James Delahunty
3 Apr 2006 19:54
It's no secret that Apple Computer Inc. and the world's largest record labels are caught up in a dispute over the price of a single track music download. Currently, songs sold through iTunes are at a fixed price of 99c and at similar fixed prices in international iTunes stores. Apple CEO Steve Jobs believes that this price is good for the market in these early stages and good for consumers. Record label executives do not agree however; they want variable prices introduced - specifically, more popular music will be priced higher than less popular music.
So far Apple has refused to have its hands pushed and Steve Jobs publicly said what everybody was thinking: "So if they want to raise the prices, it just means they're getting a little greedy." He made this comment after pointing out that record labels make more profit from a sale of a download than a sale of a single CD. For each download that iTunes sells for 99c, labels snatch up the largest figure; 70c. When you consider iTunes has sold over 1 billion music downloads and the frequency and figure of downloads are increasing rapidly, you can see why the extra cents are being called for by record companies.
Apple's defiance could be shaken this year however as record labels are expected to enter into music licensing discussions with the company. "The labels really want to be able to boost up the price for downloads on new releases," said Matt Kleinschmit, an analyst with the Ipsos Insight market research firm. "The question is, are we at a time now that we want to experiment with variable pricing?" Music download stores are still at a stage of attempting to attract consumers who download illegally to their legal services, can they really afford to push the price up when consumers can easily get music for free?
It is likely that most of this dispute has stayed in the background between the record labels and Apple, but along with Steve Jobs' comments, there was also a public reaction from Warner Music Group Corp. CEO Edgar Bronfman Jr. In his reply to Steve Jobs' comments he insisted that Apple must not only allow variable pricing, but should also give the labels a percentage of profits from iPod sales. His argument for this claim was that Apple uses the label's music (through iTunes) to indirectly promote iPods.
EMI Group PLC CEO Alain Levy also believes that variable pricing should be introduced, so that top-selling artists will be priced higher than less popular artists. Analysts believe however that Apple will have the upper hand in any discussions simply because of iTunes' market dominance. It would indeed be a very bad move for a record company to remove their content from iTunes. "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 labels can strike back at Apple though by cutting back on promotional exclusives for iTunes and instead give them to other stores that price music higher. "We can throw variable pricing in and we can raise prices of a hit song, but it doesn't mean consumers will buy," said Charles Wolf, securities analyst for Needham & Co. LLC. "They have an alternative - get songs for free."
Source:
MercuryNews.com