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Apple Sets Tune for Pricing of Song Downloads

Posted by ryuzaki0 on from the pink-lady-serenade dept.

PygmySurfer writes "Apple Computer on Monday revealed it had renewed contracts with the four largest record companies to sell songs through its iTunes digital store at 99 cents each. The agreements came after months of bargaining, and were a defeat for music companies that had been pushing for a variable pricing model."

44 of 396 comments (clear)

  1. It makes me feel all good inside... by crazyjeremy · · Score: 5, Funny
    The music industry's big four - Universal, Warner Music, EMI and Sony BMG - were not immediately available to comment ... The issue has occasionally become acrimonious, with Mr Jobs last year publicly labelling the industry "greedy". However, several music executives privately acknowledge that they have little leverage over Mr Jobs.
    Heheheh... I dunno, but ANYTIME a big guy saves the little guy money, and greedy corporate america gets told to "stuff it" and HAS to listen... It just makes me feel all good inside.
    --
    Funnypics
    1. Re:It makes me feel all good inside... by 0racle · · Score: 5, Funny

      several music executives privately acknowledge that they have little leverage over Mr Jobs

      Perhaps someone should download the Imperial March from iTunes in honour of this.

      --
      "I use a Mac because I'm just better than you are."
    2. Re:It makes me feel all good inside... by TubeSteak · · Score: 5, Insightful

      They have leverage, they just aren't willing to use it.

      If the 4 RIAA companies were willing to offer Non-DRM music, they could ditch Apple in a heartbeat.

      They're stuck because the most popular music player has a DRM format controlled by Apple.

      I bet the RIAA would love to see the iPod 'opened up' to support other DRM schemes. Then they could use a different distribution method... one that has variable pricing.

      The Emperor & Darth Vader would destroy Apple & their music empire. Not because they're rebels, but because they didn't go along.

      --
      [Fuck Beta]
      o0t!
    3. Re:It makes me feel all good inside... by Firehed · · Score: 3, Informative
      The only reason you see Apple on the other side of this issue is because RIAA is taking a peace of the pie. Apple also controls the ipod market which is complementary to the itunes market. But Apple gets 100% of the profit from the ipod market, and only part of the profit from itunes market (since they have to share with the RIAA). So they would naturally like to shift as much profit as possible to the ipod market, which means keeping lower prices in the itunes market.
      The RIAA takes more than a piece. They end up with something around 70 cents of every single one of the billion plus songs sold (about 4.5c goes to the artist, presumably the rest to Apple).

      Steve's a smart guy though. He knows 99c works. He's set a standard, and he probably wouldn't be able to charge more than that on anything, save the extremely popular supercrap that 12-year-old girls buy. He's taken a ton of would-be pirates and turned them into legal consumers. I think he's aware of the fact that selling less popular stuff at under 99c could boost sales (and yes, there would be a "correct" price point for every song, probably around the 50c range for most of the older or lesser-known stuff). But you can't take your business that's been touting "any song in the world, 99c" and say "well, except for x, y and z".

      Every item has an optimal price point. With inelastic items like gasoline, you can pretty much charge whatever the hell you want and people will still buy it (begrudgingly, but they still need to get from a to b). Music is quite the opposite, and digital music downloads even moreso. Charge $x for a CD, Y people will buy it. Figure in all of the associated costs and you've got your optimal price point. With downloads, costs are almost nonexistant. At the rates of my host, it would cost me about nine cents in bandwidth for a four-meg track, and you can bet your ass that it doesn't cost Apple even a tenth of that. The same pricing curve still applies, except that supply is infinite and distribution costs are negligable. Charge more, less sales; vice-versa: find the point on the graph where sales * price is at its highest point and there's your ideal price.

      Of course, things change with demand and whatnot, but just suppose that songs all start at 99c, and as sales decrease the price is dropped by a dime to as low as 29c. Sales will pick up a bit due to the dropped price. If sales seem to be picking up too quickly, bump it back up a level. Make some uber-algorythm to automate this and all you've gotta do is add new music to the store.


      And the RIAA becomes a problem again. Suppose that it worked out, as it roughly does, to 70c: RIAA, 5c: artist, 24c: Apple. Remove RIAA from the picture. 29c a track is remaining. Remove the RIAA, charge 49c a track, divide the extra twenty cents evenly between Apple and the artist. Sales shoot up more than twofold from the price drop in all likelyhood, the artists get FAR more money (three times as much even if the rate of sale stays the same), and Apple wins too. You've undercut the assholes and given more money to the people that deserve it, while simultaneously spreading the product to more people at less cost to them. Hell, Apple would probably be making so much extra profit that they could lose the CRAP and people using devices other than the iPod wouldn't hurt overall profits (assuming, of course, that a: people buy iPods for iTMS and not it being an iPod and b: they can be hassled to transcode from m4a to mp3/other)

      --
      How are sites slashdotted when nobody reads TFAs?
    4. Re:It makes me feel all good inside... by Doctor+Memory · · Score: 5, Informative

      With downloads, costs are almost nonexistant.

      Now that's not even close to right.

      You ever priced a Mackie? Studio time? A decent microphone? There are a large number of non-trivial costs to producing an album. No, GarageBand and a Shure mic from Sam Ash isn't going to cut it. If you want professional sound (i.e., something that will sell), then you've got to get some professional gear. And that takes professional amounts of cash. Sure, you can cut your distribution costs with on-line sales, and yes, distributino costs are significant. But to hand-wave the rest of the costs of production as "almost nonexistent" shows a shocking lack of common sense.

      --
      Just junk food for thought...
    5. Re:It makes me feel all good inside... by Overly+Critical+Guy · · Score: 3, Insightful

      greedy corporate america

      I'm so tired of seeing these kinds of tired, emotive phrases uttered. There's nothing greedy about being a corporation or American, or wanting to have variable pricing.

      I'm opposing to variable pricing for downloads, but I'm not going to fly the standard anti-capitalist flag over it.

      --
      "Sufferin' succotash."
    6. Re:It makes me feel all good inside... by jcr · · Score: 5, Insightful

      If the music was available without the DRM, people would still play it on their iPods. It was already the market leader before the iTMS opened for business, just as it is in countries where the iTMS isn't yet available.

      What the record companies don't understand is that they shouldn't fuck with something that works. Several of the also-rans offered all kinds of variability in the pricing, the number of times you could play a track, how many MP3 players you could copy it to, whether you could burn it to a CD, etc, etc. The iTMS beats them all, hands-down.

      If Apple withdraws the iTMS from the French market, then people in France will just go back to ripping their own CDs, or getting them from P2P networks, and they'll still play them all on their iPods.

      -jcr

      --
      The only title of honor that a tyrant can grant is "Enemy of the State."
    7. Re:It makes me feel all good inside... by Baricom · · Score: 5, Insightful

      If the music was available without the DRM, people would still play it on their iPods. It was already the market leader before the iTMS opened for business, just as it is in countries where the iTMS isn't yet available.

      Exactly, and I think that's what the parent was getting at. The DRM mandated by the RIAA ended up giving Apple leverage. The industry had a choice - they could either agree to Apple's terms, or drop DRM so that the iPod could play the music from a competitor. The third possible option - dumping Apple and going with a more cooperative company - wasn't available because the DRM wouldn't work with the iPod.

      In other words, the RIAA's stubbornness in 2000 came back to haunt them five years later.

    8. Re:It makes me feel all good inside... by TubeSteak · · Score: 3, Interesting

      I agree with you, but I guess I wasn't 100% clear earlier.

      The iPod is by far, the most popular MP3 player.
      Apple controls the only form of DRM in the iPod.
      The RIAA is unwilling to give up on DRM.

      You see where this is leading? They're so scared of filesharing that they've fscking up CD compatability in an effort to thwart any copying. As long as Apple controls FairPlay, the RIAA is stuck.

      --
      [Fuck Beta]
      o0t!
    9. Re:It makes me feel all good inside... by shark72 · · Score: 5, Insightful

      "Tell me again why a DVD is less than a CD?"

      Okay, once again: supply and demand.

      I think that many Slashdotters are of the perception that businesses are obligated to set their pricing based on material cost (which, believe it or not, is typically a small portion of the cost of sale). Or, perhaps to be more accurate, they know why a Ferarri costs more than a Honda, and a Honda costs more than an Kia, even though the cost of the components (the metal and plastic that makes up the car) is about the same for all three. They probably also understand why a shirt from Hugo Boss costs more than a shirt from Kenneth Cole, which costs more than a shirt from Sears, even though the material and manufacturing costs are the same for all three. But when Slashdotters observe that the material costs for CDs and DVDs are approximately the same, they hit a mental block and don't quite get the principle of supply and demand that drives pricing in other industries.

      If you're not sure how supply and demand affects pricing of DVDs vs. CDs, think for a few moments about how you use a DVD, and how you use a CD. Few DVDs are worth buying for me, because realistically, I'd only watch it once or twice. A DVD has to be pretty cheap in order for me to watch it. On the other hand, I'll listen to a good CD hundreds of times or more. It's all about the enjoyment you get out of the product. You might enjoy wearing that Kenneth Cole shirt rather than the Sears shirt. It fits better, and it's more flattering, or maybe it just makes you feel better. You enjoy driving that Ferarri more than the Kia. So, if the difference is worth it, you'll pay more. Get it?

      If I'm not connecting with you, maybe somebody else can explain it better.

      "A mass production model that wants $20 for a CD instead of selling a couple million copies at $5 a pop doesn't make sense."

      Agreed. CDs haven't been $20 in the US for ages. The average price for a new release is down to $13 or $14. This is supply and demand at work again. Selling a CD for $5 doesn't make much sense, either, as it would likely be negative margin (a retail price of $5 would likely mean that it was sold into disti for about $3, which is likely below the cost of sale).

      I think you may also be making the assumption that the CD market has what's called perfect elasticity, in which a $5 CD will sell 3x as many copies as a $15 CD.

      "The result is I simply quit buying CD's. How is this profitable?"

      One thing that the pros understand, that lay people often haven't learned, is that it's not necessary to get every potential customer to be a success. This is why that Kenneth Cole shirt costs $150, when they could probably sell it for $20 and make a profit. The secret is to find the optimum price point on the supply/demand curve (if a market has perfect elasticity, that curve would be a straight line at a 45 degree angle... but almost no industry is like that). So BMG doesn't sell you many CDs, and Kenneth Cole probably doesn't sell you many shirts, either. My guess is that both of them are fine with this.

      --
      Sitting in my day care, the art is decopainted.
    10. Re:It makes me feel all good inside... by shark72 · · Score: 5, Insightful

      "OK, let's try one more time. How about price fixing? Now, that's better."

      I guess it's time again to explain how the labels were price fixing, and why they got nailed, and why it wasn't such a good thing for lots of people. I take it that you're of the understanding that it relates to the fact that CDs all tend to cost about the same, but that's not correct. Sorry.

      Here's what happened:

      • Best Buy and Wal-Mart started selling CDs at the front of the store. They sold them as loss leaders; ie. they made sub-standard margins (or even lost money), because they were draws to get customers into the store. Best Buy had that store full of electronics, and Wal-Mart had that store full of clothes and other crap. That's where the real money is.
      • A couple of retailers that primarily sold CDs (Tower Records, TWE, and one more which I forget) were understandably annoyed. Unlike Best Buy and Wal-Mart, they didn't have a store full of high-margin stuff to sell. For them, it was either make money on the CDs, or else. But Wal-Mart and Best Buy were spending millions on circulars advertising prices that Tower et al. just couldn't hit.
      • So, they went to the record companies (notably Universal) and asked for help.
      • Universal set them up on a MAP program. That stands for "minimum advertised price" and lots of industries do it (including the PC peripheral industry). Universal helped fund Tower and TWE's ads, as long as Tower and TWE didn't advertise CDs for below a certain price. They could sell CDs for any price they liked, but if they printed prices in ads, it couldn't go below the MAP.
      • Wal-Mart and Best Buy noticed this and effectively got the government to bitch-slap Universal.

      The net result is that Tower Records went into bankrupcty and has been sold several times. Wal-Mart and Best Buy continue to sell CDs as loss leaders, and are contributing to the extinction of the independent record store. Music has become more homogenized, and CD prices didn't go down as a result of the settlement.

      This is good news for you if you happen to like the music that Wal-Mart and Best Buy sell, or if you subscribe to the "what's good for Wal-Mart is good for America" philosophy. It's not so good for you if the local Wal-Mart or Best Buy have helped your local indie record shop close its doors.

      And, of course, MAP programs continue to this day in lots and lots of industries. The moral here is not to try doing MAPs if there's the chance that this will piss off Wal-Mart or Best Buy.

      --
      Sitting in my day care, the art is decopainted.
    11. Re:It makes me feel all good inside... by shark72 · · Score: 5, Informative

      "So you are obviously an economist, since you know what supply and demand is... but you have never heard of economies of scale."

      No, I'm high up in marketing for a major vendor of PC peripherals. As a result, I have to know this stuff pretty well.

      I'll try to keep this as simple as possible, but supply and demand is typically a curve, not a flat line. A flat line would be an example of "perfect elasticity," as I mentioned in my original post.

      In short, when you're setting up pricing, the curve might show you that a 50% drop in price might only increase sales by 25% (if it were perfectly elastic, a product that cost half as much would sell 2X as many copies, and a product that cost twice as much would sell half as many units. But perfect elasticity rarely happens. For any market that's of sufficient size, you can bet that the big players have hired the appropriately smart people to do the work to understand what the curve looks like. In my particular corner of the world, I already know that selling my product at $89 rather than $99 might reduce the product's net margin by 20%, but it won't increase sales enough to make it as profitable as if I'd left it at $99. So, I don't do it. Understand?

      "You think $5 CDs would be a loss?? Maybe if the music business is more bloated than I thought. I can make CDs for less than $3... so the cost of production is not the issue."

      I don't think it's an issue of the music industry being bloated... that's not for me to say, but I do understand the realities of selling stuff in retail. First, keep in mind that a CD is sold to a distributor, who adds five points, before selling it to a reseller (retail store). Retailers like Amazon might add 10 or 15 points; brick and mortar retailers might add more. So, if your manufacturing cost is $3.00, you can pretty much rule out setting a retail price of $5.

      It's also important to understand the difference between net margin and gross margin. As you've correctly pointed out, the manufacturing cost isn't the big one. If you're selling PC equipment, you also have:

      1. Shipping costs. Somebody's got to pay them.
      2. Sales and marketing. Channel programs, merchandising, all that stuff. This isn't free.
      3. Accruals for price protections and defective returns.
      4. Miscellaneous overhead stuff like renting the warehouse that holds the inventory, and the salaries of the various people who help design, build, sell or market the product.

      "You may be right about the current rate bringing in the most money, but you are seriously deluded if you think that /.ers buy the dung that you are heaping."

      Well, you're right, in a way. I don't think that most people reading this believe that I'm correct. Slashdotters tend to be experts in server administration and coding and stuff like that; they're not in sales or marketing. I have tremendous respect for the folks who are experts in these areas, but spend a few days on Slashdot and you'll see that it's not reciprocal. There's also the phenomenon on Slashdot that I like to call "I know a little about one thing, so that makes me an expert on a lot of things." It goes with the territory.

      "Also, according to the numbers The music industry has been pulling in less money lately. Maybe a valid case could be made that CDs are overpriced."

      Oh, they've definitely been overpriced. CD prices have been in freefall over the past few years.

      "I guarantee that the music industry DOES care if he buys a CD. BMG does not make its money by being exclusive. That's a horrible comparison."

      Perhaps I didn't explain it well enough. If they can be more profitable by setting the price points that will cause some segment of the audience to opt out of buying the product, they'll do it. It all gets back to that supply/demand curve.

      --
      Sitting in my day care, the art is decopainted.
  2. good job! by clackerd · · Score: 3, Funny

    the shortsighted me says horray for only having to pay $.99 a song still. i don't listen to the farsighted me.

    1. Re:good job! by Guppy06 · · Score: 3, Funny

      "i don't listen to the farsighted me."

      I see a position in Congress in your future.

  3. Good to see leverage moving from the labels, by benow · · Score: 3, Funny

    but big label artists are still being boned.

    1. Re:Good to see leverage moving from the labels, by Quantum+Fizz · · Score: 4, Insightful
      But they're being boned either way, it's really the fault of the record labels, not Apple's. The record label doesn't need to put out as much overhead for physical media and distribution, (maybe advertising stays the same), but they're still taking the same cut they always have.

      What it will do, though, is lower the incentive for newer bands to sign with the big labels, and go with more indie labels, because the distribution will be the same (assuming Apple doesn't start doing dirty things like making labels pay a $1M fee to include their songs on iTunes or something like that).

    2. Re:Good to see leverage moving from the labels, by Original+Replica · · Score: 5, Insightful

      big label artists are still being boned
      So maybe they need to stop being big label artists. Easer said than done I realize, but if they can maintain and even use their fanbase to move to a more progressive indie label they will pave the way for artists who currently need the clout of a big label to get noticed. Once listening to bands on a Internet only indie label becomes trendy, then digital music will be all that we want it to be, right now there is still too much $$$ in the old corperate giants, because people still go for the big corperate product.

      --
      We are all just people.
  4. Re:Variably priced songs would be a good idea by alain94040 · · Score: 3, Interesting

    The killer app, of course, would be a plug-in to iTunes that let's you publish songs on it, for some form of micro-payment. If you do that, you can bypass the music store and keep the same front-end that everyone has grown acustomed to. Alain.

  5. It's all about simplicity by El+Cubano · · Score: 4, Insightful

    (note: I am not an iTMS customer. I don't even own an iPod)

    Everything I have seen/heard/etc about the iTunes store is that it is simple.

    People like simple. That's it. Why do companies not get this? How many people's VCR clocks blink 12:00 becuase (to them) it is too hard to actually set it?

    Now, Apple is on to something with their pricing model. It is simple. Sure, some older songs are probably not worth as much and some newer songs might be worth more, but overall it is a good balance. It's simple. They would likely lose more revenue by going a variable (and more complex) pricing model than they do by not squeezing those last few cents out of the most popular songs.

    1. Re:It's all about simplicity by Phroggy · · Score: 3, Informative

      I don't have an iPod either, but I am an iTMS customer. Granted, I'm on the cheapskate end of the curve and I've never paid them for music, but I bought Multipass subscriptions to The Daily Show and The Colbert Report, because I don't have cable TV, don't have a TiVo, have had really bad luck recently dealing with my VCR, and after using BitTorrent for awhile I finally decided it's just more hassle than it's worth. So yeah, I'm paying for ease-of-use.

      --
      $x='S24;r)>63/* h@<5+oZ)32"5cz';$me='phroggy'x$];
      $x=~y+ -xz+\0-Tx+;print$_^chop$me for split'',$x;
  6. Huzzah by mgabrys_sf · · Score: 4, Insightful

    After the Sony DRM debacle, I've ruled out CD-based media altogether.

    Say what you will about Apple DRM, but at least it's honest - and doesn't attempt to sabotage my CPUs. Good to know my pricing hasn't gone haywire in the near-term. For those who think that variable pricing is the way to go (except for whole albums) check out the raging success story that is google video. They're pay model is so - easy to understand - and easy to work with - no one I know is using it.

    I'd say that's a ringing endorsement for keeping it simple.

  7. Re:Too expensive by djrogers · · Score: 5, Insightful
    $0.99 is far above my threshhold for a lossy, DRM-laden song. I realize that as long as Apple has to pay the record companies on the order of $0.70/song, the price will never become reasonable. Considering the low distribution cost to the record companies, they could sell these at half the cost and make a LOT more money -- on volume. But that's not gonna happen.

    I don't think so. See, you represent one end of the bell curve we'll call 'cheapskate' and the fact is, no matter what the price were set to, someone will fall further along that curve than you and claim that everyone is missing out on huge profits by not dropping the price in half.

    The reality is that given the enormous success of the iTMS, it seems that Jobs et all were spot on with their pricing model (which one would assume was arrived at after much research). Reality check - nobody sells a BILLION of anything that's outrageously overpriced...

    --
    Think outside the... Hey, where'd the friggin' box go?
  8. relative pricing by wall0159 · · Score: 4, Insightful


    We hear so often that variable pricing is good. I think it's interesting that newly released music is commonly considered more valuable just by virtue of being new. This particularly applies to covers, rehashes, etc.

  9. Stop complaining by Anonymous Coward · · Score: 3, Insightful

    You guys can stop complaining about .99 being too much. It's obviously far out of Apple's hands. I think we should put our hands together than thank Steve for fighting The Man. (And don't stay Steve is The Man... because he is, but he damn well isn't, too)

  10. Still sucks for artists. by PAPPP · · Score: 3, Informative

    At last count, the breakdown of where that $.99 goes is (on average):
    Apple - $.35
    Label - $.53
    Artist - $.11
    And thats only after the label reclaims whatever they claim they spent in production costs.
    See http://www.downhillbattle.org/itunes/ for details.

    1. Re:Still sucks for artists. by 1000101 · · Score: 3, Insightful

      "At last count, the breakdown of where that $.99 goes is (on average):
      Apple - $.35
      Label - $.53
      Artist - $.11"

      I have never been paid 11.1% of 'market value' for any work I've done, and I can see why many people cringe over this figure. However, there is another side to the story. If an artist didn't sign with the label, their chance at large-scale success diminishes greatly. So, why not sign the deal, make 11.1% for each song sold on iTunes, and then build a following so you can pack the arenas and make the big bucks?

  11. Serves right - Profit Maximization does not always by unity100 · · Score: 5, Insightful

    ... maximize profits.

    Profit Maximization and its importance is taught in econ classes, and the sales crowd give it a rather exagerrated importance, but the fact that the 'market' is in fact people which have a tendency to behave according to their own choosing and not as mindless drones of the 'invisible hand' is not.

    They always go for getting the maximum profit achievable with a given or minimum quantity of sales. The very thought at the end does not deliver what they want to get indeed :

    If you make an easily obtainable/copyable product overpriced, you pump up piracy, or at the least unwillingness to buy your products in the target crowd.

    How many of us would think 'well, its just nothing, let me get 5-10 songs tonight' if the price per song was $5 or $10 ? or would any of us get a 'cheaper' song because the song we wanted was priced much higher ? is it that simple that we are going to get the 'best obtainable' from the songs provided ? a sheer stupidity scratch for the marketing crowd ? yes .

    Not only the 'profit maximizing' concept actually hampers the profits, but it also shatters market reach and market control - which is something priceless in most respects. Sell a song for just $0.10, and youll get hordes of people buying songs because 'its just nothing' in price - youll become a net standard.

    Sell them for $5, and youll get piracy.

    --
    Read radical news here
  12. Inside truth behind variable prices by Anonymous Coward · · Score: 5, Interesting

    Price as Signal

    Forbes: "EMI Group boss Alain Levy said at press conference today that he believed Jobs would introduce multiple price points for iTunes music within the next year."

    The story they're trying to tell you is that "older, less popular songs could be discounted, and in-demand singles could go for more than a dollar."

    Let's think this through, because I think the recording industry is lying about why they want different prices.

    Before I start with that, have you ever noticed that movie theaters charge the same price for all movies, whether they are Steven Spielberg blockbusters or crappy John Travolta religious quackery disguised as science fiction that nobody in their right mind would want to see?

    Theoretically, when a super-duper-blockbuster comes out, like, say, Lord of the Rings, there's so much demand that the movie theaters just end up turning people away. Econ 101 says that they should raise the price on these ultra-popular movies. As long as the movie is sold out, why not jack up the price and make more money?

    Similarly, when stinkers like Lesbian Gangster Yoga with Ben Affleck come out, the movie theatre is going to be pretty much empty anyway ... so Econ 101 says they should lower the price and try to get a few more bucks filling up the theater with price-sensitive moviegoers.

    And indeed this is what the recording industry is telling you that they want to do on iTunes. But they don't do it in movie theaters. Why not?

    The answer is that pricing sends a signal. People have come to believe that "you get what you pay for." If you lowered the price of a movie, people would immediately infer from the low price that it's a crappy movie and they wouldn't go see it. If you had different prices for movies, the $4 movies would have a lot less customers than they get anyway. The entertainment industry has to maintain a straight face and tell you that Gigli or Battlefield Earth are every bit as valuable as Wedding Crashers or Star Wars or nobody will go see them.

    Now, the reason the music recording industry wants different prices has nothing to do with making a premium on the best songs. What they really want is a system they can manipulate to send signals about what songs are worth, and thus what songs you should buy. I assure you that when really bad songs come out, as long as they're new and the recording industry wants to promote those songs, they'll charge the full $2.49 or whatever it is to send a fake signal that the songs are better than they really are. It's the same reason we've had to put up with crappy radio for the last few decades: the music industry promotes what they want to promote, whether it's good or bad, and the main reason they want to promote something is because that's a bargaining chip they can use in their negotiations with artists.

    Here's the dream world for the EMI Group, Sony/BMG, etc.: there are two prices for songs on iTunes, say, $2.49 and $0.99. All the new releases come out at $2.49. Some classic rock (Sweet Home Alabama) is at $2.49. Unwanted, old, crap, like, say, Brandy (You're A Fine Girl) -- the crap we only know because it was pushed on us in the 70s by paid-off disk jockeys -- would be deliberately priced at $0.99 to send a clear message that $0.99 = crap.

    And now when a musician gets uppity, all the recording industry has to do is threaten to release their next single straight into the $0.99 category, which will kill it dead no matter how good it is. And suddenly the music industry has a lot more leverage over their artists in negotiations: the kind of leverage they are used to having. Their favorite kind of leverage. The "we won't promote your music if you don't let us put rootkits on your CDs" kind of leverage.

    And Apple? Apple wants the signaling to come from what they promote on the front page of the iTunes Music Store. In the battle between Apple and the recording industry over who gets to manipulate what songs you buy, Apple (like movie theaters) is going to be in f

  13. Too bad only 4 years by suzerain · · Score: 4, Interesting

    It's too bad the contracts are only for four years...so we'll see this whole senseless charade again soon enough.

    I had thought Apple might try to secure a longer term deal with the labels (maybe agreeing to a pcrice increase with inflation or something). My plan at Apple would be:

    (1) Negotiate long-term deal with the labels (10 years or more).

    (2) Spend the next year either inking a deal with Apple Records and the Beatles, winning the lawsuit, or buying them outright.

    (3) Convince one or two BIG artists to sell directly themselves with Apple as the distributor. Offer them like 50% of the proceeds of sales, and sell through the iTunes Music Store exclusively, with possible physical distribution at Apple Stores.

    (4) Other smaller artists take notice, and an Apple label (maybe not named 'Apple' if the Beatles situation can't be won) suddenly begins to gain momentum, and fuck over the labels in the process (which would make me rather happy).

    (5) Profit.

    You could throw another step in there, since Jobs is Disney's largest shareholder. Apple and Jobs could buy Disney outright, and gain some record distribution and music IP themselves, which they could immediately market at a different standard than the labels who "won't play nice". Then they could sign artists to Buena Vista Music or whatever.

    I know, I know, the prospect of Apple having this kind of media control is a bit scary. But personally, I don't fear it because I believe all music and video is destined to be free ("pirated", if you want), anyway...but I would sure like to see someone (Apple would be fine) bend those record industry jerks over and do to them what they've been doing to us for the past 40 years.

    I feel so much better after a nice diatribe...

    --
    gameDB
  14. Re:Its still too high, but.... by TubeSteak · · Score: 3, Funny

    I bet killing Ponies in the name of music piracy would piss off the RIAA.

    How can you support killing Ponies!?!?

    --
    [Fuck Beta]
    o0t!
  15. The RIAA doesn't mind iTunes by TorKlingberg · · Score: 4, Insightful

    People make it seem like iTunes is on our side against the big record companies or something. It's not. If the RIAA companies really disliked iTunes, they could stop iTunes from selling their songs any time. The RIAA likes iTunes. Sure, they would like to make even more money from it, but they make plenty now as well. All this "fighting" between Jobs and RIAA is just a show.

    To make it simple, Apple and RIAA are in bed with each other. They just can't decide who's to be on top.

  16. Re:Variably priced songs would be a good idea by malarkey · · Score: 3, Informative

    CDBaby has something similar to what you're looking for: http://cdbaby.net/dd

  17. Metonymy by tepples · · Score: 3, Informative

    Apple doesn't pay any money to the RIAA when a song is sold on iTMS. They pay the record company

    "RIAA" is a metonym for the major record labels and the largest minor record labels, all of which are members of RIAA.

  18. I'm reasonably convinced that Apple does this by Space+cowboy · · Score: 3, Interesting

    I've heard of several accounts where someone had lost all their music, phoned Apple in desperation, and been given the right to download what they had already purchased.

    I think Apple just don't want the administrative overhead (for no extra value to them) and there may also be legal issues with promising that sort of thing - or maybe they just don't want to set the precedent...

    Still, I've heard it 3 or 4 times now from different people, and though I hope I'll never need it, it's nice to think there's *some* backup for my music on Apple's databases. It doesn't protect my ripped CD music, but at least I could get what I'd paid for...

    Simon

    --
    Physicists get Hadrons!
  19. Re:The problem... by YrWrstNtmr · · Score: 4, Insightful
    I'm sorry, but $.99 is still way too much for a compressed, restricted pop single from an artist I don't even want to listen to

    And $15 was too much for a full CD of uncompressed, DRM free pop 'album' from an artist you didn't even want to listen to. So what. You weren't buying it anyway.
    How much WOULD you pay for music you don't want?

    How much would you pay for music you DO want? $0.05/track? $0.10? $0.50?
    How much is music worth to you? Where is your personal dividing line?

  20. Your (their) numbers are wrong and misleading by linuxbaby · · Score: 4, Insightful
    My company is one of the largest distributors of music to iTunes. I know what I'm talking about.

    For a 99 cent sale, Apple pays the copyright owner 70 cents.

    What the copyright owner chooses to do with that 70 cents is up to them.

    If the artist sold their life, soul, and music over to a huge label in return for a massive advance, then the label is now the copyright owner (NOT the artist), and the label might pay the artist a pittance of that 70 cents. (Every contract between label and artist is different, and Apple has nothing to do with that.)

    If the artist did not sell their soul to a label, then they are still the copyright owner, and the artist gets to keep the entire 70 cents.

    I admire the Downward Battle guys in some ways, but their protest is misguided when they try to make Apple look like the bad guy because an artist chose to sell the rights to their music over to a big label.

    It was the artist's choice give up ownership of their music. They could have remained independent but they chose the big up-front advance in return for no longer owning their own music.

  21. All hail, Steve Jobs by Enrique1218 · · Score: 3, Funny

    I am not the type to place anyone on a pedestal, but damn, good job Jobs. Man, that reality distortion field was must have been set so high, those negotiators didn't have a chance. They must have believe in free love, down with big brother, and Macs are the faster PC's on Earth. Later, when the effects wore off, they were dumbfounded when they realized that the terms of the contract were the same as before.

    --
    You don't have to be smart to use a Mac, you just have to be smart enough to buy one
  22. Stop fooling yourself. by Doktor+Memory · · Score: 4, Insightful

    Not a single recording artist has been paid one cent by allofmp3.com, and I defy you to prove otherwise.

    C'mon. One scan of a royalty check. That's all it'd take.

    --

    News for Nerds. Stuff that Matters? Like hell.

    1. Re:Stop fooling yourself. by swillden · · Score: 4, Interesting

      C'mon. One scan of a royalty check. That's all it'd take.

      Your claim (that allofmp3.com doesn't pay artists) is correct, but for the wrong reasons and the sort of proof you're asking for wouldn't exist even if the artists were paid by allofmp3.

      I worked for a major record label them for six months building a royalties calculation engine, and I can tell you that distributors never pay label-affiliated artists directly. Distributors pay the label, the label calculates the artist's share based on the contract with the artist and periodically cuts a check to the artist which includes royalties from all sorts of distributors. So if they were to get money that came from allofmp3.com, it would be mixed in with other royalty payments, not separated out in a check that could be scanned.

      Among the royalties paid to the artist are the royalties due to licensing to radio stations, which is effectively what allofmp3.com is, from a (Russian) legal perspective. Radio stations do have to pay money to broadcast music, but it's not very much, and (IIRC) it's a blanket license to play all of the music controlled by a label. The cut that goes back to the artists is miniscule -- practically nonexistent.

      So if you're going to use allofmp3, you should assume that the money you're paying them is for the distribution service. If you want the artist to be paid, you need to find another way. Buying merchandise, going to concerts, joining their fan club, or just finding a mailing address and sending them $2 are all good ways to do it. In fact, they're all ways that will put more money in the artist's pocket than will buying a CD or downloading from iTunes.

      A direct result of the time I spent working on that royalty calculation system is that I personally feel it's immoral to give money to the labels. From a moral perspective, I feel better about using allofmp3 (or bittorrent, but allofmp3 is more convenient and consistent) and finding another way to pay the artist. Preferably one that I'm sure the label can't take a cut of (the envelope with $2 cash seems like the best bet).

      --
      Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
  23. If Apple had their way, music would be free! by Hobobo · · Score: 4, Interesting

    http://fifthroom.blogspot.com/2006/01/why-apple-wa nts-free-music.html

      Why Apple wants free music
    The recording industry keeps asking for tiered pricing on iTunes, and Apple keeps saying no. This seems odd--why can't the two agree on how to make the most money off online music sales? In fact, I'm sure they agree, and I'm sure the recording industry is right: more money could be made with tiered pricing. The real problem is a conflict of interests--the recording industry makes money off music, and Apple makes money off iPods. Here are some numbers: in under 3 years, 600 million songs have been purchased on the iTunes music store. Apples cut of that comes to just over $210 million. Meanwhile, the Apple has sold 6.5 million iPods in the last quarter of 2005 alone. That's well over $1 billion in just 3 months; the money from iTunes is pocket change.

    From the perspective, it's clear why Apple doesn't want to raise prices on iTunes. They could double revenue from the music store and they still wouldn't approach iPod level revenue. While the recording industry is interested in iTunes to generate revenue, Apple doesn't it see this way. They have other things in mind for iTunes:

    1. Apple does not trust a 3rd party to develop a music store for the iPod. They have two reasons for this: first, making good software is tough, and I don't believe they would trust someone else to do it for them. iTunes is easy-to-use, well designed, and well programmed, and the iPod is all the more successful because of this. Second, depending on a 3rd party for a business critical application could put them in a strategic bind in the future. Napster's subscription model and other byzantine DRM restrictions pose obvious problems here.

    2. The more stuff people put on their iPods, the better for Apple. I think this is Apple's main concern. Everyone who has taken Econ 101 knows about complement products--when the price of DVD's goes down, sales of DVD players increase. Alcohol prices on the rise? Bad news for Trojan. Music is a complement to the iPod, and the lower the price of music, the more iPods Apple can sell. If it were up to Apple, music downloads would be free, and we'd all be out buying 60GB iPods because our old 10GB models just can't fit everything. Do you think Apple is concerned that people are using iTunes to steal music? Not at all! Free music makes it easier for Apple to push their new, high capacity iPods. The motivation for the two latest additions to iTunes becomes clear in this light: fill up people's iPods faster (videos) and without asking for money (Podcasts).

  24. Re:Serves right - Profit Maximization does not alw by roystgnr · · Score: 4, Interesting

    How many of us would think 'well, its just nothing, let me get 5-10 songs tonight' if the price per song was $5 or $10 ?

    For one or two bands, I would. Lower that to $2 per song and I'll go up to 5 or 6 bands.

    or would any of us get a 'cheaper' song because the song we wanted was priced much higher ?

    I do, all the time. For $20 a CD had better be something I'm sure I'll love. For $10 I'll buy an album from someone who's played something I liked on the radio. For $5 I'll take a chance based on just word of mouth. Am I that abnormal, because I base my purchasing decisions on both price and expected value?

    Of course, I'm not too sympathetic with the music industry here. They're supposed to be publishers, and if they'd been smart enough to start publishing over the internet ten years ago, Apple would be in no position to start dictating terms now. The labels would just undercut iTunes for any songs they wanted to price at less than $1, and they'd refuse to put on iTunes any songs they wanted to price at more than $1.

    But they didn't want to do their jobs (Gosh, isn't the internet that place with all the pirates? We'd better stay away from that!) and now they're mad that they're being ordered around by a company who did their jobs for them. How sad! If the record companies get smart, they'll just be silently grateful that Apple hasn't started dealing with bands directly and cutting the less competent middlemen out altogether.

  25. Perfect elasticity by Create+an+Account · · Score: 4, Informative

    if a market has perfect elasticity, that curve would be a straight line at a 45 degree angle...

    Actually, I think you're thinking of "unit elasticity," or an elasticity of 1. "Perfect elasticity" would be represented by a horizontal line. At price p the firm would sell as many as they could produce. At price p + $.01 consumers display their perfect willingness to refrain from purchasing, and the firm sells none of their product or service.

    Here's a page with some diagrams:
    http://www.answers.com/topic/elasticity-economics

    From the GPA:
    "The result is I simply quit buying CD's. How is this profitable?"

    The correct answer to this question is "You are not a part of our target market."

  26. Why the ripoff tag? by rehashed · · Score: 4, Interesting

    How on earth can you people complain about $0.99 a download?
    There are a lot of people that need to get paid out of each track sold, and bear in mind the razor thin profit margins apple themselves must be taking.

    Here in the UK, we are paying £0.79 ($1.44) for EXACTLY the same music from iTunes.
    Now THAT is a ripoff.

  27. Re:I prefer variable. . . by shutdown+-p+now · · Score: 3, Insightful

    Mainly because you won't be the one deciding which ones are "better".