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Apple, music labels still divided

updated 08:30 am EDT, Mon April 3, 2006

Apple vs. music labels

Apple and the music labels are still divided over digital music pricing, pending upcoming negotiations over iTunes pricing later this year. A new report suggests that the lablels could pull their entire catalog from iTunes, if Apple CEO Steve Jobs takes the hard line on its one-price, $0.99 flat-fee for songs. The major music labels want to raise prices on popular songs and cut prices on less popular ones -- to match the pricing of CDs, although Jobs, who called the labels greedy last September, argues they already make more on sales of digital songs and any price increase could push consumers back toward piracy, although the labels deny such a charge. “After you cross that 99-cent psychological line with consumers, you’re going to hurt sales,” said Wayne Rosso, who headed the now-defunct Grokster file-swapping service and is currently working on a new service licensed by recording labels to sell downloads.

The spat over pricing has been waged in the public with music executives pushing for multi-tier pricing: "The market ought to be able to decide, not a single retailer,'' Warner Music's Bronfman, 50, said in September at a Goldman Sachs Group Inc. conference in New York.

The record labels were hit with a federal class-action lawsuit accusing major record labels of fixing prices for internet music downloads as well as CDs. In addition, digital music price fixing is already being investigated by New York Attorney General Eliot Spitzer and the U.S. Department of Justice; however, Apple's dominating position in the digital market -- with roughly 80 percent marketshare -- skews the balance of power toward Apple.

“The power balance at this point is probably still going to be on the side of Steve Jobs and Apple,” Kleinschmit said. “Can the record labels really afford to pull their catalog from iTunes?”

The report says that labels could respond by threatening to cut back the special promotional exclusives that now help drive traffic to iTunes, offering them instead to other online retailers or to wireless carriers that typically sell a song download for more than $2.

 
Previous Comments

Let market decide

04/03, 08:57am reply

Bronfman should put up or shut up. If he thinks the market is on his side, then he should test the market. His contract with iTunes is not exclusive. Let his label adopt multi-tier pricing with one or more of iTunes competitors. If the competitor's marketshare goes up or iTunes's goes down, he will have proven his point. If not, then he will have tried. I think that he and I both know how this test will turn out.

MacScientist

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Leeches!

04/03, 09:12am reply

That's what the record labels are. The sooner we sprinkle salt on them the less blood we (and the artists) will lose to them. The labels offered artists marketing and distribution, but it was a grotesquely one-sided arrangement. The internet/iTunes Store has rendered that "service" redundant. I'm not sure what they ever offered consumers.

Ben Lawson

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Downloads bad deal...

04/03, 09:13am reply

...and it's not about piracy...

...it's because of the quality - AAC as good as it is still isn't lossless, which means consumers are getting less for more as it is...

Speak with your wallets ! - buy non-drm hi fi source (LPs, CD's) & rippem' if you want to send a clear message & keep Big Brother at bay...

I'm guessing the major labels are licking their chops at knowing what, when & where you buy & listen to your music...

It would be interesting to know Apple's licensing & pricing policies for the time when digital downloads are the ONLY source for music buyers...

bobolicious

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With 80% market share

04/03, 09:33am reply

With 80% market share the labels would cut there own throats if they pulled the music away from iTunes and raised there prices. They must be brain dead if they don't think people would go back to piracy.

jhorvatic

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Go Digital

04/03, 09:54am reply delete

I think Artists should perhaps move away from the big music labels and go to Apple or others like them directly. I believe they would get a better deal and perhaps better exposure for their music.

This would then open the way for record shops or some thing similar to burn a CD/DVD for the customers that wanted that service.

What does everyone think?

AussieRog

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I long for the day...

04/03, 09:55am reply

when distribution in the music industry takes on the main tenets of the open source movement, and record labels and radio as we know it dies the death they both deserve.

godrifle

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Radio

04/03, 10:02am reply delete

Not too sure about the radio dyeing out, its still very good way to get to the masses and the coverage is huge. Plus just think how many times you have heard a track on the radio and then go out and buy it : ))

AussieRog

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downloads and markets

04/03, 10:04am reply

it's because of the quality - AAC as good as it is still isn't lossless, which means consumers are getting less for more as it is...

Speak with your wallets ! - buy non-drm hi fi source (LPs, CD's) & rippem' if you want to send a clear message & keep Big Brother at bay...


Right, its much better to spend $15 on a CD then $10 on downloads, assuming you wanted all the songs. Isn't it better to put up with less quality but saving money to get those 2 songs on the CD you wanted, rather then spend all that money just to get non-DRM, "loss-less" quality?

Bronfman should put up or shut up. If he thinks the market is on his side, then he should test the market. His contract with iTunes is not exclusive. Let his label adopt multi-tier pricing with one or more of iTunes competitors.

Hey, iTunes has a basic monopoly on downloads. Performing you're test would be inconclusive since it would represent such a small number of users. Plus, people with iPods are still kept from using it, so there's a whole market gone.

But how about this. Maybe Apple should put up or shut up. Why not let the labels raise (and lower - yeah, right!) prices like they want, and see how it affects sales. I mean, its the labels who'll be hurt more, as piracy ramps up again, right?

With 80% market share the labels would cut there own throats if they pulled the music away from iTunes and raised there prices.

They wouldn't be cutting their own throats. h***, one poster here already says you should buy the overpriced CDs, not the overpriced downloads. So the downloads will be more overpriced. Just buy the CDs (which they want you to do anyway, since the labels have really not embraced downloads). Or go illegally download the music for free.

Man, you people act like downloading music from iTunes was a right granted to you by the US Constitution. But it ain't. If the labels want to charge more, they should be allowed to, under rules of capitalism. If Apple doesn't want to sell for that, they have the right not to (they don't have to charge more, they could just suck up the difference). Its the right of any company or organization to shoot themselves in the foot if they want. Its the American way!

Oh, and wouldn't it be an antitrust issue if all the labels pulled out at once? I mean, that seems a little wrong.

testudo

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Re: i long for the day

04/03, 10:08am reply

when distribution in the music industry takes on the main tenets of the open source movement, and record labels and radio as we know it dies the death they both deserve.

Right. And how does freely distributing music help musicians? I mean, how many people who download and use open-source software actually go "Hey, I like this, and even though its open source and 'free', I'm going to support the developer". Just look at how much shareware authors get paid if they don't put in registration codes on their software...

testudo

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Grrrr I hate the Labels

04/03, 10:52am reply

These record labes ARE greedy. Jobs and iTunes IS the market leader right now. I'm with Jobs on this if they do Variable pricing Piracy WILL increase again. I know that I won't pay more than 99 cents a song for downloads off the iTunes store. People who complain about the 128Kps AAC files should just stop complaining. If you don't like it buy the Damn CD. For me and many others they sound fine and it's convienent. If when I do buy a CD I rip it at 192Kps anyway since if you were to make it Apple Lossless or some uncompressed for your iPod wouldn't last too long.

typoon

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