Apple Holding Back the Music Business?

conq writes "With average weekly download as of Nov. 27 sales down 0.44% vs. the third quart, BusinessWeek speculates that Apple might in fact be holding back the music industry." From the article: "As has been true since the start, iPod owners mostly fill up their players from their own CD collections or swipe tunes from file-sharing sites. Now legal downloads may be losing their luster. According to Nielsen SoundScan, average weekly download sales as of Nov. 27 fell 0.44% vs. the third quarter. Says independent media analyst Richard Greenfield: 'We're not seeing the kind of dramatic growth we should given the surge in sales of iPods and other MP3 players.'"

Comments

What am I supposed to do?!!!

[Thud457]

My Ipod's full, I can't buy any more music!

Absolutely Correct

[whargoul]

I use my own CD collection - NOT illegal downloads

Re:Absolutely Correct

[op12]

I use my own CD collection - NOT illegal downloads

The article mentions this too....how does that hold back the music industry? They're still making money (and probably more per song than through Apple) on people buying CD's.

Re:Absolutely Correct

[Golias]

This is a case of unreasonable expectations.

When CD's came out, the vast majority of music lovers replaced the albums they already owned with new CD's.

I seriously think that there are music execs out there who were hoping that a new format (downloaded music) would mean that we would all want to buy our entire music collections all over again, in spite of the fact that the power is in our own hands to convert files this time.

Consequently, the back-catalog sales are absolute shit compared to what the early days of CD's were like. Lots of people are using iTMS to buy songs from Fountains of Wayne, Death Cab for Cutie, and/or the latest pop princesses, but nobody's re-buying the old Pink Floyd albums they already own in another format, and that's what's driving them nuts.

Why, we even have the audacity to BACK UP our media files, so we no longer need to buy a new copy every few years because of loss, damage, or wear. It's KILLING their sales numbers.

Re:Absolutely Correct

[Anonymous Coward]

I am the same way and for a very practical reason: the quality (sound quality) of digital downloads is inferior to that of a CD. If Apple were to offer high quality downloads (using the Apple lossless format for example) I would start buying downloads even if the per song price were over $1. Maybe they could offer the "standard" 128k AAC files for $1 and the "audiophile" Apple Lossless files for $1.50 or even $2.00. For a lossy compressed format, ~200kbit VBR MP3 is the minimum I will accept. (I encode my own CDs using LAME preset standard and that seems to average out around 200k.)

Also, they need to come up with a solution to the "segue" problem. Many albums are mixed such that one track segues smoothly into the next. You get this when you buy the CD. When you buy digital downloads you get hiccups (gaps) between the tracks. Kludges like a crossfade in the MP3 player are not acceptable. I want the exact segue as mixed on the original CD!

There are two pieces to fixing this: the files themselves need tags indicating that a segue exists into the next track from the album and, for compressed audio formats, there needs to be a tag indicating any "gap" (coding delay or frame padding) at the beginning and end of the file such that the MP3 player can strip this off during playback. (The LAME encoder does this and so you get gapless playback on an enabled player eg Foobar2000.) The other item the tags should contain is a recommended fadein and fadeout to use when a track is not played among the other tracks of that album. That way you dont get abrupt cutoffs when playing songs in shuffle.

Did I mention I still buy music on CD? Lots of it too!

Re:Absolutely Correct

[Ucklak]

The article mentions this too....how does that hold back the music industry? They're still making money (and probably more per song than through Apple) on people buying CD's.

Because those greedy bastards want a nickel EVERY TIME YOU HEAR THE SONG

Re:Absolutely Correct

[Chyeburashka]

nobody's re-buying the old Pink Floyd albums they already own in another format

I don't know how many years it's been since my last copy of "Dark Side of the Moon" was either liberated by a roommate or just otherwise lost, but I bought that album from the ITMS just last night, along with some vintage Elvis. Before that, I bought some Miles Davis, Van Cliburn's Rachmaninoff Preludes, and the Fleetwood Mac Rumours album for what must be the seventh or eighth time in the past 30 years.

I owned my 30G iPod Photo for about six months, loading my 200 CD's onto it first before tapping the local public library's collection.

I only recently began buying from the ITMS, and I've probably spent $200 so far, buying old familiar but long lost albums, along with some new stuff.

My elderly father really likes the Dragnet episodes, which are quite unintentionally funny. And my daughter loves the Pixar Shorts. You've really got to take a look at the Birds and the one with the dancing lamb. Those are easily worth the $1.99.

So, if my buying habits are reflected by very many folks, Apple is in no way holding back anything.

Re:Absolutely Correct

[Prospero's Grue]

I seriously think that there are music execs out there who were hoping that a new format (downloaded music) would mean that we would all want to buy our entire music collections all over again, in spite of the fact that the power is in our own hands to convert files this time.

The music industry insists that we all should buy our music collections all over again. It's legal to copy the CDs for your own use - just as it's legal to copy DVDs for your own use.

That's why the laws to make it illegal to break encryption - it was a way around consumer rights. You can rip DVDs for your own use, but you can't break encryption, and the movies are encrypted.

This nonsense of attempting to DRM CDs is just the music industry trying to play catch-up. Trust me, I've ripped my 200+ CD collection, and the music industry would have me pay for every single song a second time.

Re:Absolutely Correct

[forgoil]

Preferably at all other times as well. When are they going to realise that the single biggest reason why people aren't spending more money on music is the fact that a handful of music stars and music industry bosses already have taken all the money. People just don't want to spend that kind of money on music anymore, and why should they? It has never been cheaper to copy music, and in fact, that is what people are doing. They are willing to pay the hardware price, but no longer the software price.

Silly

[lewp]

Oh no! Downloads are down less than 1% since the third quarter!

Seriously, it's right before Christmas, as the article points out. Nobody's going nuts buying music because they're spending all their money on presents and other holiday shit. Apple says they're selling a crapload of gift cards, and I believe them, given that everything iPod seems to fly off the shelves, virtual or otherwise. Regardless, since you no longer have to buy the physical media songs come on, there's no reason to buy them when you're doing your normal Christmas shopping, so sales very well *should* be down.

iPod sales are nuts, as usual, but that doesn't mean that music has to be selling, either. How many people you know, out of those who have bought iPods recently, are buying their first one? I'm sure a large portion of whatever iPods they're selling are peoples' second or third such devices. They're not going to be re-buying songs just because they got a new player, at least for now...

All this amounts to is another chance for the music services that lost (and it was pretty much over before they even got started) to bash Apple in a futile attempt to gain some traction. It's pointless, though. There's no buzz about Napster or Rhapsody, it's all iPod, iPod, iPod, for better or worse.

Re:Silly

[yog]

Agreed, this article is a little off the mark. Apple is a pioneer in this field and inevitable there are going to be some shifts as the industry adjusts itself. Certainly it makes more sense to sell some tunes for different prices, just as movies tend to sell for more at first and then end up in the discount bin when they're old hat.

I think by demonstrating that it's possible to be a profitable "middle man" in the online music business, Apple has in fact saved the tushies of the music companies by offering an alternative to napster-like music trading systems. This exemplary system can be emulated by the music companies, if they so wish and assuming they have the intellect and vision, or they can go through Apple or Real or whoever else jumps in (Microsoft, probably).

The iPod would not have succeeded if Apple had tied it strictly to their iTunes database and disallowed any other formats. The secret of success for any great product is its power to do one thing really well and flexibly, emphasis on the latter. They had to let people rip CDs to their iPods, and of course that will lead to trading and avoiding paying for tunes, but it also allowed the iPod to revolutionize the "walkman" generation's listening habits.

Business Week is a pretty astute publication but this is clearly a case of short term-ism getting in the way of seeing what a revolutionary product the iPod really is--and now they're doing it again with videos. Should be interesting to see where they go with this. I think iPod may eventually absorb the cell phone and handheld organizer and we'll see excellent high capacity, wifi/cell-enabled personal bliss bars in everyone's shirt pocket in a few years.

Re:Silly

[dim5]

iTunes sales have only gone DOWN. They should have gone up at the same rate as iPod sales.

Here's an interesting statistic. 100% of the people I know that have bought the new 5G iPod already own at least one earlier generation iPod. Apple is starting to get into the business of selling upgrades to existing fanboys. If someone hasn't taken the bait yet on an apple PMP, it's getting less likely that they ever will.

If Apple convinces all the 3G iPod owners in the world to upgrade to a 5G iPod, iPod sales will skyrocket, but it will still have 0 impact on the rate at which they buy music from ITMS.

Re:Silly

[maraist]

Except that iPod Photo is to iTune download like Hard drive is to MS Windows license.

MS would like to think that they can tax hard drives (and in many cases have done so successfully).. But the idea is that the HD is more versitile.

iPod photo does pod-casts, and videos.. There are cheap products which legally let you rip DVDs and put them on your iPod.

60G iPod is a GREAT USB drive, since unlike my book-bag, I almost always have my iPod w/ me (and trust me, I have a bookbag w/ me almost everywhere).

The concept of anti-correlated economic goods is always an interesting topic. People making more money means LESS people shop at walmart or buy potatoes. Here, making a more versitle iPod means less people use their trade store.

Personally I was shocked when iPod made the photo.. They swore up and down that they were only going to make AAC-based products.. And frustratingly I understood why. No radio, no games, no PDA.. These all distract from the big money maker focus. My wife, for example, got a blackberry.. You know what she does on it all day long? Play solitaire.. No phone calls, no PDA PIM data. Just solitaire. Same concept.

That being said, I'm sure Q1-06 will be a high revenue period for the music industry when all those gift cards are cashed in.

The only real question here is whether Apple makes money on the iPod or not. Often device makers sell their hardware at a discount so they can entice people into the lucrative long-term software titles (console games is the most prevalent here). If Apple is only breaking even w/ iPod sales, then this is truely bad news for them.. Otherwise, go suck it music industry.

Re:Silly

[Have Blue]

Apple is making huge profits off the iPod (still dwarfed by their computer arm, though). The music store has been making small profits, but since they consider the store a feature of iTunes its performance as a business unit is less important.

Not that bad...

[rwven]

Well, 0.44% is not too much to whine about (less than half of one percent?) It could be that maybe a lot of popular *new* music didn't come out during that time compared to the quarter before.

Not to mention a lot of the MP3 player sales they're basing their estimates on could have been bought as Christmas presents.

I think they just WANTED a big growth in sales and things just don't always work out that way. They should compare things year to year, not quarter to quarter...

That's my $0.02

Re:Not that bad...

[slashname3]

You hit the major points in your post. It is the Christmas season and a few people are spending on other things than music or are to busy to buy more music. And a good percentage of those iPod purchases are probably Christmas gifts (or should I say Holiday gifts, is the word Christmas allowed anymore?).

This smacks of another jab from the music industry trying to cry about how they are all going to go out of business because people can download songs for a dollar. The sad part is some congress critter out there that gets huge amounts of money under the table from the recording industry will use this to launch some legislation that will impose unrealistic and unenforcable laws on everyone.

A saturated market.

[AltGrendel]

I would suspect that people have enough of what they want to hear.

For now.
That's all.

Is the music industry run by monkeys?

[Anonymous Coward]

I am sure sales will pick up as soon as Apple starts charging "market price" for the music per the wishes of the music industry. :/

You're kidding, right?

[daeley]

The second "critic" expert they decided to ask said this:

"The villain in the story is the iPod. You have this device consumers love, but they're being restricted from buying anything other than downloads from Apple. People are bored with that."

Who was this expert?

None other than Chris Gorog, CEO of Napster Inc.

Yeah, Chris, people are *real* bored. And by people, you mean you and your cronies, and by bored, you mean not making enough money for your tastes.

I would expect more out of BusinessWeek.

Re:You're kidding, right?

[nelsonal]

Business Week is the least capitalistic of all the business magazines. Their core reader is the useless MBA whose sole function is gumming up the works while collecting one more paycheck toward retirement. You can disagree with the Economist and WSJ but at a minimum they are anti-government intervention in all ways (good and bad for business). I generally find myself in agreement with the libertarian ethos of those, but can't stand the editorial bent of businessweek. Businessweek is pro corporate welfare but anti government intervention in anything that might hurt business.
They are protectionistic, rearview focused, and generally useless for even lining a bird cage. The sole redeeming feature is that they are pretty good at calling the top of a mainia (by focusing on why you should be there now).
It has always surprised me that the music companies blessed Apple's entry into music, when the most basic sales calculations were demonstrating that the iPod was the thing that legitimized the public use of shared music for a large subset of mainstream consumers.

Re:You're kidding, right?

[Phanatic1a]

What fucking lock-in scheme?

iPod plays mp3s. Anyone who's willing to sell me an mp3, or something I can turn into an mp3, can provide me with a product that plays on my iPod. Where's the lock-in?

Re:You're kidding, right?

[ivan256]

He's still got a point.

No he doesn't.

He's implying that without Apple, the music industry would have some great online business going and be selling tons more music. That's clearly bullshit. If it were true, they would have their thing going dispite Apple, and people would be using it.

The music industry is pissed because Apple came up with a device that everybody wants, and instead of using it to make zillions of dollars for the music industry, they're using it to make zillions of dollars for themselves.

Boo hoo.

Apple doesn't owe the music industry *anything*. If the iTunes music store didn't exist, people would *still* buy iPods like crazy, because it's the only player out there that is user friendly, stylish, and completely impartail to whether you choose to listen to licensed or DRM-free content. It seems to me that iTunes is just a big shield from lawsuits, because as long as it exists there are considerable and obvious non-infringing uses for Apple's device. iTMS is Apple covering their ass. If this Napster guy wants more control, then he should come up with a device that people like better than an iPod and tie it to his service instead. He won't though, because he can't build a device that allows people to play pirated music, and consumers are fed up with paying high prices for music.

Apple isn't holding the music industry back, consumers are. They've reached the limit of how much money they're willing to fork over. They're going to have to be sitisfied with their revenue pit just being bottomless, and learn to live with the fact that they can't keep making it wider too.

Re:You're kidding, right?

[MoneyT]

Where is the lock in? I don't see it in either example. The lock in is present only in the file format, not the player itself. With MP3 formated files, I can move from any one player to any other player. Buying an iPod does not force me to buy from iTMS. Likewise, buying a Microsoft player does not lock me into WMA files.

Re:You're kidding, right?

[nanio]

Songs for the iPod cannot be played on other hardware. It's a known fact, from the Newspaper.

Re:You're kidding, right?

[DarkBlackFox]

I think the GP's post was meant to show there wasn't a lock-in. Insert whatever company you want into that statement, and it only drives the point home.

As long as the device can play any other [more open] format than the proprietary downloads, it's not a lock-in. In this case, the iPod can also play MP3s- it's not locked into Apple's format. If the iPod played only AAC, and not MP3s, it would be a lock-in. Just like it would be a lock-in if any Microsoft MP3 player only played WMAs.

If the choice is there regardless of brand, the lock-in argument becomes invalid. Whether or not any businesses choose to use the format is irrelevant- it's a publicly accepted format in very widespread use.

Re:You're kidding, right?

[Morgalyn]

I suspect you are being sarcastic, what with your 'known fact' statement, but I feel like clarifying for some of the less astute around here. I wish arguing was truly like math, since coming up with one exception to your statement would completely disprove it. But anyway, try this one on for size:

1. Purchase songs from iTMS in dreaded DRM'd AAC format
2. Burn to music CD
3. Use in any CD player that can read your burned discs (I would say 'any CD player' except I've encountered a few in my days that didn't like this or that brand etc. etc. of CD-R's)

Thus, you are listening to 'songs for the iPod' on 'other hardware'.

If you're particularly technically inclined, you can even rip your music cd into a non-DRM'd format.. although it takes a little more effort.

Re:You're kidding, right?

[ivan256]

Wrong. He's implying that Apple has created a device that Apple can sell music for.

How does that make me wrong? Can't he imply more than one thing in an article?

I fail to see how anything Apple does makes it OK for anybody else to bitch that they're not making money off of it. If you want a piece of the action, it's not Apple's job to open the door for you. In fact it's their job to keep it shut and protect their profits. It's rediculous for anybody in the music industry, or any other business, to expect Apple to do them any favors.

Who cares if other businesses aren't permitted to offer alternative services?

If you want to make money in the digital music market, you need to do it yourself. Why should Apple help you to make money off their product?

If this guy is so smart, he should make a better store and a better player. If he's right, it should be possible, and people should flock to it and leave the iPod behind. Anything he can come up with that nets the recording distribution industry more profits is pretty much guarantreeed to be seen as *worse* by consumers though, so he'll never pull it off. He doesn't want to offer you choice, he wants Apple to stop being so damned nice (in his opinion; obviouly not in your opinion) to consumers because it's preventing them from getting away with charging more (where more is most likely a pay-per-listen or some other recurring revenue model).

We love Apple, the iPod, and iTunes. Who cares...

I don't understand why you assume that any opinion of Apple or their products has anything to do with my point. I'm talking business here, I'm not being some fanboy. I don't have to like or dislike Apple's practices for me to see why it makes sense for them to do that stuff interms of their bottom line. The goal is to make money, not to win a popularity contest.

Re:You're kidding, right?

[meringuoid]

Perhaps "lock out" would be a better description then. iPod owners are effectively locked out of competing services (Yahoo, Rhapsody, Napster).

Well, so what?

iPod users can't download music from Yahoo! or Rhapsody or Napster because of the incompatible format those services have chosen to use. Personally I think that's a strange business decision - denying yourself, what, 95% of the potential market? - but I suppose that's their choice.

Wait, what's that? The record companies insisted they use DRM? They couldn't just offer mp3s for download, which would have played on absolutely anything? Well, isn't that the record companies' fault, then?

It's terribly strange that the recording industry and the non-iTunes download services blame Apple for the consequences of their own policies.

Personally, I have no truck with any of them. I have an iRiver iHP-140, which won't play any DRM'd files as far as I'm aware. I have no problem with this... I put shiny discs into my computer and press 'rip', producing files of whatever bitrate I desire. I hardly feel locked out of anything as a result.

Be my guest

[iamacat]

Critics say Apple's proprietary technology and its refusal to offer more ways to buy or to stray from its rigid 99 cents a song model is dampening legal sales of digital tunes.

If music industry is considering non-propietory technology and prices below 99 cents/song, there is nothing Apple can do to prevent that. All they have to do is put their stuff on mp3tunes.com

0.44%!!!

[Nighttime]

0.44%? Oh no! The sky's falling in. Good job it wasn't 1% or we'd be back to the days of the Great Depression with music execs throwing themselves out of windows. Sheesh! 0.44% is within statistical variance.

Re:0.44%!!!

[scolby]

Good job it wasn't 1% or we'd be back to the days of the Great Depression with music execs throwing themselves out of windows.

Methinks that might make a lot of people smile.

Faulty reasoning from the start

[jaymzter]

FTFA: As has been true since the start..
What exactly is this generalization based on? It basically implies that all individuals owning an ipod/mp3 player are copyright infringers from the get go. Then, just because sales are down for a quarter, it's the sign of the Apocalypse! Are they not teaching logic in schools anymore?

Re:Faulty reasoning from the start

[Yaa 101]

Nope, it gave place to creationism...

Too Expensive

[EEBaum]

When downloads start costing significantly less online than on CDs (just like CDs should cost significantly less than CDs) people will buy quite a bit more.

Re:Too Expensive

[Nerdposeur]

I heartily agree with that. Selling a CD off the shelf means manufacturing lots of them, printing booklets, shrink-wrapping, distributing to stores, suffering inevitable waste and theft, not always having the supply in the right place for the demand, etc etc.

Digital sales are VERY efficient. Once something is recorded and set up, your only distribution cost is bandwidth. So why the heck does one CDs worth of material cost the same as one physical CD?

For that matter, since a lot of the record company's work has been cut out, they should get a smaller cut of the profits than before, giving more to artists. Companies like CD Baby are doing nicely with this. Magnatune is another neat site; you can listen to streaming music all you like and you set your own price for the download (within limits).

I don't agree with stealing music, but I do think that low prices are a good way for music sellers to win back some of the business that now goes to illegal downloads.

Re:Too Expensive

[ben0207]

Actually you've handed some Russian dude $400, not the music industry. You really think the artists get a cut from something like AllOfMP3?

You would have done more good for everyone involved* if you'd just given $400 to charity and pirated that music.

*Except the aforementioned Russian dude.

Re:Too Expensive

[mu-sly]

They wanted globalisation and free trade... is this not globalised free trade in action?

That it's in reverse to the usual may be bad news for big business, but they're only too happy to use it the regular way around for their own gain - exploiting people and legal loopholes in other countries in order to keep their expenses down. Why shouldn't MP3 downloaders be only too happy to do the same?

Tough shit to the big corporations, I say - although I'm not an allofmp3.com customer either. You wanted free trade - here it is.

They're GIFTS!

[cloudscout]

Yes, iPod sales are up, but those sales aren't going to transalte to iTMS purchases until AFTER the iPods have been opened. The story says that gift card sales are "off the charts". You can expect downloads to jump dramatically beginning December 24th.

Sell us better music!

[supabeast!]

"We're not seeing the kind of dramatic growth we should given the surge in sales of iPods and other MP3 players."

Hmmm... sales suck on CD, sales suck online... maybe it's time for the record industry to reconsider its current business model of pushing albums where the musicians lose almost all control to producers who churn out an album with three good songs and ten filler tracks.

Not Apple's Fault!

[gasmonso]

Jobs wants to lower the cost of songs, but the RIAA has insisted that they raise the cost of new songs in order to lower the cost of other ones. Many people are not willing to pay $.99/song muchless $1.xx for one. And the complaint from Napster in that article is pathetic... they are just upset that Apple dominates the marketplace. You want more sales... then lower the price!

http://religiousfreaks.com/

Who cares about 0.44 percent?

[mobiux]

Is 0.44% a statistically significant number?

I.E. So of an average of 1,000,000 downloads, that means last month there were only 995600?

Seems like someone is reading alot into it.

Lies!

[Darius Jedburgh]

Napster CEO: "but they're being restricted from buying anything other than downloads from Apple"

Funny that seeing as (1) a large proportion of commercially available music can be downloaded from Apple and (2) iPods will play mp3 format files from any vendor or ripped from CDs. This guy is simply lying. It's interesting that someone can get away with such a bald-faced lie.

Re:Lies!

[The Amazing Fish Boy]

I'm a customer of Rhapsody. I can't use my subscription service with an iPod.

So you bought music knowing it had DRM, and knowing iPod doesn't play it, and now you're complaining. Sounds like you fucked up.

god, mom, you are such a LAME-O!

[Thud457]

What a crappy present!

"This even roots my computar, suckwit."

blame apple

[Paladin144]

Yes, of course the music industry would love to blame Apple for anything that's been going wrong in their business. I'm sure it couldn't have anything to do with the big labels' dwindling music-producing skills. And lord knows it couldn't be that cool new bands are refusing to sign with major labels, and are deciding to go it alone against the RIAA, thus depriving the RIAA of the right to control their music and their future.

</sarcasm>

I think I know why

[Potent]

Could it be that music just sucks 0.44% more than the previous quarter? :)

Re:I think I know why

[TheRaven64]

I haven't listened to any new music this quarter, but judging by what I heard last quarter I'd have to say that no, it's not possible.

My theory...

[LeonGeeste]

...is that some people buy iPods, but fill 'em up with pirated music instead of stuff they paid for at iTunes. I'm thinking about testing this theory soon.

Re:My theory...

[Okonomiyaki]

...is that starting around the end of November, a lot of people who bought iPods just took them home and wrapped them in colorful paper instead of opening them and loading them with music. Wait.

It's more like

[Solr_Flare]

The music industry's latest antics combined with their rediculously high pricing schemes(and wanting to raise them even more) that is hurting them, not Apple. If anything, Apple has helped by keeping the music industry *in check*. If they hadn't then we'd all be paying $3 to $5 a song by now and legal filesharing would be totally dead.

This piece comes off more as a paid attempt by the music industry to weaken Apple's position and power. Anyone who has been following the news knows that there is a bit of a mini-power struggle going on between Apple, who wants to keep things affordable, and the music industry. While I certainly think Apple could do better than they have been, at least they are thinking ahead and pushing in the direction music and consumer tastes are moving towards instead of clinging to the past model like the RIAA has, which has done nothing but hurt them the last 10 years.

The obvious solution...

[QuantumRiff]

Is to let the RIAA have their way with tiered pricing.. Obviously, if new songs aren't being bought at $.99, they will be purchased in droves at $2.99 for that hit new single...

I love statistics out of context.

[Ara]

Or, heaven forbid, there might be some people buying multiple iPods...

For example, over the course of the product, I've owned 4 different iPods. Apparently this means that my online music buying should have quadrupled, which it did not.

Thus, the link between iPod sales and buying music online is not directly proportional.

Re:I love statistics out of context.

[Jtheletter]

Thus, the link between iPod sales and buying music online is not directly proportional.

Indeed, and besides people buying multiple ipods I think the reason they're seeing a huge increase in ipod sales but not in music sales currently is because most of the ipods selling right now are probably Christmas/Chanukah gifts. Hence hardware sales now, music sales LATER.

Expecting music sales to increase directly with ipod sales is like expecting people to buy a year's worth of gas at the same time they buy a new car.

And since when has a decrease of less than one half of one percent as compared to a previous quarter meant a product/business model was failing, or that piracy is somehow to blame? I mean we all know no one else has anything more important to buy than music - certainly not higher gas prices, higher home heating prices, a huge portion of Louisiana residents just looking for jobs/homes, and one of the most intense years for charity in recent history (Katrina & FL at home, tsunami and massive earthquake abroad).

Good god music industry, get your heads out of your asses and just fix the numbers in the direction you want like you always do. Of course, online music sales being down won't stop them from continuing to insist iTunes songs should cost MORE.

Who wanted Apple to use DRM?

[kherr]

This is such a load of crap. It was RIAA who insisted on DRM before Apple could offer music. So Apple developed FairPlay to make RIAA happy, and thus was able to get all of the music we see in iTunes Music Store. This is whining because of the monster that was created. Apple owns the only really successful online music store. Apple owns the only portable music player that works with FairPlay. Music labels can easily get around this by dropping the need for DRM.

This is exactly the lock-in future that DRM brings to the world. The music labels are crying bitter tears because they don't control the locks. Whaa whaa whaa. What would be different if Sony had succeeded instead of Apple? Do we think we'd be seeing Sony offering whatever they had to everyone? No. DRM simply sucks. It's anti-consumer, anti-competitive and restricts the growth of the marketplace. Reap what you've sown, you greedy bastards.

Re:Who wanted Apple to use DRM?

[shawb]

This isn't the music labels whining this time. This was Napster complaining that you can't load Napster purchased song onto an Ipod. You think the Record labels would really complain if people were to "mostly fill up their players from their own CD collections." That means more CD sales.

Re:Who wanted Apple to use DRM?

[samkass]

In fact, the music industry would LOVE it if Apple freely license FairPlay. Then they win, and consumers lose. Right now FairPlay is keeping RIAA in check because it's basically a choice between FairPlay or stolen music for 90% of digital music player customers... so you get things like 0.99/track and such. If Apple freely licensed FairPlay, it would be you against the record labels directly, and they'd be free to charge $4.99/track for the latest pop crap because if one service didn't license it for that price, another would.

In effect, Apple's monopoly is working against the music labels' monopoly. If you take Apple's DRM monopoly away, consumers get screwed.

Re:Who wanted Apple to use DRM?

[Red Flayer]

"You think the Record labels would really complain if people were to "mostly fill up their players from their own CD collections." That means more CD sales."

I filled my MP3 player with music from CDs I already owned. Haven't bough a single song online, haven't bought a new CD in 6 months.

Quite simply, I have enough music to never get sick of what I own. And since it's all easily at hand, I'm even less likely to get bored with it. I have downloaded some music that is being distributed free of charge by the copyright owners, but that's it.

Now that its so easy for people to access their own library, the music industry needs to do more to get me to spend any money.

Re:Who wanted Apple to use DRM?

[SeaFox]

You think the Record labels would really complain if people were to "mostly fill up their players from their own CD collections.

Yes. Because they'd rather have me buy two copies of each song I want to listen to.

Confused?

[chill]

I thought the iPod would play unrestricted MP3s? What is stopping anyone from buying an MP3 from Rhapsody, MP3.com, AllofMP3.com or anywhere else from putting them on their iPod? How is this holding back the *music* industry?

I can see how it is holding back the portable music player industry, since they can't access iTunes, but they are direct competitors to Apple in the hardware arena. Apple made it easier to get to their service with their software, but that is the name of the game.

[For the unenlightened, the rules DO change if you are a convicted monopolist.]

  -Charles

In other news...

[shr3k]

In other news, the RIAA and major music industry conglomerates have announced new terms for customers purchasing and listening to their members' music.

"All people do with their CDs and iPods is listen to them. People think that they don't have to pay anything else beyond the initial purchase price. But what they don't understand is that they need to pay royalties every time they listen to them," said RIAA spokesman, Bob Degalhart. "Every song you play on your stereo or iPod should require some form of small micropayment to us for the right to even play that music. Everyone should realize that purchasing the music is only the first of many steps."

The RIAA and the industry plans to push legislation to require all stereo equipment, MP3 players, and hearing aids be fitted with special software that is capable of completing micropayment transaction per listen. Industry member Sony says that it has special software available for installation on home PCs for this purpose and plans to deploy it in the near future.

It seems to me....

[Big Boss]

That there is one very compelling reason NOT to buy legal downloads. DRM. No, not for the tinfoil hat reasons, but for one very simple one: interoperability. I can't take my DRMed iTunes AAC file and play it with my MP3-CD car radio. I can't play it via HMO on my TiVo. I can't play it in any other portable device. While I do own an iPod, I also own other devices that I listen to music on. Those can't play AAC, let alone DRM AAC. And I'm not even going to get into WMA-DRM.

Burning it to CDA and re-ripping it doesn't count. It's annoying and drops all the metadata, in addition to the transcoding quality loss. If they want to sell me music, it MUST be in a non-DRM format that I can use on ALL of my devices, MP3 for example. If they refuse, I'll take my money/time elsewhere. Indy, filesharing, certain russian sites, etc.. And I'm sure I'm not the only one. I'd be happy to pay $1/song, for high-quality (LAME-Standard minimum) MP3 or FLAC audio files. Hell, let me pick the format and bitrate and charge me a little more for the bandwidth for the higher filesizes. Oh, wait, someone else allready does that.....

Won't buy from ITMS because the quality is poor

[Thumpnugget]

Everything on my iPod is either 224 or 192kbps VBR mp3s ripped with LAME. I can even tell the difference between that and source and am considering reripping all my CDs to a lossless format, which I am NOT looking forward to, as I have over 1000 CDs.

The 128kbps AAC files from the ITMS don't do it for me. They sound highly compressed and you can occasionally here aural artifacts in the high-end, like flanging in the cymbal washes. It's a lot worse with 128kbps mp3s, for sure, but the quality just isn't high enough for me to even spend a dollar there.

Correlation is not causation.

[Irvu]

The author is saying a) We predicted that we should be making X sales this week, and b) we are not. Therefore Apple is to blame, as are the people who keep choosing to not buy the overpriced "music".

Can you spot the logical flaw?

Last week I predicted the following:
a) I would immediately win a hundred bojillion dollars in the lottery.
b) The most beautiful women in the world would gather around me to sing my praises.

None of that has happened so far, and seeing as how b is dependent upon a (lets not kid ourselves, I'd have to buy plane tickets for all of them to fly here), we should focus on a. A requires me doing things like buying lottery tickets, and the lottery having that kind of money, neither of which is the case. Therefore there is only one inescapable explanation: It's all the lottery people's fault. They're 'holding me back'. They should have set the pot that high, given me a free ticket, and then changed the rules so that only I would win.

I love this game!

The Songs are Gravy, not Blades

[ndansmith]

A competitor (I think it was Napster) put it well when they pointed out that using iTunes it would cost $10,000 to fill up a 10,000 song iPod. No one has ever expected the consumers to buy their music exclusively online. Apple debuted the iPod two years before the music store was online. They assumed that consumers would fill up their iPods with music extracted from their own CD collection and downloaded from P2P networks. Notice that there was not a significant price restructuring in the iPod line when the music store went live. In other words, the iPod is not a razor and the songs are not blades in Apple's business model, so dropping %.44 will probably not even make them balk.

Re:The Songs are Gravy, not Blades

[earthbound kid]

Your metaphor is delightfully mixed. Who puts their razor blades in gravy?

0.44%!?

[Turn-X Alphonse]

0.44%!? That's less than 1%, hot damn the world's rebeling against music! That's like.. DOOMED!

Totally ignore the fact that Christmas is comming up and people stop spending money on what they want and start saving for others, very often presents arn't music so the money goes else where.

Nothing old either

[kherr]

I bet I only find about 40% of the stuff I'm looking for on iTunes Music Store. I want to get a lot of music I grew up listening to but is not available on CD or online. Why don't these dimwit music labels put all of their back catalogs online? They sit on piles and piles of music that, if made available, would earn them money. Unlike pressing and shipping CDs, getting them online is a one-time cost that will easily be made up in sales.

Sorry RIAA...

[Craig Maloney]

I'm sorry, but I've stopped purchasing RIAA encumbered music. There's plenty out there, and I don't need to support greedy corporations who don't understand their customer wants or needs. It only took a few years, but I finally caught that the RIAA is not interested in making sure that I remain a customer, and I've complied by taking my business elsewhere. Magnatune, Positron Records, Metropolis Records... they all get it. Soon other companies will understand that the problem isn't their customers (who want to support them), but the marginalized trade group cartels that are holding them back. Until this happens, my cash goes elsewhere.

Sorry, RIAA... you had your chance.

and

[beforewisdom]

I'm sure draconian cd prices and lousy pop music have nothing to do with a decrease in sales.

Not in my household

[dada21]

My lady and I have a tendency to purchase a LOT of music -- we've filled a few 400 disc changers in the past before going with a wholehouse MP3 distribution system.

Our reasons for buying less music is:

1. Dislike of Sony and the RIAA -- where we used to buy 3-4 CDs a week at Borders, we're lucky to buy even 1 a month because of their strongarm tactics. Until Borders starts carrying the popular indie bands in their area, we won't buy CDs. Some indie bands in our area have sold 2000+ CDs privately without record store support. If they expect to be part of my community, they better do more research.

2. Bigger support of the ma-and-pa brick and mortars. As our retail stores that we own lose business to the dotcoms and the super stores, we've found that by supporting other locally owned shops, we see more locally employed customers at our stores. It is the ultimate "outsourcing" to see your community spending money outside of the community to save on sales tax and maybe a 5% difference in price beyond that. 14% is still a huge savings, all from government coercion.

3. Income. Our income this year is about double the last 3, but our income in the last 6 months is down over 70%. I've been putting more of my income into real savings (gold, silver, property) to weather to storm ahead. I've also expanded my market from just-the-Midwest to the entire world, and I expect it will take a year or two to get back to my first half of 2005 income levels.

4. Quality. The quality of the mass produced records is terrible. I can't listen to the top 40 record stations at all -- every vocalist is enhanced, delay and reverb is worse than the 80s, and the compression destroys any fidelity that might have made it through the overproduction period. Garbage in, garbage out, garbage unbought.

5. Promotion. I don't feel any desire to pay $50 to see a concert of 3 bands I barely know. The indie scene is usually $6 to $12, I see 2 amazing bands and 3 new bands cutting their teeth. $2 beer, $4 calls instead of the big shows where we paid $14 for a drink recently ($110 per ticket). Without cheap promotion the records won't sell.

6. Collusion. Try to get tickets today to any popular show. The rules governing ticket scalping are created specifically to take care of the few scalpers who are licensed by the local government. It has made shows nearly impossible to attend to. One popular show we were willing to pay $60 per ticket for was sold almost entirely to 3 ticket scalpers.

7. No desire. There are so many new ways to be entertained (due to the web) that music-on-CD just won't cut it anymore. I've been talking to a local show producer who is finding better ways to stream live shows to the web in a high quality, high fidelity, well produced show. I can't wait for his work to come to fruition.

Re:Not in my household

[sandmaninator]

Who is modding up the rich dude whining???

Some, but not all

[jfengel]

Some other services, but not all other services. In particular, you can't put on WMA-protected music, which is the next most popular format for legal music downloads after iTMS's own FairPlay/AAC format. (The article is something of a shill for Napster, which uses WMA).

You can get lots and lots of music from other services in other formats supported by the iPod, especially MP3s, but usually those are from less-well-known bands or from services of dubious legality, like allofmp3.com.

Disposable Music

[Freaky Spook]

I get my music from AllOfMP3.com, I know its not the most legal business on the market but when I want music that good & works on any of my devices I can get it, even if i am only going to listen to it a few times.

Music is like the new fast food, its junk for our brains & ears & people want a lot of it, I don't get how the music industry doesn't realise that & where the hell do they get their market research from.

People want lots of music & they want it as cheaply as they can, when your competeing with a free market like the internet you can't try to restrict your competition you have to vigirously compete with it, even if your competition is illegal, its still competition.

Maybe I'm old school

[HangingChad]

But I'd still rather have a CD than download directly from iTunes. Then I can move my material from device to device as the media changes.

It's mp3 this year but who knows what audio format is coming around next year? Are you going to be able to play your iTunes downloads 10 years from now?

I'm glad Apple is doing well with iTunes, but it's just not for me. I want a disk. I want a disk I can rip to the PC and portable device of my choosing whether it's on Windows, OSX or Linux. And I especially want to be able to find something that can still play that CD 10 years from now.

right

[mr_tommy]

Forgive me - the main quote for the start of this story comes from Apple's direct competitor, Napster, and is followed up by more in-partiality by one from Real!? It doesn't take long to decide exactly how much credibility to give this piece...

Re:Or..

[TheOtherAgentM]

They bought the first album. Then they went out and bought gold fronts and Dubs. They now cannot afford to purchase music online.

Margin of Error?

[Elfboy]

.44%. Half of 1 percent. And what is their margin of error? Somehow I doubt Nielsen SoundScan has THAT high a precision.

Entitlements

[Anarcho-Goth]

Simply put, record company execs are looking for entitlements.

Ultimately, they think they are intitled to make a profit every time someone listens to a song under their umbrella, or iron fist.

So if I own a lot of LP records, and want to listen to them in the car (car turntables are not very stable unless you drive really carefully) they cry "No Fair!" and get a tax put on casset tapes.

If this were really about piracy, that would be the only thing they would mention. The fact that they are complaining about people filling up their iPods with music that they already have a legal right to tells us what is really on their mind. They feel entitled for people to buy music all over again. And in another 10-20 years they will propose yet another format and expect it over again. Like a corrupt utility company, or a corrupt government, record companies want the right to tax us and then keep that money for themselves.

With any luck Artists will control their own music, and profit from it by then and the record companies will be dead.

Re:Entitlements

[notthepainter]

o if I own a lot of LP records, and want to listen to them in the car (car turntables are not very stable unless you drive really carefully) they cry "No Fair!" and get a tax put on casset tapes.

Chrysler had the http://www.imperialclub.com.nyud.net:8090/Repair/A ccessories/HiWay/invent.htm Highway Hi-Fi in 1956. The link implies that it even played on bumpy roads! It was a commercial failure not because it skipped, but because of a poorly marketed format change! The article is a good read, good geek late night mods...

Exactly

[sterno]

The problem the music industry is facing right now isn't a decline in the sales of new music, it's just that their cash cow of back catalog replacement sales is withering. They had intended to salvage this buy going with DVD Audio and trying to get people to re-buy everything yet again.

The problem for them is that there's nothing compelling about new music formats other than MP3/AAC. DVD Audio may be wonderful, but to the average person who just wants to listen to some music in the car, or while working out, it doesn't matter. The high end audiophile types might get into it, but there's not enough of them to create the necessary economies of scale.

I would argue that Apple/ITunes is boosting new music sales because it makes it so incredibly easy. If I find a new artist, I can e-mail you a link, you click it, and 30 seconds later, you're downloading the new music. No trips to the store. No forgetting about that cool new album your friend recommended. Plus the IMixes give another way to find music you might not have bought before.

So it is good for the music industry in the long run, but they have to learn to accept the fact that the crack pipe of back catalogue music sales is running out of smoke. It's going to be hard times for them for a while because even with growing new album sales, they're likely to see an ongoing decline in revenue.

Re:Exactly

[mankey wanker]

Yup and yup.

I think the last time I bought into the audiophile craze was for stuff like "Dark Side of the Moon" or "Twin Sons of Different Mothers" as published by the likes of Mobile Fidelity, CBS and Nautilus (half speed mastered), and Japanese high quality virgin vinyl stuff. But in the end it's hard to imagine the difference in quality was actually worth it. The sound quality bottleneck always remains the fact that your stereo system and room acoustics must also be fantastic or you can forget about it - and I don't happen to live at Carnegie Hall and a lot of the stereo component stuff (aka hi-fi mumbo jumbo) I simply never believed.

So here I am today, I own thousands of vinyl LPs and I own at least another 1000 CDs. All of my CDs have been ripped to a 160 GB hard drive and my music server is still growing by leap and bounds as I add in old vinyl favorites. For vinyl I record from a slightly clunky line-in situation ripping to wav, splitting the tracks, running a pre-tested set of filters that reduce noise, hiss, and pops and clicks, and then finally I use EAC and LAME to make VBR MP3s. Before laughing at my set-up consider that I really do have some vinyl albums and 12" tracks that never saw republication as a CD. For CDs I rip with a Plextor drive, EAC, and LAME to VBR MP3s.

For album songs that segue I additionally rip them as a single track and name them appropriately - so you get a choice, play the album as it actually sounds without interruptions or mix your own playlists with possible segue created gaps. That's pretty much the one drawback to the technology. So far that's 28,669 VBR MP3 files.

I can network the server around the house to locations that I call "dumb but quiet network boxes" with decent sound cards and 7.1 computer speaker systems. The sound is quite sweet. Winamp, Foobar 2000 and Milkdrop rule the day. And there's a use for your old computer and monitor collection if you tweak them up with sound dampening computer cases. Some 5 GB hard drive systems I have down to one Antec power supply fan which can barely be heard, the second exhaust fan kicks on as necessary. You don't need many fans for boxes that do nothing but operate as interfaces for a music server.

And speaking of that music server...

It only makes sense to backup that kind of effort offsite, right? So I gave my brother a backup on a hard drive for the enjoyment of his family. I would have no objection to giving a backup to anyone I know, quite frankly. And I can't be alone in this. I am not handing out free 200-300 GB hard drives, but if someone gives me an empty drive I am cool about it.

Copyright realistically is dead. Even if respected, copyrights have no market justification to last longer than about 4 years, if that.

It's seriously game over for the back catalogue - now and forever. Every future DRM will be cracked. Why? Because people want access to their "licensed" digital stuff. If they think I won't make my own backups and then possibly even share those with friends and family (as I have done for decades now by every other known method going back to reel to reel days) then they are mistaken. If my original copy of my CDs are lost or stolen or even sold, I have no intention of erasing backup copies from my MP3 server.

The music industry has had its day. Now it is near sunset.

Songs are and have always been just commercials for live performers - and they should always have had a nominal price and no protection schemes. That's what the market demands.

Timeline

[atomic_toaster]

My theory is that the timeline for purchasing an iPod & using iTunes goes something like this:

1) Buy iPod.
2) Rip CDs purchased way back when.
3) Buy music at iTunes to fill in the gaps in music collection.
4) Load everything on the iPod.

Now, everyone will have their own personalized timeline; you may already have ripped your CD music collection, or bought/downloaded mp3's from somewhere else, who knows? My main point here is that, for most people, buying an iPod is the first step, and buying music from iTunes (if they're going to do it at all) will come somewhere later, right?

Now, take into account that it is right before Christmas. People are buying iPods like mad (I know that in my city it's bloody impossible to find a 4GB Nano anywhere), and possibly iTunes gift certificates with them. Yet these iPods won't actually be opened until Christmas, and then people still have to install them and all that jazz (which, for the more technically savvy, is a piece of cake, but there are a lot of people out there who will have to wait for help from the family geek to get their iPod up and going). So the ratio of iPods sold over the last little while to people buying music from iTunes is of course going to be a little wonky.

Go ahead, iPod customers, prove my theory wrong. But I'd be curious to see what the rate of downloads is between Christmas and, say, the end of January. I'd predict that they'll be higher than the monthly average over the past year.

All professional rockstars, please stand up.

[Peter Trepan]

Yeah, that's what I thought.

I know dozens of talented musicians in active local bands, but I don't know anyone - not even a friend of a friend - who makes a living from their band.

The solution? Let go of those cherished dreams about getting "discovered" and give your music to the world for free. If you don't like the record industry, that's the best way to screw them. Do it for the recognition. Do it for the chicks. Do it because you enjoy it. But if you're doing it for the money, you'd be better off buying lottery tickets.

Sounds specious at best

[patomuerto]

First a drop of 0.44% is not something to stop the presses about. It might be the beginging of a trend but I would be suprised if it is outside of any statistical error.

Second, they do not give any information of mp3 purchases and usage. I just bought a nano because of its size. I am not getting rid of my 40GB ipod because of its storage capacity and I still have the first ipod player I bought years ago (TDK mojo) that I keep around just in case (for what I dont know). Most of my friends have upgraded players as well and intend to keep their original. They are not going to repurchase music.

Third, in all the music sales itunes only makes up 4% of music sales. They do not mention if CD proces are driving people to pirate music. Personally, I would rather own a CD but I cannot justify $15. Especially if I am only buying it for a few songs. I stopped file shareing music a while ago but I do understand why some people continue.

Why didnt the author point out that CD prices rarely come down. Sometime a title will show up in a bargin bin but a customer cannot consistently wait for the price to come down. More that often the case is the price is reduced when it comes out and then you can only pay regular after a few months (which can be $18 or more).

Also, why didnt the author point out the pricing of music is almost a mystery for all media. Try to find out how music execs plan to price a cd for its lifetime, how much are production costs and who gets the proceeds at various stages over time (please, try--I would love to know). It is not public knowledge for a reason.

My impression it this guy is either grossly uninformed or a shill.

Escaping The World Of Monthly Payments

[cmholm]

Apple does enjoy its little lock-in scheme that we love to roast Microsoft for.

Yes, a little lock-in scheme. They sell a music player, throw in an on-line service as a sales gimmick. Consumers have alternatives to an iPod, and music distributers have alternatives to iTunes. For some bizzarre reason, consumers opted for the Pod enmass. Go figure.

Naturally, "Napster" is pissed. It may be that they'll stay pissed. Every seller's favorate business model is subscription, for the continuing income stream. A consumer's favorate model is (usually) to buy something once, so that they don't piss away money on goods and services they aren't always using. Most folks are already Washington and Franklin'ed to death by rent/mortgage, insurance, utilitities, cable, phone, cell phone, isp, and transportation. And now some bozos want to add music to our monthly.

Yeah, I'll get right on board with that. Sorry Chris, I already did a snail mail version of Napster with the Columbia Frickin' Music Club back in the day. A pain in the ass, having to turn back the crap they were pushing, once you had your fill of your favorates, and got down to the long haul of sorting out a few grains of one's personal wheat from the chaff.

Re:XMas?

[shawb]

This article is a non-issue for several reasons:

1)As you say, many of the iPod purchases are gifts which have not been opened yet.
2)Many of the iPod sales are to repeat customers who do not have to fill up their library again. I am sure a significant number of the people who are getting their first iPod also already have music purchased from the iTunes store.
3)There are more outlets to purchase music online now than there were before, so iTunes sales would suffer due to the competition. That's only natural.
4)The previous quarter was the beginning of the school year. I imagine many students would get new music at the beginning of the semester. They are too busy with papers and studying towards the end to shop around for music. And they are getting too tight on funds as student loans or summer job savings have been spent already.
5)Because the holidays are coming up, people are less likely to buy music for themselves, but they have been purchasing iTunes gift cards of which a significant portion will be redeemed shortly after christmas. I'm guessing this alone would account for at least 0.44% of last quarter's sales. I mean, it's not like you'd actually purchase music from the iTunes store to put it on someone elses iPod as a present... you'd just give them a gift certificate to do it themselves. Similar to 1) but not entirely the same. For instance they would probably be inside a card than have a card taped onto them.

The problem is obvious

[aiken_d]

Consumers are clearly demonstrating that the $0.99/song model doesn't work. Educated by **AA's anti-piracy campaigns, consumers realize that Apple's business model is unfair to the artists who create the songs they listen to. This is clearly a groundswell of public opinion whereby customers are telling Apple "If you continue to release Ms. Spears' latest single for $0.99, you are robbing her of her compensation as an artist, and we won't stand for it anymore."

I don't think Apple has any choice: in the face of this consumer backlash against affordable music, they'll have talk the labels into allowing them to raise prices on the most artistic material (that which is in the highest demand, that is). If they charge, say, $2.99 for the latest Britney Spears single, consumers will once again be able to purchase from iTunes with a clear conscience, and not worry that they're contributing to a young artist being taken advantage of by a huge corporation.

Cheers
-b

Dear Chris

[Tsiangkun]

Chris Gorog, CEO of Napster Inc. (NAPS ), which sells both subscriptions and downloads. "You have this device consumers love, but they're being restricted from buying anything other than downloads from Apple. People are bored with that."

Chris,

I know this is hard to wrap your head around. The iPod is a media player with a built in hard drive. There is no vendor lock in. I've been able to downlaod music from napster, kazaa, soundclick, and a variety of vendors. Amazingly, they all work fine. AIFF, WAV, MP3, ACC, all work fine on my iPod. Should your's behave differently, RTFM.

What the iPod doesn't do, is support every god damned DRM scheme on the planet that lets you and your corporate cronies "lease" your DRM infected music to iPod owners. Quite frankly I'm not interested in DRM laden crap from napster, real, or anyone else including iTMS. I bought my iPod to carry around the large collection of music I already have, not to populate it with new music that has been approved by some industry suit.

So, in conclusion, the iPod is a hard drive. I can get files of any type onto it with ease. The iPod is a media player. I can play a fair variety of widely available media types without problems. The problem is in the DRM schemes that lock content to specific devices.

The iPod did not lock me into anything, your DRM infected business plan locked me out of your customer base. I am not interested, and it has nothing to do with my iPod.

I have not, nor will I ever "lease" digital music for my device. If I am paying with real cash, I want real bits I can twiddle as I see fit.

Sorry Charlie!

[Morgalyn]

As has been true since the start, iPod owners mostly fill up their players from their own CD collections

I'm not sure why they are surprised with this? Did they honestly think people would only put newly-purchased music on their iPods (apparently so)? Why wouldn't I want to put all the music I already listen to on it? When the iPods first came out, it seemed like the biggest buyers were people with too much money on their hands that bought every CD that ever appealed to them, and were tired of shopping for n-disc changers for their cars and jukebox systems for their homes. The whole POINT is that they can hold albums and albums and albums of music without carrying around all the accompanying cruft (CD organizers, anyone?). iTMS was just icing on the cake, a way to explore new music and purchase a track or two without buying the whole album. If I had to make a guess, I'd say iTMS completely revitalized the 'singles' market.

We're not seeing the kind of dramatic growth we should given the surge in sales of iPods and other MP3 players

"the ... growth ... we should"... hmmm.. I think its time to hire new analysts, right? Just because someone came up with some numbers doesn't mean its a bonafide, set in stone, destined fact. If this commentary is referring just to the current quarter, then they should REALLY give themselves a kick in the pants - sure iPods and other MP3 players are flying off the shelves: people are buying them for christmas gifts. They aren't even being used yet! They're probably wrapped up and under a tree, or being shipped, etc.

PAH. I give up. Someone needs to get the music industry to grow up and stop whining that someone played with their toy: it's time for them to eat their vegetables and wear regular underwear instead of diapers. This should be accompanied by a talk about how life doesn't play by the rules you make up for yourself. Sheesh.

iTunes Music Store - never have, never will

[DeliBoy]

"I have half a million subscribers who would love to use an iPod with my service," says Napster's Gorog.

I'll bet a lot of owners have used Napster (circa 1998) to load their iPods. About 20% of the music in my collection is from this previous version of Napster. Most of that is crappy 128k, misnamed, and ID3tag-less. 60% of the rest of it is from legally ripped CDs. The final 20% is legitimate free music - from archive.org, fingertips, The Hype Machine, other blogs, live torrents, etc.

Perhaps the RIAA should reconsider the free ride they expected from iPod users. When I purchased my Nano, the sole purpose was to haul around some of the 120GB of music I own. I never planned on using Apple's Music Store, and I probably never will. Similarly, I will never purchase DRM encrusted music. The music industry should really consider anything they've sold through iTunes as frosting.

And while we're on it, the RIAA will never see me re-purchasing music I already bought. I've downloaded and feel fully entitled to albums I've previously bought on cassette & LP. I could go through the work of encoding it in realtime, but the same thing is available online for free. The same goes for lost or damaged CDs. I've been emailing the RIAA regularly for several years to see if they have a problem with this policy - with no reply to date.

"You have this device consumers love, but they're being restricted from buying anything other than downloads from Apple."
- Is Gorog willfully ignorant of free music, or just plain stupid? Has he ever even used an iPod?

Should

[umbrellasd]

"Music sales aren't what they should be." There is no should in the market. There is what is. It is just retarded when things do not meet some "smart guy's" expectation and then the guy claims the market is wrong and he is right about what should be happening. It's about as unscientific as you can get. At this point all there is is a correlation between iPod sales and reduced music sales, and an extremely weak correlation at that. There are a wealth of other economic factors involved in music sales and few of them are constant right now.

That's a far cry from cause, and some guy's expectation is a far cry from proof.

0.44%

[LoudMusic]

0.44%. But for an android, that's like an eternity

Seriously, 0.44%? Is that honestly an issue?

funny you should mention Pink Floyd

[tomcres]

I actually just bought several Pink Floyd albums on iTMS. These were albums that I used to have on cassette tape, copied from friends' CDs and tapes. So, the recording industry made money not only on the subsidies they get from the sale of blank cassette tapes and dual cassette decks, but then also on the legitimate copies I eventually bought on iTMS.

But iTMS is killing the industry! Legal music downloads were down a whopping zero-point-four-four per cent since the previous quarter! (For anyone who can't tell.. that's sarcasm!)

Re:What?

[necrognome]

I'll back down if you can name one or two.

bleep.com.

Re:What?

[MoneyT]

Nobody will sell those MP3 files on-line. So you have to jump through extra hoops to get to them. I'm sorry, but I'm not accepting MP3 as a non-lock-in example.

"Buying an iPod does not force me to buy from iTMS."

Okay, maybe I'm being ignorant here. What other services can you buy iPod compatible music for? I'm dead serious, I'll back down if you can name one or two. Part of my reaction here is that I CAN'T use my existing music service with an iPod, but with other players I can. You'd be doing me a huge favor if you could suggest an alternative music service with a subscription model that I could use an iPod with.

Failure to fill a market void is not lock in. Your subscription services failure to offer iPod compatible music is not lock in. You are the one that chose a subscription service which locks you out of using the iPod.

Ignorance is bliss

[geekee]

"With any luck Artists will control their own music, and profit from it by then and the record companies will be dead."

If ignorance is bliss, you must be very happy every time you contemplate the music industry, or economics or business in general.

Listen to the Hallelujah Chorus!

[DrSbaitso]

"RIAA sucks! Apple rules! iPods rule!" et cetera. It's getting old.

To fill a 60 gig iPod with songs from itunes costs roughly $15 grand. And yet they still sell very well... hmmm. I suppose a lot of folks with 1250 disc CD collections (the stack of CD cases would only be about 30 feet high) will come out of the woodwork to talk about how much they love having each bootleg Phish show they own on their iPod, but the fact is that most people who have 60 gigs of music stole a lot of it. (Other anticipated responses: I use my ipod to store 8 million digital pictures of my girlfriend; I keep 60 gigs of [not copywritten] porn on it; I back up every Linux distribution ever created; etc. You're a hero, and this post isn't about you, so go have a Jolt to reward yourself!)

If quarter-over-quarter iPod sales are way up (discounted for seasonality - lots of those iPods will be Xmas gifts, after all) but quarter-over-quarter music sales aren't, record executives are right to be skeptical about iPods driving their sales. They've pretty much figured out that Apple screwed them over - the iTMS is basically an advertisement for iPods. The fact that it generates some revenue is an ancillary benefit, nothing more.

Now, I'm all for music labels as they are generally constituted now shrivelling up and dying. I couldn't care less. But for the longest time, people b**ched and moaned about how they wouldn't steal if there was a better alternative; if only some genius company would sell tracks for $1 each, so you wouldn't have to buy the whole crummy album for the 3 songs you wanted! I think I read that same post about 6 million times in 1999. Now that it's here, people are discovering that actually, free is still a lot better than $1, and so file-sharing and allofmp3 downloads keep setting all-time records.

This is bad, because the mean record industry is going to call up their cronies in congress and pass more stupid laws that will piss off everyone here. They are going to do something, because the availability of cheap, legal music isn't enough to stop the flood of illegal music being shared. So stop whining and go buy some indie records off itunes :)

Incorrect

[Prien715]

That's why the statistic is quarter over quarter. Every sales statistic in existance uses quarter over quarter sales to account for the routine seasonal fluctuation, since after all, it was almost Christmas this time last year as well.

Re:Incorrect

[nodmc]

Actually, the correct way of showing growth in a seasonal business is Year-over-Year, and not what this article shows, Quarter-over-Quarter, which in retail driven areas are largely irrelevant. That is always why retailers are comparing this Christmas over last Christmas, and not this Christmas over this past Labor Day. Okonomiyaki is correct in implying that one should wait until we see what this quarter (Q4 2005) looks like compared with Q4 2004 before using such growth trends in declaring legal downloads a "dying" business.

Re:Incorrect

[Reaperducer]

Especially in a "decline" of less than half of one percent.

It's just another sign that Apple is going out of business. Has been since 1984.

Re:Incorrect

[Loconut1389]

It's another sign that everyone is going out of business.
Remember the dot com implosion?
"Everything's overinflated, no real assets." "Everything's overinflated, no real assets." "Everything's overinflated, no real assets." The talking heads repeat over and over...
Finally, a downturn and everyone panics, "oh my gosh, everything was overinflated, this stuff isn't worth anything!"

If you broadcast "impending failure" loud enough and long enough, a failure will occur where one may not have otherwise.

Seriously.

[commodoresloat]

This reminds me of the "Apple is dying" hogwash. iTMS sales are down a bit so now Apple is holding back the music industry? Give me a break. It if wasn't for iTMS, the music industry's main mode of doing business with the internet would be the same as it was in 1998-9 -- suing the hell out of Napster, Gnutella, etc. users, and extorting money from anyone forward-thinking enough to invest in such endeavors. Apple came along and showed the industry that there was a way to make money selling legal downloads, and now they are bitching that it's not enough. They want the price raised; they want more DRM; they want more restrictions and more costs added until we are paying full album sticker price every time we listen to a song, and they're still complaining that sales are going down. Even then it won't be enough for these greedy corrupt egotistical blowhards. Given their attitude they should be happy anyone buys any music from them at all.

What could they possibly do?

[soft_guy]

In your case, it sounds like you've "outgrown" buying more music. You aren't into new artists or looking forward to new records coming out.

To get my 70+ year old father to buy more music, you'd have to bring Bob Wills back from the dead to record another album.

I don't think you or my father are the kind of customer the RIAA is trying to attract.

Re:What could they possibly do?

[badasscat]

I don't think you or my father are the kind of customer the RIAA is trying to attract.

No? I'm not the guy who wrote the comment you're replying to, but I'm in the same boat. You really think the RIAA doesn't want to attract thirtysomething males with scads of disposable income? Maybe you're right - maybe they don't care about actually getting people who have money to spend, but that's really their problem, isn't it? Shouldn't they be doing something to attract people like me?

I actually do still buy music, but of the last six CD's I've bought, five have been used CD's from Japan. If I told the RIAA this, it would drive them absolutely nuts. They'd tell me I'm everything that's wrong with music consumers these days - buying used, and buying imports! This is what they need DRM and region protections for! And pass a few more laws too while you're at it, make used purchases illegal!

Well you know what? Release those CD's in the US, and provided there was no DRM on them, I'd have bought them new. But hey, RIAA, you didn't. So I had to take matters into my own hands, didn't I?

I have no patience for Britney Spears or JessicAshley Simpson or any of these tone-deaf, generic monkeys from American Idol that they keep trying to foist on the American public. So yeah, maybe they're not trying to attract me; instead they're trying to attract people without any taste that live in trailers and live off unemployment insurance. Well, more power to them I guess, but that doesn't sound like a business model.

I guess the point I'm trying to make is yeah, I've slowed down buying music as I get older, but it's only because the RIAA and its member companies (and the RIAA is the music labels, remember) refuse to release any music I'm interested in anymore.

Re:No

[el_womble]

It worked then. You would have infringed copyright had iTunes allowed you to share. They allow a work around that is both time consuming and annoying, but not difficult, and you refuse to break copyright. Sounds like pretty succesful system.

When it comes to DRM - don't make it hard, people like a challenge, make it boring.