll turn off a lot of people, but it doesn’t really effect me since I still prefer buying actual CDs.

Fishes,
narco.

Posted by narco on August 28, 2005 at 11:48 AM (PDT)

47

I generally don’t bother to comment, but I feel extremely strong about this issue.  iTunes has been fantastic for me and has totally swayed me away from P2P because of its ease of use.  But they still don’t have ‘All’ of the music out there, and their lure is the $0.99 singles.  Most of the time the full album costs as much as it does in the stores on sale so I prefer to buy my albums in stores where I get a physical CD with better quality and the case and booklet.  Where itunes has one up is in buying singles, but if those prices rise to $1.50+, then that advantage for me quickly falls.  I may continue to buy a few songs that I really want, but for the most part the impulse purchases I make (which is where they make most of their sales to me) will stop.  Over time I can justify the song prices rising with inflation, so a $0.05 increase every 2-3 years sounds reasonable, but not 50%+.  iTunes needs to focus on providing more songs (since missing tracks lead me to go search for them on P2P), including more album art and booklets, and possibly increasing the bitrate.  I would possibly pay more if I received more.  So for top singles, I would pay $2 if you include the music video for it as well.  Since there’s no market for music videos today, that would be a terrific increase in earnings for the labels.  Then again, I’d need my iPod to play these videos in order for them to be meaningul in the long run since I don’t listen (or watch) much music on my PC anymore.

Posted by Dennis Q on August 28, 2005 at 11:57 AM (PDT)

48

i dont get it. a CD in the store costs 13-15$
an album from i-tunes= 10$ they are already profiting more because they arent paying for printing, the case, the paper, the disc, the equipment to do all of that stuff. if anything the price ought to come down. its eliminating raw materials

Posted by droo on August 28, 2005 at 1:10 PM (PDT)

49

For 99¢ a track, I want lossless and printable artwork. Same as when I buy a CD. For $1.49 a track I want sexual favors as well.

Apple’s far too greedy with 99¢ per song. It’s hurting sales. No wonder the spazzo record companies are weighing in with their stock answer to low revenue: jack up the price! Don’t they get it? Lower the price to 25¢ and they’ll make many more than four times the number of sales.

Has anyone ever run out of space on their iPod? (And I don’t mean minis and shuffles.)

Posted by Bob-o on August 28, 2005 at 2:08 PM (PDT)

50

This is stupid- Why not just own the physical CD for that price?

Posted by lovepoke in Paradise on August 28, 2005 at 5:17 PM (PDT)

51

Gas is coming up on $3 a gallon… and you guys a whinning about paying a quarter or two more for a song? Boo-hoo….....

History has branded most of you 20 somethings here as the “spoiled generation”.. and after reading your pathetic posts here..

it shows.

Posted by kilo on August 28, 2005 at 8:48 PM (PDT)

52

eww, .1.49.


the music industry is looking more and more like the oil industry, jackin up the prices.

Posted by Ernie 2.0 on August 28, 2005 at 8:50 PM (PDT)

53

why do you bash Apple for 99c pricing, Bobo? Labels pretty much directed Apple to post songs at 99c since about 97c of the 99c goes to labels. In other words, Apple barely makes anything by selling songs from iTunes.

and as far as dropping the album price to $2.50, if I am the executive of the label I would NOT do it. the risk of offsetting 75% discount on album by selling 4 times as many is too much. While I do agree that album price should go down to 7.99 or uniformed at 9.99, the beef is not with the album price for me. If they raise the song price to 1.49 or $1.99, as someone noted the whole point of getting singles in bargain price would cease to exist.

On the other hand, if labels are going to aggressively cut the album/single price of some outdated music (like 6 month) and raise the album price to $13.99 and single price to $1.29, then I would not whine. Also, if they are going to raise the single price, they better increase the bit rate of the songs too. 128 just doesnt do it for me.

Posted by Make Trades Fair on August 28, 2005 at 9:17 PM (PDT)

54

“why do you bash Apple for 99c pricing, Bobo? Labels pretty much directed Apple to post songs at 99c since about 97c of the 99c goes to labels. In other words, Apple barely makes anything by selling songs from iTunes.”

Er, according to the NYT article, Apple gets 29¢ of every 99¢ sale.

Posted by flatline response on August 28, 2005 at 11:48 PM (PDT)

55

“and as far as dropping the album price to $2.50, if I am the executive of the label I would NOT do it. the risk of offsetting 75% discount on album by selling 4 times as many is too much.”

Well, I think you’d be a poor record exec that tries to equate a DRM’d lossy file with no included backup media or extras with a lossless physical product that has much greater usage rights included. To me these files are no different than a higher quality recording similar to what you’d make off the FM radio and yet they want us to pay the same as if we were getting the open standard CD.

I will never bite.

Look at this way, I’ve spent a few hundred dollars at allofmp3.com, I’ve spent a good amount of money with Napster’s subscription service, and I’ve spent a ton on open standard CDs, I’ve not spent a penny on DRM’d lossy files because they are overpriced. I’ve got zero issues paying for music, I do have issues with overpaying for music. A $1/track is already more than I’ll pay, if they bump it higher then it’s even less likely they’ll get any sales. The market is way too small at this point to be thinking you can change the rules so in favor of the execs and so not in the favor of the customer.

Posted by Code Monkey in Midstate New York on August 29, 2005 at 7:01 AM (PDT)

56

makes me wanna just steal music instead of buying it

Posted by pomarem on August 29, 2005 at 8:53 AM (PDT)

57

i would welcome the price increase on the popular songs while they decrease many of the lesser known songs, because those are the ones i download more anyway.

Posted by Graham on August 29, 2005 at 1:14 PM (PDT)

58

If you have no understanding of how business works please keep your lame ideas to yourself.  Apple and the Labels are in this to make money.  They’re not in this game to give music away.

There’s no way in heck albums are going to go down to $2.50 and there’s no way the price of a single is going to stay at $.99!

A dozen eggs cost about $2.40 in the store.  Can anyone tell me of a store that let’s you buy one egg for 20 cents?  This isn’t how business works.  The labels are not going to abandon their historically proven business models completely.  If an album sells for $9.99 then I believe a single will sell for $2.99.

We can make all the threats we want, but the Labels are not going to listen.  If you don’t buy it, someone else will.  There’s a sucker born every minute.

Posted by Talking Madness in Los Angeles on August 30, 2005 at 12:48 AM (PDT)

59

Buisness’s are good at killing themselves over bad decisions.  I say let the RIAA kill themselves.  What’s left of the record insdustry will just have to reinvent itself and we the customers (who are always right) will have the right to say we told them so.  smile

Posted by Phoenixfury on August 30, 2005 at 2:35 AM (PDT)

60

“If you have no understanding of how business works please keep your lame ideas to yourself.  Apple and the Labels are in this to make money.  They’re not in this game to give music away.”

We have the option of getting music much cheaper than $2.50 at higher quality without usage restrictions already.

That is what they’re competing with, not idiots who believe that something that neither feeds, clothes, or otherwise does more than provide some background entertainment should be compared to items that actually have a tangible cost associated with them.

“The labels are not going to abandon their historically proven business models completely.”

HAHAHAHA! Historically proven? The model completely fell apart in the past decade, what makes you think it can suddenly be revived just because a handful of people like overspending on iTunes.

Even if you only consider my paid-for music, the average cost is certainly no more than $3-$4 an album.

Posted by Code Monkey in Midstate New York on August 30, 2005 at 5:12 AM (PDT)

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