12/13/2005, 8:20am, EST
Tuesday, December 13th
Is Apple holding back the music business?
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."
Filed under: industry
Other story tags: digital music/video
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Well, that's a shocker.
Now if you'll excuse me, I'm off to further retard the digital download market by filling up a new 60 gig iPod with music from CDs I've previously purchased.
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.
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.
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.