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Jobs irate over proposed digital music price hike

post #1 of 63
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"Some leading music labels are in talks with online retailers to raise wholesale prices for digital music downloads in an attempt to capitalise on burgeoning demand for legal online music," the Financial Times is reporting. The move, which aims to secure the record labels a larger stake in the digital music arena, has reportedly left Apple chief executive Steve Jobs fuming. However, around this last year, Apple denied similar rumors published by The NY Post. "These rumors aren't true," Apple spokeswoman Natalie Sequeira said at the time. "We have multiyear agreements with the labels and our prices remain 99 cents a track." This is the second year in a row that talk of digital music price hikes have surfaced around the anniversary of the iTunes Music Store -- a period where Apple's contracts with the labels may be up for re-negotiation. The store first launched on April 28, 2003.
post #2 of 63
Well they either have a multi-year deal or not, and nobody around here knows that (or if they do, they won't post it if they know what's good for them). Since they seemed to state that they do, then this will be a non-issue.
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post #3 of 63
I hate the recording industry.
edit: well, not the industry, the executives.
post #4 of 63
Well, assuming Apple has a multi-year deal, I think it's past time Apple starts working on technologies to bypass the recording industry. Get their own iTunes Music Store label going, give musicians their fair cut to sign on directly and bypass the recording industry, have live streaming concerts, etc.
post #5 of 63
Quote:
Originally posted by pmjoe
Well, assuming Apple has a multi-year deal, I think it's past time Apple starts working on technologies to bypass the recording industry. Get their own iTunes Music Store label going, give musicians their fair cut to sign on directly and bypass the recording industry, have live streaming concerts, etc.

Then you have an issue with Apple Records which Apple computer is likely to lose..again.

I don't know the veracity of this statement but it wouldn't suprise me. The music industry is ran by snakes and cutthroats. They own the content so they can raise prices just like anything. Filesharing is still an option but I guess they feel like they can sue or poision P2P to oblivion.
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post #6 of 63
Man.... if they do, I hope there would be action against that, like "We won´t buy any music for a day" or go protesting next to their buildings - especially the first option would be something they would notice.
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post #7 of 63
Quote:
Originally posted by hmurchison
Then you have an issue with Apple Records which Apple computer is likely to lose..again.

Not if they make a seperate entity containing only iPod and iTunes, leaving Apple out of it completely...However, I may be talking out my arse...(most likely). But, I remember Amazon doing something really similar to this and it working well for them to get the market of "real" CD purchases. Private musicians could have Amazon sell their music and Amazon would take the order, then fill a backlog of the order until the musician shipped the items to Amazon. Then Amazon would handle all tracking, re-ordering etc. Give the Musicians their cut, and all was well and good. If perhaps Apple did not do anything but be a middle man, like it is now, and let the musicians have their "own" label, and just package it and re-sell it, then they would still be fine under the ruling. A lot like Amazon did. I think it could work, the only hard part being that there would be a lot of musicians tied to contracts and once Apple did this, we would probably see a huge decline in available files. I hope this is just a rumor, because if it is not then it could kill this whole legal digital music revolution, which would be very bad....
post #8 of 63
Quote:
Originally posted by pmjoe
Well, assuming Apple has a multi-year deal, I think it's past time Apple starts working on technologies to bypass the recording industry. Get their own iTunes Music Store label going, give musicians their fair cut to sign on directly and bypass the recording industry, have live streaming concerts, etc.

WTF?? I don't think Apple would ever want to get that vertically integrated on that side of the music business. Granted, technology is furthuring the democratization of the business, but I believe few of us outisde the business realize how much support for an artist is given by the major labels, i.e. there is so much more to it than just recording and distributing an album/single.

So you would like to see Apple sign artists and release their material? OK, what about theirs and others catalogs? Who do you think owns the vast majority of the publishing, very few artists have control over that side of the equation.
post #9 of 63
it would be a shame (not that I'm buying this story) but when the 45 died in the eighties so did a big part of the music biz.
Young kids bought singles, when they got older and had more disposable income, they bought albums. Pretty simple.
Then the music industry decided the singles market wasn't worth it and decided they had to make it worth while (raising prices), forgetting that they were "conditioning" kids to buy records, the single vanished.
A few vague attempts to revive this market in CD form failed and eventually all music charts have become just barometers of airplay.
Man, when I was a kid (60's) when the charts came out we'd be all over them, we studied them and argued over them like they were some kind of sacred text.
Kids are starting to buy records again, the chart at iTMS actually mean something again, or they are starting to. You can look at the iTMS download chart and know that it means something.
The only reason I could see for record companies hiking prices is that they realize that their insignificance is approaching rapidly. Young artists no longer need a butt-load of money to make a decent sounding record and their are now alternatives to established ways to market a record.
post #10 of 63
Major labels 'force 70% price hike' on Apple
By Tony Smith
Published Friday 7th May 2004 11:26 GMT

The world's five biggest music labels have successfully forced Apple to increase the prices it charges for songs on the online iTunes Music Store.

As we reported back in April, the major labels have been engaged in negotiations with the Mac maker in a bid to persuade it to put up prices.

According to a New York Post report today, citing sources close to the talks, all five have succeeded.

The sources claim Apple has now signed agreements with EMI, Bertelsmann Music Group (BMG), Sony, Universal and Warner that will see prices on some songs rise from 99c to $1.25, an increase of over 26 per cent.

Still, that's better than the $2.99 price point some labels had been pushing Apple to introduce.

Album prices are going up too. Many are likely to continue to be offered for $9.99, but some are appearing in the ITMS for $16.99, a rise of 70 per cent.

As one music industry source told The Register: "That will really ingratiate the public and discourage piracy, won't it?"

Apple does appear to have had it way in other areas, however. The NYP's sources reckon the company did not agree to label demands that some artists' songs only be sold in album batches and not as individual tracks.

In the past, some acts, most notably Radiohead and Metallica, have said they will not allow their songs to be offered individually. But that clearly runs against what many music consumers want: the ability to pick and choose the songs they want and not be stuck with all or nothing album offers. The old days of buying an entire album for one song are hopefully behind us.

We'd say it's about time the music industry started thinking that way too. There will always remain a place for albums - CDs too - but artists and labels have to start thinking 'outside the disc' if they're to reach a new generation of consumers now empowered to buy exactly what they want.

Other services may face similar demands, but there does seem to be a particular focus on Apple. Having established the market for legal downloads, Apple now seems to be facing a music industry paranoid about the power that success might bring the Mac maker
post #11 of 63
the above article (from last year) posted by PBG3, is why I don't give credence to the new rumor.
It was B/S then, so I see no reason to think it's not this time.
post #12 of 63
The music distributors aren't afraid of the power that Apple has. This is strictly financial proposition to them. They figure that at the current run rate that Apple is seeing in a few years the revenues from digi downloads is going to be huge. Thus, if they ratchet up the costs right now they stand to profit even more. After all it's "their" content.

Metallica and Radiohead have done well for themselves but who speaks up for the artists that don't get played on Clear Channels radio stations? Trust, I've purchased a lot of music that "made the cut" at $.99 but wouldn't make it at $1.99.

I always new this was a weakness of iTMS/iPod. Apple doesn't own the content and hence is beholden to the studio "taking their ball and going home"

Open letter to artists

When are you guys going to take some responsibility for yourselve.

When are you going to secure the rights to the very music you created painstakenly note by note lyric by lyric.

How can you blame someone for stealing your music when you let some schmuck in a 3 piece suit steal your livelyhood and fund his mortgage.

Wake up! Everyone out here has to bust their asses. Get busy busting yours and find a way to retain control over your music ...and your life.
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post #13 of 63
If anyone can stop the greedy bastards from gouging the listening public, it is Steve Jobs.

He has a lot of credibility in the industry. He created the first (if not the only) viable legal digital music distribution business model. Many of the competitors like Dell, Wal-mart and Sony can cook the books so they can avoid revealing how poorly they are doing with their attempts to compete with the iPod/iTMS juggernaut.

Also, as CEO of Pixar, Jobs is a full-time content creator (not just a gadget maker or retailer) so the music execs have to know that he is fully aware of the need to make money from art. Between his positions at both Apple and Pixar, there is no one more involved in the fight against piracy of intellectual property than Steve Jobs.

If the money-grubbers ignore Jobs, they will have cooked their golden goose and all hell will break loose. It's not hard to find legal means to download free music if you look carefully at the laws of copyright. At 99 cents a song and $9.99 an album (delivered at astonishing speed), it's just not worth jumping through those hoops to stay within the law. If prices increase, this equation may need to be re-examined.
post #14 of 63
good points.....but I'll play devil's advocate for the record companies......

"why should we let Steve Jobs and APPLE use us as a loss leader so he can sell more freakin' iPods"?
post #15 of 63
I think that it will be good for the world if popular music is more expensive (Brittney Spears songs for $3, say, while everyone else sells for 0.99).

Hopefully it will mean that fewer people buy the crap at the top.
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post #16 of 63
Quote:
Originally posted by superkarate monkeydeathcar
good points.....but I'll play devil's advocate for the record companies......

"why should we let Steve Jobs and APPLE use us as a loss leader so he can sell more freakin' iPods"?

The iTunes music store isn't a loss leader. And the music industry doesn't care about iPods. Their focus is on profitting off of music. Hey they have every right to ask for more money. They own the content. It's just sad that they once again are appealing to their greed.
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post #17 of 63
Quote:
Originally posted by hmurchison
The iTunes music store isn't a loss leader. And the music industry doesn't care about iPods. Their focus is on profitting off of music. Hey they have every right to ask for more money. They own the content. It's just sad that they once again are appealing to their greed.

The greed part is fine, but if they earn less money due to hiking their prices (and therefore getting fewer sales), then they got what they deserved.
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post #18 of 63
Quote:
Originally posted by hmurchison
The iTunes music store isn't a loss leader. And the music industry doesn't care about iPods. Their focus is on profitting off of music. Hey they have every right to ask for more money. They own the content. It's just sad that they once again are appealing to their greed.

In the begginning iTMS was completely a loss leader....how many times did you hear "don't expect it to make a profit" and then Apple confounded everyone by making a "slight" profit before it's first year was over.

I'll say again, I'm not believing this story is true. I think it's someone trying to stir the pot.
post #19 of 63
Quote:
Originally posted by blue2kdave
Well they either have a multi-year deal or not, and nobody around here knows that (or if they do, they won't post it if they know what's good for them). Since they seemed to state that they do, then this will be a non-issue.

I believe it has been said by Apple that they have a single year deal that they have renewed once already and soon again. Each time it is renewed, the process starts over. Hence, the changes in the DRM last year.
post #20 of 63
unless i am mistaken, the iTMS was a loss leader TO APPLE, since they were providing all the iron that those songs would reside on, and the account handling, the negotiations (and likely stupid-high legal fees), etc. but i don't think the losses were felt by the record companies very much, if at all.

and they can't possible look at a competitor like napster and think that's goint to net them more money. "hmmmm, every time steve manages to get someone to buy a kelly clarkson song, that's money in our pocket, for that song. but with napster, someone pays their monthly fee, gets her entire album, plus every other album in our catalog, meaning that cost-per-song has shrunk by maybe 1000%, and when they get sick of her or our other artists, they cancel their subscription and move to someone else, or figure out how to pipe that signal through a recording app and keep it forever, and we're left with... uh... "

the iTMS doesn't just move iPods. if the record execs can't see that, they're dumber than i thought.
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post #21 of 63
Quote:
Originally posted by superkarate monkeydeathcar
In the begginning iTMS was completely a loss leader....how many times did you hear "don't expect it to make a profit" and then Apple confounded everyone by making a "slight" profit before it's first year was over.

The iTMS was never a loss leader. It was expected to cover its own costs and turn a slim profit and it has always done that.
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post #22 of 63
Record companies are pricks! People will just download Kazaa Lite, Ares, Poisoned or whatever and spend their dollars on DVDs.
post #23 of 63
PLEASE GET YOUR FACTS STRAIGHT!!

iTunes has never been a loss leader. if you don't believe me look at their financial filings. it consistantly makes a slim profit.

Also, record labels actually make MORE money selling on iTunes than they do selling their own CDs. With CDs, labels have to distribute them to stores, print CDs and the CD booklets, package and ship them. Then they have to give some profit margins (only a little more if any more than what Apple gets) to the resellers.

With the iTunes model all the record labels have to do is give Apple the song files along with the album art and then Apple covers the bandwidth costs and the storage costs. Record labels make even more money this way because they don't have to pay a dime to distribute. Apple gets somewhere around 10 cents per song and out of that 1-3 of the cents makes Apple profit.
post #24 of 63
Quote:
Originally posted by Telomar
The iTMS was never a loss leader. It was expected to cover its own costs and turn a slim profit and it has always done that.

link one

link two

link three - go to 3rd paragraph from the bottom

are these facts straight enough?
post #25 of 63
Primary sources != secondary sources nor tertiary sources (Arstechnica quoting someone quoting Jobs?)

"Not a money maker" != "loss leader"
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post #26 of 63
blimey. do you even know the definition of loss leader? ever heard of giving away the razor to sell the razorblades? (although here it's vice versa)

is there anyone here who doesn't have their head up their ass?
post #27 of 63
This isn't about making more money - it's about making CD's seem more attractive compared to downloads. It's about killing music downloads.

This is what's known as the death throes of an industry. Too bad Apple's stuck in the middle.
post #28 of 63
Quote:
Originally posted by superkarate monkeydeathcar
link one

link two

link three - go to 3rd paragraph from the bottom

are these facts straight enough?

?

The first link is a repeat of the second link, neither of which actually has Jobs saying that the iTMS is a "loss leader." It's always turned a profit, thus no loss, thus no loss leader. Yes, iTMS pushes sales of iPods, and that's where the bulk of Apple's music profits are coming from, but that doesn't mean the store is operating at a loss to do so. In fact, I think there was a Cringely article arguing that Apple had trumped the razor/blade model by making them both profitable.
post #29 of 63
you don't know what a loss leader is.
tell me what a loss leader is.
post #30 of 63
Quote:
Originally posted by superkarate monkeydeathcar
you don't know what a loss leader is.
tell me what a loss leader is.

"A commodity offered especially by a retail store at cost or below cost to attract customers"

iTunes Music Store doesn't apply once it started making even the smallest of profit. It "was" a loss leader in the beginning but it no longer maintains that status.
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post #31 of 63
no.

loss leader

which is a pretty good definition of iTMS in the beginning, and looking back on it, it's an exact definition of what apple HAS achieved with iTMS.
post #32 of 63
http://dictionary.reference.com/search?q=loss%20leader

"A commodity offered especially by a retail store at cost or below cost to attract customers."

So the question is, does Apple make any money from iTunes music? The last 10Q filing from Apple (primary source) shows $170 million in sales for the music store, but does not break out cost for it. Jobs had said that he doesn't expect the music store to make much money, but he didn't say they'd be losing money either.

Given the way Apple runs the rest of its business, I'd be surprised if they lose money on it. They simply aren't willing to have any part of their business lose money.

But that's just my opinion.
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post #33 of 63
Investopedia is not a primary source either, by the way.
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post #34 of 63
a loss leader is in intention, because it happens to make money is irrelevant. Its purpose is to get people in the door.
which is why it was exported to the windows platform.
TO SELL iPODS!
post #35 of 63
see my original post.
Quote:
In the beginning iTMS was completely a loss leader.

does it make the same margins as their hardware? as their software?
so they are making a marginal amount of money for what reason, to make fanbois happy? yeah that's it.

loss leader does not mean to lose money! it means to make less profit to drive another profit engine.
post #36 of 63
Quote:
loss leader does not mean to lose money! it means to make less profit to drive another profit engine.

Wrong!

Man i've been in sales over a decade. A Loss Leader means you either break even or lose money to spur sales(usually of another item like warranties, iPods etc). Period.

iTMS was in fact a LL in the beginning. It is no longer a LL and is expected to turn a profit where it can.
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post #37 of 63
.....which is wahat i said....in the beginning it was designed as a loss leader.
wow 10 years!

query:
if your are on Apple's board of directors, hell let's say you are Vice-President Al Gore, and you are examining the iTMS division's P&L, what would your opinion be? Why is this part of the company? What does it do for Apple? What's the point of putting money in this division?
post #38 of 63
Quote:
wow 10 years!

I said "over" 10 years could be almost 20 :P
trust me I learned to "hate" Loss Leaders.

I think iTMS has the potential to scale well as HD and bandwidth costs decrease. Thus I think Apple had set it up for a trajectory that takes iTMS from Loss Leader status to making quite the nice sum of money. The Big5 raising their prices throws a severe kink into this IMO.
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post #39 of 63
you didn't answer my question.
20 years....still wow!

you're on the board of directors, looking at the P & L of the iTMS division, why do you allow iTMS to exist?

I'll take an answer from anyone.
post #40 of 63
I've reread your reply and I guess you'd keep iTMS because some day they might make a nice sum of money on it.
and you base this on reduction of the costs of hosting. Bandwidth and HD space.

so now Al Gore asks:
Isn't their a cap on the amount of profit we can make inside iTMS? We have a ceiling, even if we eliminate costs of hosting the store there is only so much money we can make with this model.
we can make millions of dollars you say but if it costs hundreds of millions to make millions I'd rather invest in another division that makes money.
How about that iPOD division? we seem to be getting a pretty good return there.
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