April 15, 2005 4:00 AM PDT
Music moguls trumped by Steve Jobs?
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Now, nearly two years after Apple's iTunes launch, record executives have become worried that they have inadvertently ceded too much power over their industry to this charismatic computer executive.
Frustrated at what they see as Jobs' intransigence on song pricing and other issues, some record executives are now turning their hopes toward other partners, particularly mobile phone carriers eager to get into the business of selling music. They see this new focus as a way to broaden the digital music business, and lessen Apple's dominance over their market in the process.
What's new:
The dominance of iTunes and iPod has recording business moguls questioning their deal with Apple.
Bottom line:
Frustrated at what they see as Steve Jobs' intransigence on song pricing and other issues, some record executives are now turning their hopes toward other partners, such as mobile phone carriers.
"The (wireless) carriers' economics are aligned with us much better than Apple is aligned with us," said one senior executive at a major record label, who asked to remain anonymous because of his company's ongoing relationship with Apple. "The mobile market is very important, as important to us as the PC."
Jobs is given undeniable credit for jump-starting what is now a fast-growing digital music market, but some music executives complain that his company, with 70 percent of the digital download market, is setting the ground rules for their own business.
While iTunes is designed to propel the sales of iPods--more than $1 billion worth in the last quarter alone--the labels complain that Apple's policies are insensitive to their goals and limit their ability to grow their digital business even faster.
For example, Apple wants to sell all its songs for 99 cents each, a single price point that's easy for consumers to understand. But the record labels have pressed for the ability to vary prices to maximize their own sales. They want to sell older titles at a discount--like the $9.99 CDs available in most record stores--and charge more for popular songs to take advantage of market demand.
Jobs also has refused to license Apple's antipiracy technology, called FairPlay, to rival MP3 player makers, and has blocked music formats from other companies, such as Microsoft, from the iPod. This makes iPods and the iTunes store incompatible with rival digital music devices and stores, fragmenting the market in a way the labels fear ultimately limits sales.
"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
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"No record company by itself can basically tell Steve Jobs, 'You're not going to get our catalog unless you open up FairPlay to Microsoft.' We can't do it together."
If Apple were to license out FairPlay, why would it be to Microsoft? Microsoft would be the last company to get a license for FairPlay. And Microsoft wouldn't need a license for Fairplay for someone to play iTunes Music Store songs on a Creative device. And it's already possible to play iTunes Music Store songs on Windows. I just don't get it. Microsoft doesn't need a Fairplay license.
that some labels put pressure on Jobs to up the pricing on some
cuts to $1.29. Jobs held the line.
Now, if it's a monopoly they're seeking to break, the pricing
would go DOWN, because of increased competition. That's not
the aim here. For me, if Apple has to open up Fairplay, then ALL
DRM is opened up. Suggest that, and notice the sound? Crickets.
75 cents for every song Apple sells through the iTunes music
store. (The lowest guess I've read is about 60 cents per song.)
What does the music industry have to supply for that 75 cents?
Only the original digital tape (or CD) of the song. If a song is
downloaded 100,000 times through the iTunes music store they
get $75,000 and it cost them $5.00 or less to supply it.
The industry does not want to sell old songs more cheaply. That
is a pure smoke screen.
They want to sell as many songs as expensively as they can get
away with. Does anyone think they will only get 75 cents of a
$2.50 song down load? Not on your life. If they get a similar
percentage they would be getting upwards to $1.89 a song.
Sounds like pure, unadulterated greed to me.
pull one over a small, high-quality, smart, yet tiny market share
based company. Bottom-line, and here is why.
THE TRUTH:
"Now, nearly two years after Apple's iTunes launch, record
executives have become worried that they have inadvertently
ceded too much power over their industry to this charismatic
computer executive" --- yep, and it was a good thing to.
THE SMOKE SCREEN:
"Frustrated at what they see as Jobs' intransigence on song
pricing and other issues, some record executives are now
turning their hopes toward other partners, particularly mobile
phone carriers eager to get into the business of selling music"
--- Because Apple has a tiny market share, they fully expected
to be able to replicate Apple, and/or control Apple in their
arena. "BOOM" in their faces. The arena belongs to Apple.
"While iTunes is designed to propel the sales of iPods--more
than $1 billion worth in the last quarter alone--the labels
complain that Apple's policies are insensitive to their goals and
limit their ability to grow their digital business even faster." ---
Gee Steve, that was too good. Can we take over now? They are
complaining that iTunes are too successful, and they see no way
in hell, that they are ever going to get control of that market.
"For example, Apple wants to sell all its songs for 99 cents each,
a single price point that's easy for consumers to understand. But
the record labels have pressed for the ability to vary prices to
maximize their own sales. They want to sell older titles at a
discount--like the $9.99 CDs available in most record stores--
and charge more for popular songs to take advantage of market
demand" --- Their argument for wanting to have variable
pricing is bogus because I have seen older albums at rates the
same or lower than in used cd/record stores. However, each
song remains at a fixed price of .99 cents. This is all in
accordance with the FairPlay "way of thinking". I think they
forgot that Apple is also a supplier of "ideas" as much, if not
more, than selling software and computers.
THE BOTTOM LINE TO THIS STORY:
The record labels thought they were going to have Steve play
with an idea of his, to see if they could take advantage of it, if it
was successful. They thought this was a win-win situation for
them. iTunes, and iPods became the market on a scale the
executives hadn't the brain power to imagine. Now they are
being forced to play in a market with fixed rate costs to
consumers (by the way ALL consumers LOVE if the price is fair,
and affordable).
They feel this is restrictive because they fully believed they
would be able to control any market involving music. The want
to treat music as a utility and be able to fluctuate prices to
maximize their profits.
Due to their limited vision and imagination, they are attempting
to play in the digital phone/music market?! They are so
ignorant that they think their is a difference between a phone
and computer. That may have been true in another era, but it's
certainly not now.
The record labels can't extract themselves from iTunes, because
it is so successful. Is it true that the record labels collect .75 on
each 0.99 song?! Even at half that we are seeing tremendous
profits going to the record labels and they simply have to give
Apple the right to sell a song, and a single digital copy of the
song. They have practically no cost for all of their profits!!!
AHHHHH screw the record labels! Power to the musicians. From
what I've seen, musicians should be signing with iTunes, instead
of the likes of A&M.
would be high INITIALLY because they were new technology and
that the prices would come down. They lied! In fact, over time
the prices went way up - and they lost one of thier best
customers, myself, as a result of gouging.
Not again. Steve Jobs created a solution were no one else did,
including the greedy Record Co.s.
They work in industries which the consumers view as basically public domain services. Thus they have little tolerance for price gouging dweebs who are perceived as feeling entitled to find new ways to ramp up prices as quick as they can. The public will happily and without guilt, take advantage of these companies at every single turn, and already have for decades. These companies in turn will attempt to stall or stop the ?abuse? of their product, and as always, fail.
I always bought a walkman that could record music off the radio. My friends in college all dubbed audio cassettes as fast and furious as they could. The lucky few with CD-Cassette decks dubbed CDs as quick as they could. I was already burning music to my 8 bit sound card in 1992. When the ZIP drives came out, the RIAA and many others could have seen what was coming. I simply ran audio-out to my stereo and made tapes. Nothing has changed to prevent anybody from doing the same, only with CDs. Indeed, for all the talk of DRM, it still doesn?t stop anybody from doing that even now, and utterly by-passing it.
The industry has long said people wouldn?t because they would want a pure copy. Pure audio is moot. With any walkman, MP3 player, or iPod, the wind, people around you, work-out machines, all make enough noise to render a perfect copy and a technically imperfect one indistinguishable.
This current trend with iTunes will pass, but the price expectations will not. The RIAA and cell phone companies alike will attempt to put the genie back into the bottle and fail. The tighter the squeeze, the quicker they will simply spur another mass rebellion of free downloading, or whatever comes after that. Last I checked, people were still downloading more than ever.
The reality is nobody, not Steve Jobs, not the RIAA will get rid of copies or the future counterparts of P2P. That so many more people are willing to go download and copy, and that they feel they way they do about attempts to stop them, and feel they are getting robbed when paying more than $.99, only shows how low a value the music industries product really commands.
NWLB
http://www.nwlbnet.blogspot.com
This would represent a convergence of technologies.
Instead of carrying around an MP3 player and a cell phone you'll just have one device.
Sort of like the Crackberries and Treos. The PDA phone is a natural.
Of course, you do realize that Jobs could team up with Motorola and create an I Pod Cell phone.... ;-) Imagine not just an MP3 player, but a recorder too. ;-)
under this story. Every one has been negative and I totally agree
with most of the comments made here. There is no way in hell
I'd spend that much on a download. As for mp3 ringtones: I use
my powerbook g4 with bluetooth and download ( i use the
original cd i bought) them onto my sony ericsson s700i and set
it as my ringtone. Spend £2 or more on some crappy ringtone no
way. Mobile phone carriers and most record companies are
unreasonable for the amount they charge for their content
especially for some of the music that record companies
promote. I am a huge fan of the itunes music store, but i'd like
to see higher quality downloads, the whole cover art booklet
(lyrics woud be great too) and more Indie bands.
WRONG!
The consumer is controlling the rules of the market. Steve Jobs is the only one so far who has shown the ability to understand what consumers of music want in this new world. What this demonstrates is that the record companies care less about what consumers want (e.g. they don't care about their customers).
Well, I will continue to support iTMS and Apple, and I will boycott the "alternatives" being put up by the record companies.
This is among the most shortsighted strategies I have seen from a company. While Apple is currently riding on its iPod?s success, consumers are busily purchasing iPods not so much for their technology, but because of their ?neat? scroll wheel which has made the iPod the current trendy item to have. As iPod?s novelty fades, so will Apple?s iTunes stronghold and its Fairplay DRM. Apple must realise that its current success in the portable media player market is not guaranteed indefinitely for the future, and it must actively seek additional methods to spread the use of Apple technologies while generating profits through licensing. If Apple began licensing out its DRM now, it could capitalise from licensing royalties from third party players, which would not likely hurt iPod sales whatsoever, but allow Apple to push aside Windows Media and establish its Fairplay as the music DRM industry standard. If Apple neglects to license its DRM technology, it will only see a rise in Windows Media use which will inevitably lead to Apple being forced by consumer pressure to add Windows Media playback to the iPod, and see its Fairplay DRM fade away into the shadow of Window Media.
when you don't even agree with their philosophy?!
If you think Apple, iPods, iTunes, the Mac, are fads, then sell
your $tock when you think the fad is changing.
i don't promote file sharing over the P2P networks. those networks are thriving in spite of lawsuits and threats. consumers are the boss of commerce. we decide what business models work and thrive. music is quickly becoming a commodity.
"have you heard this song? here, let me send it to you via email."
the face of the industry is changing. the companies that try to control the conduit with DRM and outrageous prices will learn their lesson by ultimately failing to deliver what consumers want at reasonable prices. there's no way i would pay $2.50 for one song. no way.
i've already paid for some record executive's kid to go to college. i'm drawing the line.
pull one over a small, high-quality, smart, yet tiny market share
based company. Bottom-line, and here is why.
THE TRUTH:
"Now, nearly two years after Apple's iTunes launch, record
executives have become worried that they have inadvertently
ceded too much power over their industry to this charismatic
computer executive" --- yep, and it was a good thing to.
THE SMOKE SCREEN:
"Frustrated at what they see as Jobs' intransigence on song
pricing and other issues, some record executives are now
turning their hopes toward other partners, particularly mobile
phone carriers eager to get into the business of selling music"
--- Because Apple has a tiny market share, they fully expected
to be able to replicate Apple, and/or control Apple in their
arena. "BOOM" in their faces. The arena belongs to Apple.
"While iTunes is designed to propel the sales of iPods--more
than $1 billion worth in the last quarter alone--the labels
complain that Apple's policies are insensitive to their goals and
limit their ability to grow their digital business even faster." ---
Gee Steve, that was too good. Can we take over now? They are
complaining that iTunes are too successful, and they see no way
in hell, that they are ever going to get control of that market.
"For example, Apple wants to sell all its songs for 99 cents each,
a single price point that's easy for consumers to understand. But
the record labels have pressed for the ability to vary prices to
maximize their own sales. They want to sell older titles at a
discount--like the $9.99 CDs available in most record stores--
and charge more for popular songs to take advantage of market
demand" --- Their argument for wanting to have variable
pricing is bogus because I have seen older albums at rates the
same or lower than in used cd/record stores. However, each
song remains at a fixed price of .99 cents. This is all in
accordance with the FairPlay "way of thinking". I think they
forgot that Apple is also a supplier of "ideas" as much, if not
more, than selling software and computers.
THE BOTTOM LINE TO THIS STORY:
The record labels thought they were going to have Steve play
with an idea of his, to see if they could take advantage of it, if it
was successful. They thought this was a win-win situation for
them. iTunes, and iPods became the market on a scale the
executives hadn't the brain power to imagine. Now they are
being forced to play in a market with fixed rate costs to
consumers (by the way ALL consumers LOVE if the price is fair,
and affordable).
They feel this is restrictive because they fully believed they
would be able to control any market involving music. The want
to treat music as a utility and be able to fluctuate prices to
maximize their profits.
Due to their limited vision and imagination, they are attempting
to play in the digital phone/music market?! They are so
ignorant that they think their is a difference between a phone
and computer. That may have been true in another era, but it's
certainly not now.
The record labels can't extract themselves from iTunes, because
it is so successful. Is it true that the record labels collect .75 on
each 0.99 song?! Even at half that we are seeing tremendous
profits going to the record labels and they simply have to give
Apple the right to sell a song, and a single digital copy of the
song. They have practically no cost for all of their profits!!!
AHHHHH screw the record labels! Power to the musicians. From
what I've seen, musicians should be signing with iTunes, instead
of the likes of A&M.
I have a couple ideas to add however:
1) Let's say Apple and Motorola release their co-branded phone/
ipod combo. This trumps the so called Telecom Music Service.
Why? Because nobody's going to want to pay or play the $3.99
per song game on a cellular/gsm phone. Apple does an end run,
and never actually has to touch a cellular phone service.
Motorola puts out a phone that's instantly in demand (it's an
ipod and a phone, duhhh...) and Verizon, Cingular, etc HAVE to
respond and pick up the phone - even if they have their own
service they want to use on it too. Nobody's going to buy cell
phone songs. They'll just load it all up on the itunes/ipod
portion of the phone, and carry on as a Cell phone normally
would for good measure. You're in Check "Mr. Music Industry".
2) Apple cuts the song prices to an obscene level, by signing
artists directly to Apple Computer/ITunes publishing. They give
the artist 3 cents out of 5 cents promising to sell much more
than a dollar a song will get them. Songs become very expensive
individual pieces of popcorn and the market buys them by the
bucketload. Check AND Mate.
I remember reading about the $3 billion ring tone industry and thinking to myself, 'just how stupid can people really be?' Who in their right mind would pay $3 bucks for a portion (and probably a fake portion) of something they can get for $0.99 or for free. And if the wireless carriers think they can continue to rip-off consumers they are going to learn a really hard lesson in global economics. Better yet, if they truly believe they can control how consumers load music on to their wireless devices they are crazy. Why would I pay $3 bucks for something I can hotsync for free? Besides I am already paying a premium for wireless Internet connectivity and if it is cheaper to download the file to my PC and transfer it to my phone or to a memory chip, then that's what I'll do.
If I were a betting man, I would bet on Apple?s distribution model. They are only one in the industry with credibility and a proven track record. No one else has made it work! Going forward. Eventually Apple will have to open up their distribution model, but at least they will have some control over the final product, much the same way Microsoft controls the operating system.
Apple does not have a track record of licensing it's technologies, even when it's virtually proven to be a liability for them. It's probably a large part of the reason the Mac market is a niche market--they never let other companies produce Mac-compatible computers.
Given that track record, you probably shouldn't have relied on them opening their technology. Apple apparently just doesn't like to do it.
fire, and now they're boo-hooing because THEY ceeded too
much to save their skins in the first place. Tough! If the music
execs hadn't been so greedy to begin with, they wouldn't be
standing in the mess they created.
First Jobs is right. $.99 price point is an excellent model. A song is a song is a song. That is what the consumers want. The ability to listen to their choice of music at a common price.
The record industry wants to capitalize on their marketing of their artists and use a model that charges more for an artists latest hit music and decrease the price as the content matures. Clearly not a consumer friendly model.
Of course, how does the record company justify this model? Because consumers willingly pay $2.50 for a cool ring tone.
To the record companies, here's a free clue. How many songs does a consumer buy at .99? How many ringtones at $2.50? Hint: A ringtone, while shorter, is a way of personalizing one's cell phone. You do it once in a while, if at all.
My point?
Record companies are in trouble, not because of Jobs, but because they just don't get the economies of the digital age.
Oh and one more thing.... Record companies own the content. Apple didn't corner the digital rights media technology. Any other potential competitor can come up with a viable scheme. ;-)
I think this is the real issue. Everybody would benefit: the consumers, the artists and Apple. The only losers would be the studios.
The excuse of saying that the market is fragmented is really stupid, well at least 70% of the market isn't!
What probably scare them too is that with 15m iPods sold the potential sales for the iTunes Music Store is simply staggering.
Anyway few people are going to cry over their situation...
- How ironic...
-
by cedstrom
April 15, 2005 11:16 AM PDT
- Steve jobs did to the recording industry, what the recording industry has been doing to artists for many years. Selling lopsided contracts. [sound of laughter inserted here] But the recording industry knows they have options when artists don't.
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Reply to this comment
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- ditto
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by Dibbs
April 15, 2005 7:30 PM PDT
- i was pretty much going to say the same thing. i have no pitty for the industry's fat cats. they've oppressed good musicians for too long. i wish this was another nail in their coffin but at the end of the day, they're still making money off Apple's store! just not as much as they want. news flash: i don't make as much as i want.
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See all 80 Comments >>and it's not like steve has done something wrong. he worked out a way for everyone involved to rake in more dough. now the execs don't like it? renegotiate! don't tell ME how apple mistreated YOU! take the plank out of your own eye!