Is Apple holding back the music business?
updated 08:20 am EST, Tue December 13, 2005
Apple hurting music sales?
Apple may be , according to a new BusinessWeek column that notes iPod sales--nearly 10 million or so expected this holiday season--have not driven sales of digital music. Apple's closed iPod/iTunes system may preventing the market from growing as fast it could because it limits buying choices--at least according to its competitors such as Napster and RealNetworks. Citing figures from Nielsen SoundScan, the report says that average weekly download sales as of Nov. 27 fell 0.44% vs. the third quarter. "As has been true since the start, iPod owners mostly fill up their players from their own CD collections or swipe tunes from file-sharing sites. Now legal downloads may be losing their luster. ...Says independent media analyst Richard Greenfield: 'We're not seeing the kind of dramatic growth we should given the surge in sales of iPods and other MP3 players.'"
However, the report notes that sales of iTunes gift cards, which BusinessWeek sources say are "off the charts" may be redeemed later this holiday season, thus pushing digital download numbers higher.
Noting that subscription services have begun to take off, BusinessWeek reports that online music competitor Napster is clamoring to offer its subscription music services to iPod users: "I have half a million subscribers who would love to use an iPod with my service," says Napster's Gorog. Industry watchers, however, say that Apple has best chance to popularize subscriptions, which are drawing digitally savvy music fans, but are a tough sell to mainstream consumers,
For now, Apple has no reason to change its iTunes pricing or offer alternative pricing models, because Apple's is making healthy margins on its iPods, which helps the company subsidize its iTunes music business.
"So will Jobs change his tune? Not unless he has to. Apple can barely keep up with demand for iPods, which reap as much as 25% gross margins, vs. minimal profits for each iTunes track. So right now there's no reason for the company to alter the way it sells music or make its player compatible with other services. But if download sales don't bounce back, music companies could start looking beyond Cupertino for answers."
The Department of "Duh"
12/13, 08:46am reply
Apple's closed iPod/iTunes system may preventing the market from growing as fast it could because it limits buying choices--at least according to its competitors such as Napster and RealNetworks.
Well, that's a shocker.
Now if you'll excuse me, I'm off to further r***** the digital download market by filling up a new 60 gig iPod with music from CDs I've previously purchased.
SomeToast
Senior User
Joined: Jan 1999
Quality
12/13, 09:20am reply
What a bunch of whiners. Nobody seems to consider the possibility that the sales of music isn't going very well because of the c*** that's being made these days. Give us quality music, give us quality films and people will buy and stop blaming illegal downloading for the decrease in sales.
macnavi
Fresh-Faced Recruit
Joined: May 2001
It's the holidays...
12/13, 09:30am reply
I think the gift card comment hits the mark. It's the holidays, and people aren't buying for themselves as much right now... they're buying gifts for others. How do you give people the music they want for their iPod? ...with an iTunes gift card.
The drawback for the music industry is that the gift card models delays the revenue they receive from the purchase until the point where the recipient actually uses the card. It's time to stop whining and adjust their expectations accordingly. Instead of Q4 being a high-volume period, it's likely this will shift to Q1. Same money, just distributed differently.
lockhartt
Fresh-Faced Recruit
Joined: Apr 2000
Ha!
12/13, 09:30am reply
I love how the companys forced to compete with Apple are crying foul. What a stupid story. What are they supposed to say? "Our product is junk, so we need people to believe that buying an Apple hurts the industry." Frankly, the RIAA and their tatics have hurt sales more than anything Apple could do. Consumers perceive the RIAA as greedy, so they'll have no sympathy for their problems.
TailsToo
Mac Elite
Joined: Jun 2004
Gorog is full of it.
12/13, 09:33am reply
Gorog if full of it. He called anyone who uses an iPod stupid. Well I think anyone who would take the bait on a subscription music service can't be all that smart either. Because in the end you are spending a whole lot more on renting your music than you are just buying it out right and being able to listen to it forever. If there subscription service dies so does all of your music that you spend monthly on plus what you download.
jhorvatic
Fresh-Faced Recruit
Joined: Apr 2005
poor bitrates...
12/13, 09:55am reply
The reason I don't buy iTunes anymore is because of the poor bitrate. For almost the same price, I can buy CDs at Amazon, et. al. and rip the originals at 256kbps VBR mp3. The difference is amazing. That said, I agree with tailstoo, since most of the CDs I am buying are at least 3-4 years old, and many more are from the 90's (just fell into the shoegaze trap). Now MAYBE if that "we want to sell old music at a lower price point" is really true (don't count on it), then I might be persuaded to take another look at digital downloads (but old CDs aren't dropping in price, so I don't believe them).
Oh, and Napster better watch what they ask for, because Apple will definitely start their own subscription service before opening up to any of the others. If that happens, it's death to Napster and RealMusic.
boomer0127
Fresh-Faced Recruit
Joined: Jan 2004
Am I missing something
12/13, 09:59am reply
I can't believe that the music execs are stupid enough to think that people would rather purchase a second copy of a song they already own, rather than burn the CD to their ipod. Were they really counting on people to do that? I can understand how moving to cassettes from records, or to cd's from cassettes, would drive sales of the new format, but come on, who wouldn't rip their current music, rather than repurchase.
mkral
Mac Enthusiast
Joined: Nov 2000
They Don't Get It!
12/13, 10:08am reply
I have about 600 CD's and I also have about 500 iTunes I have purchased. Obviously I buy music. I would love to spend more if they only would make more available, they make many older popular songs unavailable (record companies are stupid exhibit A). Generally if I can't find it on itunes, I beg, borrow or steal it! Imagine if other business ran things the same way....Gee this would selll alot lets make it unavaiable then complain we are not selling enough!
ClevelandAdv
Fresh-Faced Recruit
Joined: Jul 2004
Delayed Reaction
12/13, 10:10am reply
I now buy all of my music online. (In a couple of cases, direct from the band, otherwise in iTunes.)
However, it took me some time to start doing this. When I first bought an iPod, I had a lot of music to move over from my existing CD collection. Just having spent money on an iPod, the novely of my own music on it was good enough.
Now, though, I'm buying new music. I don't buy CDs anymore. I even ask family for iTunes cards on my Xmas list. It took some time, but now I'm spending more in iTunes than I used to on CDs.
njfuzzy
Fresh-Faced Recruit
Joined: Apr 2001
Non sequitur
12/13, 10:10am reply
Just because Apple isn't making potloads from the iTMS doesn't mean the record companies aren't. Given the virtual absence of overhead, no duplication, distribution etc. it's a sweet deal for labels and typically poor journalism from MacNN.
Feathers
Forum Regular
Joined: Oct 1999