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Record executives upset with Apple?

Written by James Delahunty (Google+) @ 15 Apr 2005 9:43 User comments (4)

Record executives upset with Apple? When people think of the iTunes music store they see a partnership between Apple and major record labels that has become a huge success. Apple seems to have single headedly created the online digital music market with its iTunes store, but that may be the problem, the major labels basically handed the business straight into Steve Jobs' hands. Apple runs iTunes for little profit (when you take into account the amount money they make vs. the amount they sell) but they do it to promote the iPod music player.
Unfortunately for major record labels, this means that both have different aims when it comes to selling music. iTunes will continue to sell music for 99c per track and album or $9.99. However, the record labels would prefer different pricing methods like charging less for old albums and more for newer albums and tracks. That kind of pricing model would help them to take advantage of the demand for music and maximise revenue.

Some record labels are now spending more time looking at different ways to sell digital music, particularly digital downloads to cell phones. "The (wireless) carriers' economics are aligned with us much better than Apple is aligned with us," said one anonymous senior executive at a major record label. "The mobile market is very important, as important to us as the PC." Steve Jobs can be given credit for jump-starting the digital music market but some record labels complain that his company with a 70% market share is setting the ground rules itself.

Jobs also is reluctant to license the companies antipiracy technology, Fairplay, to rival digital music player makers. That means that someone who buys tracks from iTunes has to purchase an iPod to listen to the music on a portable player. "We hate the current situation," one top record industry executive said, referring to the issue of incompatibility between different companies' music devices and services. "There is one man who's going to decide this...No record company by itself can basically tell Steve Jobs, 'You're not going to get our catalogue unless you open up FairPlay to Microsoft.' We can't do it together."

Apple however still gets a lot of support from its customers and analysts. "Apple really understands that pricing models are critical," said Jupiter Research analyst Michael Gartenberg. "I think 99 cents resonates with consumers as a sweet spot." Customers also show their support for the service. "iTunes really sucks you in," said Jackie Kerr, an iTunes customer in Baltimore. "I don't mind the 99 cent cost, though sometimes I do feel stupid for paying $1 for some horrifying '80s band I don't want to admit liking."

In the case of mobile phone music downloads, Apple has also tried to affect that market by partnering with Motorola to create an "iTunes phone". Users could transfer their purchased music from a computer to their phone. However, some people aren't happy with this approach, saying that it still relies on the need for a computer to purchase music. However, the potential for a market for digital music downloads to mobile phones is huge when you really think about it.

I'm sure you have all seen those annoying ads on TV trying to sell you ringtones for your phone. These ringtones only have snippets of songs and they cost a lot more than 99c. Also some of them actually require you to subscribe to a service just to get the tones. I'm sure people with compatible phones would prefer to download full songs for 99c than download a few seconds of it for a lot more. Also you have to remember that there are a lot more mobile phones in use in the world right now than there are iPods in use, or other portable digital audio players.

It is important to remember though that for the most part; record labels and Apple are still working very close together, often holding discussions on other topics such as future copy protection on CDs etc. "The relationships are really better than ever," said Cary Sherman, president of the Recording Industry Association of America. "Everybody understands where the other side is coming from. Everybody understands that there is a market here, and everybody's trying to find a path. The dialog is healthier and more wide-ranging than it's ever been."


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4 user comments

115.4.2005 11:25

Wahhhh! First the P2P'ers screwed with us, now Steve Jobs (who LEGITIMATELY sells music) is screwing us! Wahhhh! We're the music industry, we will never be happy! Wahhhh!

215.4.2005 11:57

Cary Sherman, president of the Recording Industry Association of America said "...everybody's trying to find a path." The only path we totally refuse to go down is, Give the customers what they want...

315.4.2005 12:27

Muhahaha... Finally ppl get what they want at a price they seem to be happy with... Digital Media is the way to go and the Record Company's are clinging by their fingernails onto tapes and cd's...

416.4.2005 14:50

And what they seem to keep forgetting in all this whopla to copy protect CD's is our rights to fair use. I have a right to make a backup of my media and put my original away for safe keeping. THis is to protect my investment from theft and damage. I dont know about others, but if my ability to do this is removed, i will stop buying media i cannot backup <i already have to go to heroic lengths to back up my DVD's and computer games>

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