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iTunes Might Lose Labels

Posted by CowboyNeal on from the different-strokes dept.

Dreamwalkerofyore writes "According to the New York Times, the iTunes music store might have to change its 99 cents per song policy or risk losing a huge amount of songs due to recent disputes with record companies, who demand an increase in the cost. From the article: 'If [Mr. Jobs] loses, the one-price model that iTunes has adopted 99 cents to download any song could be replaced with a more complex structure that prices songs by popularity. A hot new single, for example, could sell for $1.49, while a golden oldie could go for substantially less than 99 cents.'"

29 of 614 comments (clear)

  1. great! by j.blechert · · Score: 5, Insightful

    good idea!
    might change that 'it's new - it must be good' thingy people have in their heads..

    1. Re:great! by aussie_a · · Score: 5, Insightful

      Actually it may just re-inforce the "Oh it's more expensive so it must be better" meme people have in their heads.

    2. Re:great! by Feyr · · Score: 4, Insightful

      or like me, it'll reinforce the "it's too expensive, fuck it" idea.

      better stick with web radios

    3. Re:Great! by deltagreen · · Score: 5, Insightful

      $1.49 might be too much for the top end, but a price substantially lower than 99 cents could indeed be a step in the right direction. Since plenty of the merchandise sold online is already in 'the long tail', an increase of sales in that segment, might show more clearly to the record companies two things: 1) Hits don't necessarily have the same pulling power in online stores as in the local store with a limited selection of 300 albums 2) Maybe selling three copies of a song at 75 cents is better than one at $1.49?

    4. Re:Great! by Anonymous Coward · · Score: 5, Insightful

      How sweet. Such innocent naivety in the shark pool of economics. What they meant to say is that some songs could be cheaper than others, not necessarily cheaper than $0.99.

      It's quite simple when you think about it: They are not demanding higher prices to discourage buyers from getting the popular tunes and steer them to obscure songs. They're asking for more because they want a net gain. Guess who's going to pay for that. The low end will have to pay for the reduced number of sales of high priced songs, so the price range for anything above garage band level is going to go from $0.99 to $1.49. The few songs which will sell for less you could probably get for free from a crappy website where a rightfully starving artist put them in a hopeless promotion attempt.

    5. Re:great! by mmarlett · · Score: 4, Insightful

      Actually, a fluctuating price (according to economists, of which I am not one) is an issue of supply and demand. The issue this raises is one sided: there is more demand so it should cost more, record companies say. Well, yes, the supply has stayed constant, but it's virtually infinite. Their production costs for digital media are the same if they sell one or one hundred million. Except for the bandwidth, which is Apple's concern anyway, right?

      So while it's easy to see the record companies' points, they fall down under any scrutiny. It comes down to "what price will the market bear?"

      And if they want more for the more popular songs, they will quickly find those songs less popular.

      Which will be fine for the record companies, because they'd rather you buy out of their catalog so that they can tell new artists, "Sorry, kid, you don't sell," and screw them out of royalties, fame and etc. They may then go on to blame P2P for the failure of new artists.

      You'll find Muddy Waters really cheap, though, because the record companies always owned all of his rights.

    6. Re:Great! by Ahnteis · · Score: 4, Insightful

      Exactly. There's no way they're going to charge LESS then $0.99.

      This is about prices going UP.
      And considering they already nearly match the price of an actual CD (without cover, case, physical medium, and at a lower quality with DRM to boot)) it's an incredibly bad deal for the consumer. But hey, it's convenient right?

    7. Re:great! by stilwebm · · Score: 4, Insightful

      Recall though that in this rational actor paradigm, the record companies have ignored an important force: piracy. While the record companies have a point saying that increased demand should allow for price increases, the market has already made it clear that many consumers are not willing to follow their pricing model. This is why iTunes Music Store has been so successful. The low price and convenient media fill in for the labels' missed opportunity and for many users, the hidden costs of piracy. If labels start controlling price again, they may flush this success down the toilet for Apple and themselves.

    8. Re:great! by BackInIraq · · Score: 4, Insightful

      While the record companies have a point saying that increased demand should allow for price increases, the market has already made it clear that many consumers are not willing to follow their pricing model.

      Perhaps increased demand should lead to higher prices...but then, if we're pricing music based on supply and demand, then the nearly infinite "supply" of digital music should make it damn near free.

      I guess could agree that music should be priced at what the public is willing to pay, based on demand. But continued piracy of music online shows that even at 99 cents a song, much of the public feels that price is too high. One would argue that it's hard to compete with somebody giving away your product for free, but at the same time I really do feel there is a price point at which a vast majority of people would choose the legitimate market over the black market. I just don't think the record labels have dipped that low yet, and I know they don't want to.

      Really, the quality of the product being given away for free is also much lower than what is being sold. I'm more than willing to give up good money to have a physical disc, at full audio quality, that I can re-rip should I lose my files. I like liner notes. Hell, I even think buying a full album on iTunes has some value...such as knowing that the entire CD will have been ripped at the same quality, with accurate and consistant tags without my having to take the time to do/fix it myself.

      But is the physical CD worth $14.99 to me? Is the "virtual" CD worth $11.99 or $12.99 (the price the labels seem to be pushing for full albums on iTunes, compared to the original $9.99)? No.

      For sake of argument, my personal price point would be more like $9.99 for physical CD's (and I'm not talking old/surplus stuff) and $6.99 or $7.99 for whole album downloads. $0.99 a song actually doesn't bother me, as for many CD's it would be saving me about ten bucks, as there is often only one song I want. Do the labels want to try these price points? Hell no. They'd argue that they cannot possibly make money at those levels.

      At which point I would pull out a tape of MTV Cribs, which to me is absolute proof there is some room to lower prices. And that's just what artists pull in...I also know that there aren't many record execs driving Civics.

    9. Re:great! by mmarlett · · Score: 3, Insightful

      You're oversimplifying my simple economics. If you look back, I say that it comes down to "what price will the market bear" because the supply is not an issue.

      I was talking about how they justify the different pricing. And simply pointed out that supply and demand isn't their reason.

      They also are not suggesting some sort of popularity model -- songs that sell X number of times per day cost $1.50, Y sales are $1, Z sales are $0.50 -- I could see that. That would be entirely popularity-based pricing, perhaps something like the stock exchange (roughly; don't think about it too much). That pricing might not be a bad idea, actually.

      But it would freak out the record companies, because they don't want popular things to be more expensive. They want the things that they market heavily to be more expensive. That's the model that they are familiar with and one that they know works.

      Apple, however, has completely changed everything about their economic model. Nothing makes sense to the recording industry anymore. There aren't any DJs to buy off with payolla, there aren't any record store chains to give under-the-table kickbacks to -- everything is above the board, and they don't even control the distribution channels.

      The record companies want to guarantee hits. They want to control prices so that you are either buying (a) something that they've put a lot of money into at a high price or (b) something that has been sold at a high price for years and is nothing but pure profit. Hits or classics. Expensive or cheap.

      But they don't want you buying independent music -- certainly not independent music that costs exactly the same as the stuff they've pumped millions into to convince you to buy.

      Which begs to question why they are pumping all this money into promoting these artists if they can't guarantee a certain amount of profit.

      But they're finding that when they put their heavily marketed tracks up on iTunes then they lose control. You've got classic music records from 1996 by Telrac Records right between "The Who Sings My Generation" and U2's "How To Dismantle An Atomic Bomb"; D.L. Menard's "Cajun Saturday Night" on Rounder Records in with Justin Timberlake and Travis. If Apple is selling that placement (and it wouldn't be too hard to convince me with the Timberlake appearance), it's certainly diluted.

      There are five major labels -- Universal, EMI, BMG, Warner and Sony -- who own nearly everything.

      The current new releases are Trick Pony (Curb->MCI->Universal); Craig David (Warner->Atlantic); The Flaming Lips (Warner Bros.); and Crazy Hits by Crazy Frog on Mach 1 Records Gmbh, which is owned by Ministry of Sound, which is definitely not one of the big five.

      It's also at the bottom of today's top 10 album list. Coincidence? No.

      Apple doesn't care because Apple just sells whatever people want for $1. But the record companies must be livid. Yes, they have 1-9, but they're used to having 1-100. And you can be damn sure they want more money for their efforts. (Though in the end, it will just do more for Crazy Frog.)

      The real economics at work here is "Seller sets the price, buyer decides if it's too much." And we have two sellers who 1) disagree about how buyers will react and 2) have completely different motivations toward selling.

      Apple thinks buyers will baulk on all sales if some are weirdly more expensive and want to keep everyone using iTunes to sell the most music to the most people. The record companies want more money for their product and don't care if they sell it through stores or iTunes or beam it directly into your head as you sleep (which they may already be doing) as long as they get the most money out of it.

      So there you are.

      Notice also that these models also never once involve the artists directly, even though one would hope that they did all the real work.

    10. Re:great! by Thangodin · · Score: 3, Insightful

      Someone invented Mickey Mouse; people are still willing to pay for him; why should parasites who put no effort into the character get a free ride?

      Oh, you mean like the Disney lawyers? Or Disney itself, which based most of its movies on public domain material?

      You take some, and you put some back in. That's the way it works. The parasites are the people who don't want to pay back their debts...ever!

  2. Great! by lukewarmfusion · · Score: 3, Insightful

    Then I might actually consider buying music, given that I rarely buy "new" or "popular" music.

  3. Yeah well by teslatug · · Score: 5, Insightful

    It was working so well, it was about time they fucked it up.

    1. Re:Yeah well by Dmala · · Score: 4, Insightful

      What Apple really needs to do is tell these record labels to go screw. Let them pull their catalogs off of ITMS. Do you think the legions of iTunes users are all going to stampede out and start buying CDs again?

      If they're really lucky, these record labels won't see a further drop in their CD sales. Plus they won't have the revenue stream from Apple anymore. They'll come crawling back in no time.

  4. Wow by EvilMonkeySlayer · · Score: 3, Insightful

    Great way for the labels and Apple to discourage people from using legal methods for downloading music.

    1. Re:Wow by geofferensis · · Score: 5, Insightful

      I still don't see how this is Apple's fault.

      The cable company story doesn't really seem comparable. Cable companies have a lot of leverage on content and it is a hassle for people to switch cable companies. However, it is very easy for people to buy music from a different store than iTMS.

      Apple does not have monopsony power.

    2. Re:Wow by Altima(BoB) · · Score: 5, Insightful

      ...they just wnat in on this price gouging that the oil companies are enjoying right now.

      I can just see the RIAA, overcome with jealousy over OPEC, arranging a Music shortage. Prices going to $60 an album, people waiting in giant lines at record stores just to pick up a new Black Eyed Peas album. People avoiding playing music while driving to work because it's a precious commodity, while the record industry rakes in profit. Network news would alternately go nuts about how apocalyptic it is, then reassure people that it actually isn't the highest price peralbum ever when adjusted for inflation, informing us that people used to pay more for wax cylinders that could barely hold a song. Then the record industry would graciously recieve generous subsidies from the US government as part of a giant omnibus Music bill. Politicians will promise to help reduce America's dependance on foreign music, and to help keep the chart hits American.

      Then we'll invade France to take control of Khaled and his snappy North African pop beats.

      --
      Yup...
  5. Geeeze by QaBOjk · · Score: 4, Insightful

    Apple goes out of its way and makes a system so that the record industry CAN profit from online media, and then they whine their not making enough! shoulda stuck with P2P, not like they're ever happy.

  6. $0.99? Yeah, right. by Nimey · · Score: 5, Insightful

    I expect that if this goes through there will be few if any songs that go down in price.

    --
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  7. Greed, greed, greed... by Cirrocco · · Score: 5, Insightful

    The 99 cents per song you already pay is a bit much, especially considering there is NO physical packaging, shipping costs, storefronts with employees and power bills, ad infinitum.

    I really LIKE iTunes, and I *KNOW* how to steal music if I want to. I really LIKE the fact that I can buy a specific song for a pittance on a whim instead of hoping someone will upload it to the Usenet.

    It's not that $1.49 is too much, but it just shows that they will try to reach a price that people will accept, however grudgingly. But the $1 mark is a psychological barrier; once they reach that, people will start to think, "Is this song worth $1.49?" and might not buy it after all.

    In any case, good luck to 'em. I don't buy any new stuff anyway. Most of it is crap pushed by the payola artists.

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  8. Greedy bastards by tinrobot · · Score: 5, Insightful

    Like it costs so much to record a song in this day of digital recording. 99 cents is plenty.

    The record labels pretty much killed CDs by charging 20 bucks each for them, now they'll kill this outlet as well.

  9. AllOfMp3 by Rew190 · · Score: 5, Insightful

    Let them do it. Sites like AllOfMp3.com will just get more business (which appears to be totally legal). Why would anyone buy a crappy compressed song for $1.50? At that price it costs as much (or more!) as a regular CD with artwork and no compression!

    I'm still waiting for the day when the general population knows about sites like AllOfMp3, where you can download an entire album in just about every popular format for around a dollar. You can even preview an entire album before purchasing, and the selection is pretty decent. Not as good as iTunes, but probably enough to satisfy a good chuck of iTMS users.

    And given all this, the record companies want to make themselves look worse? Hilarious! Let them!

  10. Include more indies by yintercept · · Score: 5, Insightful

    A variable pricing model would be fine with me. If iTunes were to include more indies and let each artist set their price, they we would end up with a dynamic model.

    It seems to me that the primary problem with the music industry is the history of price fixing.

  11. Re:Ignores the long tail... by pla · · Score: 3, Insightful

    If you're the music industry, and you give a discount to the misses, you're going to end up making less money.

    Nah... You just need to realize that the "could go for substantially less" part of the deal means maybe all the way down to $0.95. They threw that in there to make the idea more palatable, but in practice, it won't happen that way.

    Also, consider that even a slight reduction could end up boosting sales of such material, in the same way that otherwise slow-selling unknowns fly out of the cutout/discount bin at any local music store... We might agonize over whether or not to buy a decent new release at $18.99, but we'll throw away a $50 without blinking on $5-$10 discs we've never heard of.

  12. Apple is the WalMart of Music Downloads by Luscious868 · · Score: 4, Insightful

    The more I think about this, the more I think it's pure and total BS. Apple has become the WalMart of music downloads. Apple accounts for more than half of digital music downloads. The record companies can huff and puff all they want, iTunes and the iTMS have become the WalMart of digital music. If they don't carry it, it doesn't sell. The record companies would be shooting themselves in the foot.

  13. Re:To be fair to us Americans by aukset · · Score: 4, Insightful

    I wouldn't call this 'capitalist' at all. This article is telling me that somehow, completely independently of one another, every major record label suddenly decided to make apple change their pricing model to the exact same thing at the exact same time? I don't think so. These labels are not in competition at all.

    I don't think this has much of anything to do with actual profit by the labels. They're making plenty right now, and growing plenty simply by virtue of increased volume. This is a power play. This is the industry telling Apple, "We own you, we don't need you. You do what WE say."

    Basically, since they can't compete with Apple in digital distribution individually, they are colluding to strong-arm Apple and will likely run iTMS into the ground eventually. I think laws are being broken here, but I don't expect anything to be done about it.

    --
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  14. Re:iTunes monopoly by Lally+Singh · · Score: 3, Insightful

    MS's DRM is more open only because apple has 90%+ of the market share.

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  15. Re:A Cent Sign by hattig · · Score: 5, Insightful

    I think your post sums up Windows vs. Mac OS X totally. :)

  16. Re:Variable price != lower price by yintercept · · Score: 4, Insightful

    This article is about record companies wanting to raise the current fixed prices.

    If varible prices led to an open market with artists competing on price, then variable prices would like lead to a drop in price.

    There are several big ifs in the equation.

    Our first big if is the assumption that the prices would have a decent minimum that is near the price of delivering the music. The second big if is the assumption that rights to music is held in enough hands that there will actually be pricing pressure. Right now, the big music collections are owned by a few mega corporations.

    You are complete right. If Apple has a pricing structure that sets $.99 as a minimum, then we would see a big jump in price.