Once Again, Apple vs. the Music Companies

UK Pop Charts - The number one single this past week was by "Crazy" by Gnarls Barkley and was only available online. This is the first UK #1 single to be an online only release.

I betting they would have made Nothing, or far more likely lost billions in repeated, incompatiable, expensive and unworkable paranoid schemes while more people stole their music. Apple comes up with a program that gives the music companies the lion share of the returns, which is nearly pure profit for them, and they want more control. If a company doesn't like what Apple pays for all of its music, don't sell your rights to Apple, and watch your stuff get ripped off for nothing.

The music companies never learn. Let them go ahead and start making things complicated. This is sort of the cyber way they make albums. Get two goods songs, and then add a bunch of garbage until you've got an album. Now they want us to pay more for the good songs. Go ahead, make my day. I've still got both a Kazaa account and an ITunes account.

When and if Apple Computer settles with Apple Corps and obtains the go-ahead to become a record label, establishing direct relationships with artists and the consumers, the record companies will finally reap the rewards commensurate with their contribution to the world of music: NOTHING AT ALL.

There have been over a billion downloads from the Apple iTunes music store. At a billion that means revenue of 990 million dollars. As well, the consumer has been satisfied with the costs involved which means even more revenue, and the recording industry wants to screw with this?

What? have they forgotten all about P2P sharing??

what? people are still paying for music at all?

Record companies: put out CDs with more than 2-3 decent songs on them and I'll stop using iTunes's nifty 30-second preview feature to pick and choose the tracks that I actually care about.

people dom't like the inconvinience of CD's and the whole Sony Rootkit fiasco has certainly only made it worse. People like to download songs better: They don't have to pay $20 for 12 songs when there's only one they wanted. If people don't have an easy and safe way of puchasing songs. they will simply download them illegaly of P2P networks. How much will the music compaines get they? if the Music industry wants to butt their head in and force this pricing change, they will just lose money.

Thats typical of the music industry. Wanting to complicate life on a major scale. Doesnt seem fair to place a different price just because the song is better than others or more likable. I myself would rather wait till the play it over the radios a billion times and listen to it there till it gets older than dirt. I dont Own an IPOD.. And dont get me started with satalite radio..

Oh happy day! It would please me to no end to see record companies charge 4 or 5 times as much for their latest TOP40 drivel. Since I NEVER buy that sort of crap, it is likely that the less popular but much more desireable (to me at least) music I like would cost even less than 99 cents. I think a single from, say Britney Spears should cost $5. Maybe $2 of that could go toward a mandatory sterlization program for buyers?

Not a bad idea, Jeff. The 40-year-old virgins that constitute the majority of Spears' audience might have something to say about that though.

Apple most likely would never have had the need to battle in court over the desire to barge in to the music business if they'd only done it by funding a subsidary that didn't utilize a logo so close to the one already in use;-)

They could've been
CORE MUSIC INC. - Making better music through a better business model.
WORM MUSIC LTD. - Bringing the world one BIG byte closer to the music it wants!
THE ORCHARD GROUP - Purveyors of some of the freshest music on the net!

You could go on for days....

The record companys business basic model has remained unchanged for decades.

They've been in denail of the need for change even when faced both the potential rewards for moving into the "new" music landscape and the penalities for failing to adopt a new strategy.

They hold to their dead business model as a miser would his wallet and they persist on blaming the customers who drive their profits for their own failings.

As much as I'm not a fan of iTunes or Apple I do hope they can overcome and bring a new ray of hope to this abysmal landscape!

I'd be even happier if several of the music mafia organizations fell as a result...IDIOTS!

I have to agree.... I read a study the other day on the music industry in America. The demographic was mostly the 19-24 age group with a sizeable portion also the 13-18 which was I think about 70% of the respondants (1250 people surveyed.) They found the #1 reason people download music was that the quality of most music today was so poor.

Wow. The music industry HAS to change.

My father's way of doing business is over; even he knows it

I can see why record companies want to charge more for songs that are more popular, commercially viable or geared to radio listeners. The thing I hear over and over when it comes to iTunes and/or single track purchasing, is the purchaser's relief that he or she can just purchases the one desired track and not the other 12 on the CD. This has to cause some serious concern record companies because it poses some huge problems from their current business model.

Record companies have focused on pushing one or two songs per album to the listening public. There is a lot of business sense to this "all your eggs in one basket" approach. Companies can concentrate their marketing dollars on the most commercially viable songs, these songs in turn become the impetus for purchasing the album. Before the advent of the internet, digital music, P2P and iTunes this model worked smashingly for the large record labels. Sell the public one good song and 12 mediocre ones. The inclusion of the filler songs allows the record company to sell the album for 14 plus dollars. This has effectively created song listeners and buyers as opposed to album listeners and buyers. (Just look at the whole Wilco YHF debacle and Warner's inability to grasp the idea of an album being a cohesive stand alone product.)

iTunes has turned this model completely on its ear. No longer can record companies pimp one song in the hope that the user will purchase the CD that contains it. (And that's the big risk with having all your eggs in one basket.) Now each song has to stand on its own merits to be purchased, it can't be 'bundled' with a more popular song. Since a person is not likely going to purchase one song for the price of a CD, the profit per pimped song decreases dramatically. In addition, since the record companies have worked so hard to create song vs. album listeners, it is conceivable that a potential customer won't even bother listening to other songs on the album. To combat this dramatic loss in revenue, record companies obviously want to charge more for the songs that they've worked so hard and spent so much pimping.

There are several other things the record companies could do: sign more bands vs. focus on one or two artists, produce better albums instead of one good song and 12 fillers, allow radio stations to play more music to give listeners more breadth of experience with the music. Of course, these ideas will take a long time to produce ROI, whereas the charge more for stuff that sells will show immediate results. Plus the theory alines nicely with the supply vs. demand law that all the executives learned in Econ 101. (Because why mess with something that's worked in the past?)

At the end of the day, I'm the skinny indie rocker kid sporting the obscure punk band from the 80's t-shirt you see at shows. So iTunes pricing and the pending disaster facing large record labels doesn't affect me too much. I'll continue listening to KEXP and internet radio, buying self released and uber-indie label music at my local independent music store, going to shows and being generally cooler than everyone around me on my fixie with PBR in hand and a smug "I saw this band before they became popular... now look at all these poseurs" look on my face.

The quality of music is not poor. It's just hard to find because record company hacks and radio programmers push the lowest-common-demoninator junk on the public. Finding good music is hard work - a job that most people don't have the time or energy to undertake.

Man you seriously misunderstand how media companies price their product if you think that old and obscure media would some how be cheaper than the mass marketed flavor of the month.

The album format was never the problem.

The problem is with this generation's "one hit wonders" and pop-pretenders who predominate the industry today. Anyone can put out one great hit. Todays technology and marketing muscle can make anyone sound great and look good doing it. No instruments needed. American Idol has proven that.

Only the truly talented can put together a string of related, relevant songs that can collectively be called an album. An (good) album tells a story as composed by talented musicians. Think Van Halen I. Led Zeppelin (any). The Doors. The Beatles. I could go on... but the point is, the album format is not about a collection of 10-12 number one hits.. it is about the more popular "hits" subsidizing the less popular tunes, and therefore exposing the listener to a whole new experience and broadening their musical tastes too.

No one bought Van Halen I for Ice Cream Man, but it has become one of their most memorable tunes. That single could never have made it on its own, but boy what a treat it was at the end of the album!

But I digress, the album format has been dead for a long time. And yes, video killed the radio star. Looks came in and kicked Talents ass all over the floor.

I think Hollywood has not realized the importance of dollar pricing.

Retail Dollar stores are popping up like dandelions everywhere, because people simply like the idea of a fixed price.

Record companies used to get $5 per good song. I used to buy CDs, and I am sure most others, for one or two good songs only. We were willing to pay more than $10 even after knowing that we like only 1 or 2 songs. Basically the price of the music is as much as the people are willing to pay for it.

Now Apple sells the same music at $1. It is easy to sell something at 80% discount. Record companies initially agree to promote this model. So the credit for the success of the model does not go to Apple alone. If record companies insisted on $5 per song then I am sure Apple would not have succeeded in making this revolutionery change.

Initial promotion is not a new thing. Even goverments many times agree to give tax-breaks to some thing new which they believe will bring a bigger benefits after the initial success. Now we consumers are sort of saying that governments keep those tax-breaks forever even after the novel thing does not need any more financial encouragement?

If Apple really thinks of keeping the cost low for consumers then it must agree to a fair solution to record companies. Apple treats the iTune as loss leader and makes substantial profit on iPod. So IMHO, there are three ways to have offer fair solution to record companies.

1. Let the record companes compete with each other on prices. Let them charge 5cents for a not-so-in-demand song and $2 for an in-demand song. Let the market forces work. It is the right of record companies to estimate how likely the user to pay a higher price vs how likely they are willing to steal.

2. Give a cut to record companies on iPod sales. Certainly availability of 99 cents song on iTune makes iPod more desirable.

3. Make iTune the complete loss leader. Pay all of 99 cents back to the record label. Realizing that, since iTune is a loss leader and bundled with iPod, its cost for Apple is already built in the cost of the iPod.

Clearly 1 is the open market solution which made capital economies rich. 2 and 3 are the compromises which show that Apple is on consumer side. Anything else is just Apple's abuse of its almost monopolistic power in digital music business.

In the end, Apple must realize that Apple needs record companies more than the record companies need Apple. iTune is only a fraction of revenue for record companies but it is the air-supply for Apple.

Go mess with something that works and it will mess with you. Apple introduced a legal model that is thriving and of course, the record companies has to show its ugly head in the form of greed once more. If that industry successfully breaks Apple's model, then the masses on the internet would be more than happy to bring out the wrath again via illegal downloads. "You can't stop the insurgency... and good luck in trying to contain it."

As a musician and private studio owner who has spent his whole life in various aspects of the music business I must say the record execs have created thier own hole. With the dramitic drop in the cost of producing records (most of the good recording are done in the artists' private studio), in conjunction with the huge drop in pressing the only real costs for the record company is marketing and distribution with the artist still typically getting a paltry 10 -20 % of sales (after expenses) there is no excuse for charging $16 - $20 for a CD. No wonder people download.

As far as giving the record companies part of the Ipod traffic, psat, and make sure you give them part of the radio, TV and DSL revenue also.
What, they don't think econimics 101 applies to them? i.e. lower the price, sell more product, make more money on volume.

Anonymous, 2 up.

You're dead wrong. If the idiotic management of those cash-fat music labels had woken up when Napster hit the scene, they'd be fine.

Given the current consumer attitudes towards the music industry and purchasing cd's - and the industry's continued reliance on heavily-pimped, hyped-out bubblegum albums with a club single and 12 filler songs - the recording industry as it has stood since the 60's is ready for a sea change.

If anything, the music companies need Apple.

On the other hand, to ShittyDriverSpotter - people never stopped so-called illegal downloads (which we call fair use here) RIAA sued Americans into compliance. Ain't gonna work the world over, trust me.

One major factoid missing from discussions on Record label profits in Digital Downloads is the lack of cost vs. the more traditional store-bought formats.

They're making 70 cents a song on an infinitely available product that costs them nothing to distribute. There's no packaging costs, no manufacturing costs and no shipping costs. Apple is fronting the hardware, bandwidth and software requirements, so the labels have little to nothing invested iTunes.

iTunes brought me back to paying for music again, but if the songs I want wind up being more I'll go right back to my old ways...

The music industry is greedy. I have boycotted the music industry for quite some time now and will continue. I listen to the radio. That's good enough for me. I won't pay a penny for the worthless garbage they're passing off as music nowadays.

My two cents.

And it's staying in my pocket and out of the filthy rich music stars hands.

I like the post about 'Ice Cream Man' - however I think those days of letting artists choose material are long behind us ...the last decade or so has not only seen 1-2 hits per album but along with that a sort of 'manufacturing' of artists. This was the problem - getting force fed substandard bands with formulaic songs ...and then adding the 1-2 'good' songs into the full album concept that - like other posts have mentioned - take a lot of skill on the part of the band/artist. Too many crappy bands leads to only a few worthy songs that in turn leads to the consumer revolt over the pricing.

Someone stated that the music company got nearly 100% profit off this venture. In case you don't know, most recording contracts require the artist pay 100% of the costs. This means that they get 100% profit. That's how the oligopoly of music houses managed to work things out. It is also why the music industry churned out so many half-assed artists in the 90s. They were signing up everyone that could hold a tune.

Bottom line, the music industry has it in spades. The costs are covered by the artists (which includes salaries and all production costs). This is why they don't like Apple. They got it anyway and now they want to have their cake and eat it too.

Anonymous,
1.)You are an idiot.

2.) The record companies did not think it was a good idea, or the start of something big. They thought it would fail, and give them more legal ammo to get subpoena's against ISP's for private information. So the credit for success does go to Apple alone.

2.) Everyone used to buy 8-tracks too. How many 8-tracks do you see being made for new music now? How about vinyl or cassette's, for that matter? The reason you paid $5 a song is because you had no choice, not because you were "willing". The consumer now demands choice, at a lower price. If the labels had insisted on $5 a song, iTunes would not exist. Period.

3.) Market forces have never determined the price of music. The public has been screaming about the price of music for 50 years, and not had one wit of effect. Since it costs someone literally nothing to host a single song, there is no impetus for ever lowering it's price, since there is no "stock" to move.

4.) Applie is already losing money on iTunes. You want them now to lose money on the iPod as well? They give the labels 80% of the cut off of iTunes, for which the labels have to do .. oh let's see .. .nothing. Face it, the labels are being selfish, greedy bastards. As usual.
I think the current situation is already more than "fair" for the labels.

5.) I realize you want to keep your job at the record company, but if it were not for iTunes and others like it, they would slowly hemorrage to death at the hands of Kazaa and other P2P technologies. Then where is your job going to be? Apple put the bandage on the severed artery of the RIAA and now, having forgotten the pain, they want to rip it off again. Idiots.

6.) You are an idiot.

it took them a long time to accept Radio, and to accept CD's even. they struggled to cling to tapes.

now a model of selling things they don't need to mkae! that's how they got into the business of a monopoly! nobody else can make cd's as cheap and fast thant he labels.

now what do they have to tip the scales in there favour. empty threats.

but honestly, i have seen panels of these old white men bitch and bray about what they think the industry, and consumer in general are like at the Canadian Music Confernece a while back.

Biggest rip for the money, but it showed they don't even understand what's going on. The only person that got an applaude was the one girl that pointed out that nobody listens to radio because it plays music nobdy likes, nor do they play new or inovative music.

response from the consultant for major music labels, in a high and mighty voice:
"bah, radio is just for revenue."

They don't understand why people like music. not because there supporting someone, or that there giving there money to fund an artist, or more correctly, a major label, because only less than 10% of artist ever see money from a record deal. that's being generous to how many recoupe.

Basicly, they are scared. they are losing there power fo making a physical commodity they can over price for. and there's no turning back. They should have bought out napster when they had the chance.

everybody knows that's how you make it in the biz. not by sueing people.

the music industry has become extreamly greed there is no dought. and this endless war of fighting people who try to "illegaly" steal music is going to rage on forever. the fact that they are sueing over itunes is stupid though. like the artical state they are getting 500 mil. just for letting mac fit the bil for the bandwidth and the right to put the music in mpg4 format, and thats it. some one should start a download only company and contract artist to liscense songs to them. this would allow them to team with online stores to partner with and flood some cheaper music. thank god for file sharing.

To be honest, I long for a day when music companies are a thing of the past. It's about time artists took control of their own destiny.These days great talent gets set aside for the cosmetic...If it gets any worse artists will start looking alike.. The music companies have gone in a decade from managing and promoting good artists and music to creating fake artists with excellent lipsyncing capabilities...Makes me wonder how many artists are REALLY creating their own music these days? Thankfully I don't suffer as much as the rest of you since I've been creating my own music for years!

To be honest, I long for a day when music companies are a thing of the past. It's about time artists took control of their own destiny.These days great talent gets set aside for the cosmetic...If it gets any worse artists will start looking alike.. The music companies have gone in a decade from managing and promoting good artists and music to creating fake artists with excellent lipsyncing capabilities...Makes me wonder how many artists are REALLY creating their own music these days? Thankfully I don't suffer as much as the rest of you since I've been creating my own music for years!

is it just me but i have never had and legal song on my ipod? like um i will by songs when they go to 15 cents then ill consider it buntil then i have my ipod nano filled with limewire music lol

To Anonymous 1 post above me: I don't understand a word you just said.

Moving on, I love eMusic. I'll just keep getting disposable, cheap Visa gift cards and then get 100 free downloads over and over and over... :)

Look back at the 80's when CDs first came out. What kind of music was popular then? Bad 80's pop music. Every album had one or two (Maybe) good songs on it and the rest was just filler. BUT, there were also a bunch of REALLY good albums to come out then, too, they were just considered "obscure" or they just weren't mainstream back then... It's the same thing now, except that instead of CDs being all the rage, it's downloadable music. People say times have changed? Have they really? Wait until 2010 when the next "Big" thing happens in music that mixes everything up some. Until then, enjoy the P2P networks and Russian websites that allow you to get full albums for $.99 instead of just one "Pop" song.

Multi-tiered pricing, at least at the song level, is idiotic.

From my experience, people who actually pay to download music (not me, I download for free, then buy the cd if I like what I hear), do so for one of 2 reasons:

1) general guilt
2) specifically so indie artists will get money out of it
(I guess you could add "Kazza screws up my computer", but then I tell them about the better file-sharing options.)

Now, say a couple tracks cost $3, and the rest cost 79 cents. The people who download because of reason #1 will pay .79 a piece for the cheap tracks, and will download the $3 tracks for free. Since they're still paying some, they won't feel guilty.

#2 doesn't apply, because (I can only assume), they are talking about raising the price on "popular" (i.e. top 40) artists.

So either way, they're screwed.

Like many of the people who have already posted, iTunes brought me back into the legal music scene. I purchase music through iTunes as atonement for Napster-era tansgressions, and because I don't use CDs anyway, save for poppiong them into the CD-ROM only to have iTunes import them. SO why would I pay twice as much for a CD that I'm just going to import, put in a box, and never look at again? I wouldn't.

And on a related note, MovieLink and CinemaNow are perfect examples of the industry refusing to let go of their 20th century business model. After they've tanked, maybe Hollywood will crawl back to Apple and say, "can we talk?"

this is obviously a dying industry's last ditch effort to line their pockets before they have to take their talentless asses to the unemployment line... their 'services' (namely, helping other talentless hacks make shitty music) are no longer needed. finally, we have a way to pay our money to the BAND, almost directly. who needs an agent/'vp'/'ceo'/blood-sucking-hanger-on collecting checks for free??