Music Exec Fires Back At Apple CEO

geniusj writes "Warner Music Group CEO, Edgar Bronfman Jr., has fired back at Steve Jobs in response to the Apple CEO's claim that having variable pricing for iTunes music would be 'greedy.' From the article: 'To have only one price point is not fair to our artists, and I dare say not appropriate to consumers. The market should decide, not a single retailer ... Some songs should be $0.99 and some songs should be more. I don't want to give anyone the impression that $0.99 is a thing of the past ... We are selling our songs through iPod, but we don't have a share of iPod's revenue ... We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only.' Perhaps iPods combined with iPods are selling music as well, and it's not just a one-way street?"

Comments

Do they get a share of the sale of CD players?

[Nicolas MONNET]

I don't think so. Why should they deserve a share of iPod sales?

Re:Do they get a share of the sale of CD players?

[JeffTL]

That man simply does not know the word "iTunes" and was substituting "iPod" for "iTunes Music Store."

Re:Do they get a share of the sale of CD players?

[tb3]

Edgar Bronfman, Jr. does not know a lot of things. He inherited the Seagram fortune, sold its $9 Billion stock of Dupont to buy MCA, for the sole purpose of becoming a media mogul. He's failed miserably. Here's a great article about him on Slate. I especially like this quote, "Edgar Jr. has been designated the movie industry's official idiot--a 42-year-old child who's squandering his family (and his shareholders') fortune on romantic Tinseltown fantasies."

Don't think he speaks for the entertainment industry; he's an idiot even among those morons.

Re:Do they get a share of the sale of CD players?

[BandwidthHog]

That was what I thought at first, but by the time I got to the end of the article, I was pretty sure he really did mean to imply that his industry was entitled to a cut of each and every iPod sold. Perhaps I’m wrong, but Bronfman isn’t known for being the brightest crayon in the sandwich, if you get my drift.

Re:Do they get a share of the sale of CD players?

[Drooling Iguana]

He should run for President.

Re:Do they get a share of the sale of CD players?

[jangobongo]

The Slate article you linked says:

"Edgar Jr... outraged the industry by proposing that theaters charge higher prices for more expensive movies. Why, he asked, should you pay the same amount to see a $2 million movie as you would to see a $200 million one? Analysts and movie types hooted with derision--that's "like charging for a piece of art based on how much bronze or paint was used," sneered one.

Edgar Jr. wants to treat movies like any other product: If a movie costs more to produce, you should charge more for it.

That was seven years ago!

And now, talking about music:

"To have only one price point is not fair to our artists, and I dare say not appropriate to consumers. The market should decide, not a single retailer ... Some songs should be $0.99 and some songs should be more."

Sounds eerily familiar in that context.

Re:Do they get a share of the sale of CD players?

[tricorn]

The reason you don't charge a different price for a more expensive movie is that the cost per showing is exactly the same regardless of the cost to create it (e.g. cost of wear and tear on the print, cost to the theater for projector maintenance, etc). You get more money back from a $200 million movie than for a $2 million movie because the more expensive movie is better. Supposedly. Being better, more people will go see it. Supposedly.

If it isn't better, that's the fault of the producers, not the consumers. You still have a market effect, its that stupid producers who produce excessively expensive movies that aren't worth it go out of business.

Same thing for the popular hit music - you'll get more money because you sell more, not because you charge more.

Re:Do they get a share of the sale of CD players?

[Seumas]

It doesn't make sense to say "let the market decide" when there is no limit to the supply. I mean, when you download a track, you're not reducing the quantity of available tracks out there in the world. So regardless of the DEMAND, the supply (and thus the price) is the same. Any notion otherwise is an artificial limitation - exploiting popularity by saying "this band is more popular and, thus, you should pay $1.50 per song".

Re:Do they get a share of the sale of CD players?

[poopdeville]

My question is, why is it so hard / bad to vary prices on iTunes?

Because it's just an excuse to raise prices across the board. Every label is going to want their songs at the highest price point. Apple realizes that the iTMS drives iPod sales, and they don't want to alienate their potential customer base by raising prices.

Re:Do they get a share of the sale of CD players?

[banzaimonkey]

Shares of Apple were up $0.47 to $52.37 in recent trading, while shares of Warner Music Group were down a penny to $18.03.

I think that alone says something.

As for the rest of the article, allow me to translate:

Waaaaaaaaaaaaaaaaaaah.

Re:Do they get a share of the sale of CD players?

[natronxx]

Fortunately for all you Americans, I believe this jackass was born in Canada which would disqualify him from running for president.

Unfortunately for us Canadians, his being a jackass makes him perfectly qualified for running Canada.

Re:Do they get a share of the sale of CD players?

[unitron]

That man simply does not know the word "iTunes" and was substituting "iPod" for "iTunes Music Store."

I fear you are both correct and mistaken. From the article:

Mr. Bronfman said the music industry should not have to use its content to promote the sale of digital music devices for Apple or anyone else, and not truly share in the profits. "We are selling our songs through iPod, but we don't have a share of iPod's revenue," he said. "We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only.

When he said that they were selling their songs through iPod he should have said iTunes but he didn't mean iTunes, he meant iPod. He thinks that the record industry is helping Apple sell hardware and that they should get a share of the profits on the hardware.

Here's something that I stole from a site that stole it from the Wall Street Journal:

Consider the economics of the iTunes store. Apple charges 99 cents per song that is downloaded by a consumer. Of that 99 cents, Apple pays the record label about 65 cents for licensing rights to the song, estimates Charlie Wolf, an analyst at brokerage firm Needham & Co. Other analysts come up with similar figures. In addition, Apple incurs costs such as credit-card fees, which typically amount to 25 cents a transaction (which can include several songs), plus 2% to 3% of the amount charged. The result: On average, Apple earns less than a dime for each song it sells from the store.

So here's what's going on. If you buy one song and use your credit card (assuming that your credit card company and Apple will let you use your credit card for a 99 cent purchase) the credit card company gets 25 cents plus another 2 or 3 cents and the record company gets about 65 cents. That leaves Apple with 6 or 7 cents. If you buy more than one song at a time the credit card company doesn't get the 25 cents on the second through infinity dollars but they get that 2 or 3 cents on every dollar and that 25 cents on every customer. So the best Apple can do is 32 cents per song minus 25 cents per customer, and that money has to cover all of their expenses--bandwidth, advertising, payroll, electric bill, water bill, telephone bill, building maintenance, lawyers to keep the record companies from getting any more than they already do, and anything else that they wouldn't have to pay if they weren't running iTunes.

The record companies, who don't have to pay much of anything they didn't already cover getting those songs ready to go onto a phonograph record, cassette, 8-track, or CD (except for the lawyers to try to screw Apple), know that Apple's not about to give them a bigger cut out of that 99 cents, so the only way they are going to get even more "money for nothing" is to either convince Apple that the record companies deserve a cut of the profits on the hardware (which would go over about as well as Microsoft saying they deserve a cut of Mac sales because Office for the Mac drives Mac sales) or getting the price per song above 99 cents.

You'll notice that although he said that the market should decide the price and not a single retailer, he didn't say anything about any songs selling for less than 99 cents, so before long that will be the "fair market price" for songs so low in demand that no one will pay more, and everything else will be higher in price and before long you'll be paying as much for downloads as for a physical CD, at which point they will no doubt declare physical CDs underpriced.

Remember, Apple is doing almost all of the work and paying almost all of the expenses on iTunes while the record companies get 65 per cent not of the net or the profit, but 65 per cent of the gross and the record companies think that they're doing Apple a big favor and that they should get a cut out of each iPod sale as well. Tell me again who the pirates are?

Notice what he didn't say...

[stoneymonster]

Some songs should be $0.99 and some songs should be more. I don't want to give anyone the impression that $0.99 is a thing of the past ... We are selling our songs through iPod, but we don't have a share of iPod's revenue

So I guess no songs should be LESS than $0.99. Apparantely that is the minimum value for all music clips of any length or quality. Oh, and I like how they want a cut of the "iPod" revenue. Maybe they should go after CD player manufacturers and home stereo's too, by that logic. Classic.

Re:Notice what he didn't say...

[Blondie-Wan]

Remember also how CDs were considerably more expensive than LPs and cassettes when they came out, but it was promised the price would fall as soon as CD technology matured? It's funny how the average CD price never did drop after all, even though the production costs for CDs fell dramatically from above that of LPs to a fraction of it...

kill the goose

[all your mwbassguy a]

fuck the golden eggs. we demand platinum!

Wow. A walk down contradictory lane!

[numbski]

Some songs should be $0.99 and some songs should be more. I don't want to give anyone the impression that $0.99 is a thing of the past ... We are selling our songs through iPod, but we don't have a share of iPod's revenue

So yeah. It will never be cheaper than 99 cents. We don't want to give people that 99 cents is a thing of the past, but we want a piece of the pie, and 99 cents isn't doing it.

Real bright there guy. You suck.

Tell you what. Let's go variable then. Songs older than 5 yrs are 50 cents. More recent non-top 100 tunes are 99 cents, and top 100 are $1.50.

Of course that will never happen. :\

Market decide.. don't make me laugh

[Ckwop]

Let the market decide? Oh give me a freaking break. There is no market, not in the free market economics sense of the word anyway. I can buy petrol, gas, cars, PCs, coal, condoms or even a blowjob from any number of suppliers. This competition drives down prices and forces companies to compete on quality and price. Copyright guarentees as monopoly on your product. If I want to buy the latest white-stripes album I can only buy it from one label: V2 Records. Sure I can go to different stores to try and hunt down a lower prices but V2 set the price. The consumer only has one choice: buy it, or don't buy it. In a real free market economy the consumer has a third, more powerful option, to find a cheaper supplier.

This is terrible for the consumer and almost always leads to disproportionate prices. Rather than supply and demand setting the price of the music, V2 can simply mandate it and then it will be so. The market becomes distorted and everybody loses except the labels. There's this idea that the artist somehow needs to be compensated for his work and that's fine but why not do it off ticket sales for concerts? I don't see why we need these artists need these government granted monopolies to make money!

Simon

Price Fixing

[topham]

Since when does the supplier legally tell you what you can sell a product for?

Generally, that is considered illegal.

But hey, who am I to talk, I haven't been convicted of price fixing, so how should I know?

Oh wait, they have.

Anyone notice how

[grasshoppa]

This only makes them sound even GREEDIER than Jobs painted them.

Sometimes, the best thing to do with a certain type of person is sit back, keep your mouth shut, and let them bury themselves.

Re:Taking this to its logical conclusion

[Anonymous Coward]

I also suggest speakerwire be taxed per foot, since the longer the cables, the bigger the room and thus the more people can listen at the same time.

Re:The Obligatory Remix

[Fnkmaster]

My personal favorite is that "the market" should decide. Apparently this guy failed introductory microeconomics - when you are a monopoly supplier (or a cartel) "the market" doesn't decide anything, the monopolist looks at the demand curve and sets a profit maximizing price. Sometimes they decide they've been too generous in the past, and having roped consumers into a new distribution channel, it's time to start jacking up prices again as perhaps demand isn't quite so elastic as they had previously thought.

Also, he has apparently never taken Strategy 101, or been introduced to the Theory of Complements - iPods and iTMS (and the downloadable music it distributes) are a classic example of complements. Just because Apple has for ONCE actually played a situation intelligently from a strategic perspective and the music industry has yet again failed to do so (monopolies rarely have any incentive to act strategically) doesn't give them a right to shit.

This diatribe can be simplified into "a company that is not us is making profits in something vaguely related to music and we don't like that". After I finish wiping away the tears of sorrow from my eyes, allow me to say how many nano-give-a-shits I have for this guys problems.

Article Summary

[Paladin144]

here's the quick version:

Apple: "You guys are greedy."

RIAA goons like Bronfman: "We're not greedy. We just want all that money Apple is making. We don't want to do any extra work or promotion. Just send us more cash."

Re:wow ?!

[KingVance]

Well....Back to piracy.

Re:A Cut of iPod Sales?

[lav-chan]

Austria: In Austria, the television & radio licence varies in price depending on which state one lives in. All are in euros and are paid annually.

Denmark: The licence fee in Denmark is DKK 2 040 per annum for colour TV, DKK 1 310 for black and white TV and DKK 320 for radio.

Finland: The licence fee in Finland is 193.95 per annum for TV.

France: In 2004, the television licence fee in France (mainland & Corsica) is 116.50 and in the overseas departments (where viewers receive the Reseau France d'Outre Mer (RFO) rather than France 2-France 3-France 5-Arte) it is 74.31.

Germany: The licence fee in Germany is 193.80 per annum for TV and radio, and 66.24 for just radio. It is billed by month, but typically paid quarterly (yearly payments are possible). Unemployed and disabled people do not need to pay the licence fee.

Ireland: In 2005, the television licence in Ireland is 155. It is free to anyone over the age of 70 and to some over 66. The licence fee is the primary source of revenue for RTÉ, the state broadcaster; however, its radio and TV stations also broadcast advertising to supplement this income.

Italy: In 2005, the licence fee in Italy is 99,60 per household with a TV set. It is the primary source of income for RAI, though it also broadcasts advertising.

Norway: The licence fee in Norway is NOK 1 969 per annum (2005). The fee is mandatory for any owner of a TV set, and is the primary source of income for Norsk Rikskringkasting (NRK).

Sweden: The licence fee in Sweden is SEK 1 920 per annum. It is collected on behalf of the public broadcasters by Radiotjänst.

Switzerland: The licence fee in Switzerland is CHF 450.35 per annum for TV and radio.

United Kingdom: In the United Kingdom, these fees are set by Parliament and go directly to the funding of the BBC, enabling it to run without the need for market competition. The licence fee, initially for radio sets (exempt since 1971), was mandated by the 1904 Wireless Telegraphy Act. The fee was originally 10 shillings (£0.50) and in 2005 was £126.50 for colour TV and £42 for monochrome TV. There are concessions for the elderly (free for over 75s) and blind people (50% off). Only one licence is required per household.

In most cases it's not directly on the television itself and it only goes towards state broadcasters (as opposed to a whole industry like the parent was talking about), but it amounts to the same thing.

Re:The Obligatory Remix

[Fnkmaster]

Perhaps you are confused. Warner Music Group controls two of the approximately 25 board seats of the RIAA Board of Directors. They had revenues of 3 billion dollars last year and a market cap of 2.7 billion. They are considered one of the "Big Four" (EMI, Sony-BMG, Universal Music, and Warner) music publishers responsible for 95% of all music CDs sold worldwide. The Big Four were convicted (along with some smaller players) of price fixing and forced to settle with 43 states attorney generals in 2003.

So Edgar Bronfman, Jr. is the CEO of one of the Big Four music publishers, part of a proven price fixing cartel, and one of the major controlling organizations of the RIAA, a "trade group" (i.e. cartel) that ruthlessly pursues anybody who's interests aren't aligned with the publishers.

What were you saying again?

Re:Wow. A walk down contradictory lane!

[bay43270]

songs over 14 years should be public domain

President?

[nhaines]

He's overqualified. ;)

Re:Uh...

[darkonc]

Who rated this informative?

Someone with a wicked sense of humor. If I could moderate the moderation as funny, I would. I've got the points too.