Warner Music may not renew yearly iTunes contract - report - Page 3

This is such a tired argument. How many Limewire/Kazaa/whatever P2P network users do you think actually switched from free downloads to paying iTunes customers? 10% maybe...being really generous perhaps 20%. Again, downloads only constitute 10% of music sales. What percentage of that 10% do you think the converted pirates represent? Maybe 1%. Why do you think someone would stop using a P2P network and suddenly go legit?

Digital movie sales are even less of a factor than music. Back in May, Disney announced they had sold over 2 million movies on iTunes. This past week, I believe it was reported that the Transformers DVD alone sold over 5 million copies. That's just one movie in one week. How low is digital movie purchasing compared to physical, maybe a generous 1% of total movie sales if that. Seems to me the studios were already making lots of money selling movies before iTunes came back and "saved" them. I'm sure the studios because all the studios have to do is create a file and just keep selling copies of that one file ad infinitum with no manufacturing costs, shipping expenses, return issues, etc.

How is using Amazon any harder than using iTunes?. You're at your computer, browsing the web and look over and see your iPod sitting there and remember that song you wanted to buy. You click your bookmark to Amazon. Find the song you you want. Click, buy, done. Not exactly that different than your iTunes scenario.

Regardless, if iTunes went away, why do people think piracy would just go through the roof? Most likely digital piracy involves many of the same people who would have previously borrowed the CD from a friend or coworker and made a copy for themselves. Different mechanism with the same end result. Now people just look for an anonymous stranger on the internet to get it from. In the end though, music sales aren't going to plummet if digital downloads ceased to exist.

Will to compensate creators for something of value.
Investment in the chance that the creators go on to make more good stuff if compensated for their previous creations.
Convenience of finding the things you search for easily.
The utility of finding good stuff you weren't aware of, with functions like Amazon's "what did people buy after viewing this", recommendation lists, et cetera.
Trust that you are really getting what you think you are getting - not a virus infested, spanish subtitled version recorded with a cell phone camera in a theater.

I used to pirate *everything*. Now all the software on my computer is legit.
And if CD sales were stopped, music sales wouldn't plummet because people would just go back to C cassettes? No. There are lots of people today who have never grown to deal with optical disks. Better alternatives exist and there is no going back.

It's not that I think Apple is good and the music labels are evil. Apple just seems to have a better idea what their customers want. The music labels don't have a clue. Of course Apple has to think about their bottom line, I hope they do since I own some stock, but Apple knows that the best way to help their business is to please their customers. The music labels treat us like the enemy. How long would Apple last if they treated us like the music labels do?

Part of the problem is greed, but the bigger problem as I see it is that the CEOs of the music industry are no longer lovers of music, they are MBAs running a business. Once upon a time there were people running at least some of the major music labels who loved and understood music. Now it's just business people who think music is a commodity. They might as well be selling razors or screws. It's like when Apple was run by Gil Amelio. Gil was not a bad guy, he just didn't get Apple. He was a good administrator but he didn't have vision. The music labels only think about making money and they are trying to do so with an outdated paradigm. Instead of adapting to the new world, they are sticking their fingers in the dike, hoping to hold the flood from drowning them once and for all. They don't get music and they consider their customers thieves. That doesn't seem like a winning business model.

My point is that by using the iTunes store we help break the dike. Using stores like Amazon MP3 puts more fingers in the dike because that is the venue that the music labels have chosen to stand against iTunes. The dike is coming down, there is no helping that now. The question is how soon. I want to hasten its eventual break.

What Mr. Shields isn't recognizing is that by taking away the content from iTunes Music Store (IMS) will not stop people from buying iPods. Therefore it can't be used as leverage as easily as he might think.

People will get their music and video from other sources and still put it on their iPods, as many do now. It is wrong to go on the assumption that IMS is what drives people to buy the iPod. It certainly makes it easier and generates income for everyone involved. They are not considering the other factors like design, user experience, etc... The very things that separates Apple products from the rest.

Once it's understood just how different Apple and content producing companies are, the reasons for what they do is apparent.

Apple is a hardware company. Last year, including sales from iTunes, Apple's total sales of software, including OS sales, was less than $4 billion. The other $20 billion is hardware.

Considering that most of Apple's software can only be used on Macs, which, of course, only Apple makes and sells, Apple's concern about piracy is minor. The software lives to sell the hardware.

On the other hand, content and software companies have products that are very subject to piracy. They must treat that differently.

Even so, look at how Apple, while within their rights, treated iPhone users who DID use software that wasn't even Apple's.

Do you think Apple did right by its customers there? Do you think Apple does right when there are widespread problems with its hardware, and they do nothing about it? How about when they remove posters to their forums who want to discuss those problems?

Do you really think Apple is so different? No, they really aren't. Not when they don't want to be.

Let's be honest here. There's a world of difference between software, content, and hardware.

As far as Amelio goes, he never had a chance. Look how long it took after Jobs took over before Apple lucked out with the iPod. When that first came out, Apple had no idea what they had on their hands. When Jobs was asked about it, shortly after it came out, he said that it was a "nice little product" for Apple. He indicated that Apple expected it to have a decent showing, but nothing big. When it began to grow so quickly, though, I do give credit to him and his people for realizing what they had, and handling it well.

But, when Jobs took over, Apple still had about an 8% marketshare. That plummeted to about 2.8% before it began to rise again. It took over 6 years. Amelio didn't have nearly that long to prove his worth, though he was credited with substantially staunching Apple's red ink, and settling the ground that Jobs later walked onto.

You should go read my earlier posts. You are missing the bigger picture for Apple here.

Apple told developers to make web apps only. Any developer that relied on a hack to write native apps for the iPhone took a risk. The 1.1.1 update shut down the unlocking hacks. The third party apps were not the target of the update, they were unfortunate casualties. If Apple was trying to screw people, they wouldn't have warned anyone about the possibility of bricking. Anyone who unlocked their iPhone and then applied the 1.1.1 update is a moron and deserved an iBrick. The 1.1.1 update addressed hacks that were possible because of security vulnerabilities of the iPhone OS. It would have been stupid and irresponsible for Apple not to shut down the vulnerability that made the unlocking hack possible.

Apple has now announced an iPhone SDK. If Apple goes after developers who use that SDK and follow the rules, you may have an argument then, but not now. Apple is not under any obligation of opening up the iPhone to anyone. They would be stupid not to allow third party apps, but they don't owe it to the developers.


And we are very lucky Amelio didn't get that chance. Gil was so clueless about Apple that he seriously considered licensing NT from Microsoft as the basis for the new Mac OS. About the only thing that Amelio did that may have saved Apple indirectly was acquiring Next. That brought Steve Jobs back, without whom Apple would have been doomed, and made it possible for Mac OS X to happen.


You seem to forget the horrible shape was in when Jobs came back. Apple was on the ropes and almost everyone had given up on it. Had Steve Jobs not taken the reigns, Apple would have gone bankrupt and been sold off. While no one could have predicted how successful the iPod would become, I assure you that Gil Amelio would have never come up with anything remotely like it. Do you think that turning Apple around happened overnight? Gil's great idea was licensing the Mac OS. That worked so well that the licensees were cannibalizing Mac sales. Instead of opening new markets, the clones were taking away Mac sales.


I don't know where you got your numbers, but even if the 8% figure is correct, there is a big difference between 8% and shrinking and 8% and growing. Just look at the stock price in 1997 and the stock price now. Apple is now not just bigger than Dell (suck on that Mike Dell), but it is now larger than IBM. I cannot imagine that Apple would still be around had Gil Amelio continued running Apple.

I know all about this. It's now old news. I just did say that Apple was within its rights. But they could have been more conciliatory, and they weren't.


You're pretty much wrong about all of that.

You do seem to have forgotten that it was Amelio that bought Next. It was his decision. Donb't misunderstand the implicati0ons .


It was in much worse shape when Amelio took over. he fixed the immediate problems, bought the new OS, hired Jobs, and set the stage. He was maneuvered out before he could do anything else.


Look it up if you want.

Learn about why Apple got into its position before you discuss it. a lot of people mischaracterize it because they weren't around when it happened, and a lot of rewriting of history has taken place.

Don't look at anything that's taken place i the last three years. They aren't relevant to this discussion, and I did explain some of it myself.

Gil might have bought NeXT, and I do give him credit for that. You don't seem to have read my previous post. Buying NeXT was the one thing that Amelio did that was any good. I was around then and I recall clearly that Gil was seriously thinking about using NT as the kernel for the next Mac OS before they bought NeXT, look it up. They even considered buying BeOS. Gil didn't acquire NeXT because he knew Steve would come back and save Apple. He got incredibly lucky. He was a capable administrator but he didn't understand Apple or have the vision to save it. We are lucky Steve ousted him.


I fail to see how Apple's success in the past three years is irrelevant. Maybe because it undermines your arguments?


You are the one coming up with 1997 figures of 8% market share. Why not provide us with your source?


I was around, and I remember it clearly. I remember the awful Macs that were made during Amelio's era. I remember the sense that Apple was lost and adrift. You somehow seem to gloss over that.


Back it up.

People want their content but they also like easy and affordable. These content providers better make it that way. If it is not on iTunes / Amazon or it is a pain to get from whatever online stores they set up, then P2P is the answer, not their new stores.

We really don't know if it WAS Steve who "saved" Apple, or a bit of luck. For most of the time he was here, Apple continued to disintegrate.

Sure, they considered buying a number of things. That's the responsible thing to do. I remember that most Mac users at the time were really pissed that he DID buy Next. Most everyone wanted Apple to buy Be. I didn't though. NT isn't a kernal.


It doesn't undermine anything. It simply isn't relevant to what happened back then. We have no idea as to what would have happened if things were done differently, and we can't pretend otherwise. If Amelio hadn't gotten Apple financing in 1996, it would have gone out of business. He also had balls to discontinue Copeland.


I've got this article. I was off, When amelio left, and Jobs came in, in the third quarter of 1997 the US marketshare was about 5%. It went down to 2.8% under Jobs.

http://www.news.com/Apple-market-sha..._3-206284.html



Amelio inherited a lot of problems from Michael Spindler, the man he replaced. It was a combination of Windows 95 and Spindler's bad decisions that led to the mess in the first place, and Amelio wasn't there long enough to have had too much of an impact on the models being offered. It was enough, for that time, to have prevented the company from going under.



I might as well say the same wise ass thing to you. You haven't said anything so far.

P2P is never a legit answer, for any reason. This stuff is available, for the most part.

Before illegal file sharing, if something wasn't available yet, people waited until it was.

Its funny how you quote the lowest market share under Steve Jobs and dismiss the past three years when the Mac's market share has been climbing steadily. The worst market share is important while the best is just mere luck, funny that. By the way, that low 2.8% market share happened in July 1997, just after Steve kicked Amelio out and became CEO. Yes it happened under Jobs but only barely. You'd be hard pressed to blame Steve for that. Give Steve a tenth of the slack you give Gil and you'll have to agree.


Really, I'd say that since the introduction of the iPod Apple's fortunes have been improving steadily. Some would point even further back to 1998 and the introduction of the iMac. That would make it six to nine years out of ten (since 1997 when Steve took over Apple). Check my math but even six is more than half of ten, so that would make it most of Steve's time as CEO not less. You'll probably want to argue that the iMac was conceived by Amelio and that thus Steve doesn't deserve the credit for its success. Steve gets the blame for the 2.8% market share but not the credit for the iMac.


I see, Amelio's missteps are not his fault, they are Spindler's. But you are not so generous with Jobs. Even though Steve Jobs inherited a demoralized, devastated Apple which was on the verge of bankruptcy he is responsible for the low market share that happened just as he took Apple back. According to you, poor Amelio was hampered by Spindler's screwups, but Amelio's screwups only helped Steve. Please!

You have a problem with Steve. According to you he hasn't done anything for Apple. Steve Jobs has been riding on Gil Amelio's coattails for the past 10 years. You don't give Steve credit for the iPod, for iTunes or for Mac OS X. I would hazard a guess that you think that the success of Pixar has nothing to do with Steve either.


Copeland was already dead. Amelio just had the decency to put it out of its misery. That required no balls, just facing facts. You should try looking at the facts every so often too. If you did, you'd realize Amelio was a putz and Steve saved Apple and deserves the credit.

When exactly would be never, which I think is good. Generally I don't think the consumer benefits from vertical integration, the company does. Adding that the music business is in flux with artists going independent and electronic distribution, adding an iTunes label would be either a bad investment or just superfluous. iTunes can "sign" artists simply by carrying their tracks or "drop" them by not.

I think the NT kernel was actually very good in some ways. My most reliable computer ever was an Alpha RISC system running Windows NT. NT was available on PPC too.

"People"? who is this "people" you talk about?

There is no "before" and "after" illegal filesharing. music listeners have always traded music, in tapes before, ripped cds... then when P2P came along, it continued.. and even now "Illegal" filesharing is still very popular, it is still underway. So it has always been around. And this has never been about getting things for free, it has always been about getting your music easily. they are different things.

and don't forget there are countries (for example, mine) where there are no mac-compatible music stores. There are times when if you want a song, the only way to get it is P2P, and not because music listeners are cheap and they don't like to pay, but because it is the most efficient, easy to use delivery method.

just recently i was so sick of not having an easy way to buy digital music, that i ended up signing up for mp3sparks.com. at least russians get it. an online store, with a HUGE catalog where you can select the encoding and bitrate for any song you like, in un-drm'ed formats for low prices. (like 9 cents a song). could be illegal by US standards or by whatever american associations may want you to believe, but for me, who lives in a country where there are no other alternatives, it is the only way to go. and "it's not for sale" is not an answer in this digital day and age.

i guess my basic point is, today, there should be no excuse for not being able to get digital music/movies/videos, because the content is out there, and users can get it regardless, either free or by paying for it. so, the content providers better make it easier to pay for it than getting it for free... if they want to stay in business in the long run

I think it's almost definitely an unlicensed situation or license violation on the part of the Russian store.
As far as I can tell, they are getting away with using a licensing system intended for FM radio transmitted over local analog cable systems (CATV), not for selling discrete songs or overseas transmission. For reasons that should be obvious, those two situations are priced differently. The Russian courts did go along with it though, but I suspect not because it's completely legal, but because it's another case of protecting one's own.

The NT Kernel may have been excellent, that's not the point. If Apple had licensed the NT kernel, it would have given up control of the core of it's OS to Microsoft. How soon after that would have Macs become PC clones running a version of Windows? The point I was trying to make is that Gil Amelio didn't understand what made Apple tick and why licensing the NT Kernel would have been a mistake. I don't think Gil was a bad guy or even incompetent. I think he didn't understand or have the vision to lead Apple.

AllOfMP3.com did operate under ROMS, which is for radio stations mostly. MP3Sparks operates under NP-FAIR in Russia. Might not be legal to use it from the USA, but well, frankly that doesn't apply to me. Here, we have bigger problems to care about than the legality of paying to download songs off a server in Moscow, which in other words means it is not legislated.

But that is besides the point. Regardless of the legal status of such online stores, what impressed me about MP3Sparks is that the store is very well done. It is easy to set up an account, they accept major credit cards, you select the format and bitrate for your unDRM'ed songs, they have album covers, MP3 ID3 tags have complete information, it is easily searchable, well organized, affordable, etc. It is just too convenient.

And back to the original line of thought: I wish record companies and TV networks would create something that is as easy to use, and as FLEXIBLE. Digital content users deserve it!

Except that iTunes itself can be an effective avenue to promote new talent.

They already have top sellers by category and streaming audio. I know that I buy books on Amazon based on user and pro reviews and digital cameras the same way (on DPReviews).

Between myspace like social software and links to iTunes I'd say that artists have a very effective way of generating sales that may not be superstar level would still allow a very comfortable living doing what they love.

I think you overstate the problems for Apple. They are currently just POTENTIAL problems that can be mitigated in a variety of ways...including making it easier to go from GarageBand and Final Cut to sales on iTunes.

You may not get Sopranos from indie producers but...well, lets face it...you don't get Sopranos from NBC either.

It's not just the US. If you're in a country governed by the Berne convention, then off-license use is very questionable legality at best. Most countries are Berne signatories. The ones that aren't signatories are usually very tiny countries, like single islands, tiny archipelagos and such.

Bravo! Bravo!
That is one of the finest re-writes of history I've ever seen.
Jobs (probably one of the most brilliant and cold-blooded negotiators in the history of the industry) just kinda 'lucked' into the iPod. Not 'recognized', or 'nurtured'.... 'lucked'. Kinda just tripped over NeXT OS as well, huh?

Apple was dead in the water when he returned and its resurrection was nothing short of staggering. Amelio was pursuing what? BeOS? Gimme a f***ing break.

Bet you are still calling the current financial cliff the US is heating toward 'Clinton's Recession'.

I already have a corrected number, but that's just a part of it.

For the first five or more years after Jobs took over, Apple's fate was still questionable. There was never any question that actions taken by Amelio saved the company back then. That's been acknowledged.

And Job's intentions to unveil Rhapsody as Apple's new OS was strongly contested. If he had gotten his way with that, it's doubtful that Apple would still be here, as no major developer would have moved to the new platform. Jobs, and Apple's Next people, were pushed to come out with OS X the way we know it.

And yes, even with the iPod, Jobs said that they thought it would be a nice little product for Apple. He gave every indication that that's all it was. He was pushed into allowing Windows support only after months of Windows people buying, and working out how to support it. I did make very clear though, that once the popularity of the iPod became clear to Apple, he and his people did see what they had, and ran with it.

But, now, with Apple's great success, there is also great concern that arrogance may be Apple's undoing.

One of the reasons I criticize Apple at times is because I have a fair amount of stock, and I want to see continued success. If people continue to refuse to see the truth, and just sip the Koolaid, they will miss the reality.

One doesn't have to want to look at the situation through rose colored glasses to admire the company, and buy its products. Believe me, I've bought more of Apple's products over the years than any 100 people put together, and am responsible for recommending far more than that, so calm down, as your last two sentence's show you are in a parallel universe.

I own stock too. And I could not be happier with the performance of Apple in the past six years (over half of Steve Jobs time at Apple). The stock price in 2001 averaged around $10. As of Friday, the stock was about $184. That's 18.4 times the price in 2001. I'd call that kind of performance excellent. There are not many companies that can match that kind of growth. I am not talking about drinking the Kool-Aid or wearing rose colored glasses. That kind of performance would make anyone happy. I don't know how anyone can look at this success and not see that Steve Jobs has done an amazing job running Apple. I don't know how long this kind of amazing growth can continue. No company can maintain this kind of success indefinitely. Having said that, the iPhone is not even six months old. We have not seen version 2 of the iPhone. If Apple keeps upgrading the iPhone like they did the iPod, Apple could see a lot of growth over the next few years. I wouldn't be surprised if Apple kept growing at a very respectable rate for the next five years or so.

Leopard looks great. It makes Vista look like the pitiful piece of crap it is. I am sure Leopard will help increase the Mac's market share even higher. Having more DRM free music available is not going to hurt the iPod, I believe it will help instead. It means more music will be available to play on any device and the iPod remains the best music player out there. I don't see any reason why the iPod should not continue dominating the market. You would have to be tremendously pessimistic not to believe that Apple will continue to succeed in the next few years.

I agree that Apple is doing extremely well, and I'm surely hoping that it continues to do so. That's why I think we have to realistic about it's failures, and mis-steps, as well.

By the way, $184 is about 37 times as much value as it was then, at $10, or about 23 times as much as when I bought it at $16.93 a share mid 2004.

I think both NBC Universal and Time Warner are monitoring closely how well the Amazon download service does in terms of music downloads. The very fact Amazon encodes their DRM-free MP3 music files in 256 kbps VBR format means that the sound quality is very good to start with, and that could entice both NBC Universal and Time Warner to sign digital distribution deals with Amazon.

Too many companies, too much hassle, and it's going to keep on being like this. I am glad Amazon is going DRM free screw itunes for making music that is purchasable not able to be used on any other medium. Good for Warner.

but unlike other countries (US), that won't make a difference. we have flea markets full of "unlicensed" music and movies, right on the main avenues and streets of latam cities, open during business hours selling this stuff and it's ok... any conventions or copyright laws are not enforced, known or cared about. that's latam. so, same difference. in here it's like... "who cares. we don't even have itunes. let's go to the flea market or download from russian stores wooo"

If people were concerned with that, they would have been buying the CD's to begin with, not waiting for them to magically appear as digital downloads to buy.


At least these have some validity. But seaching a P2P network isn't that much harder than any other search, like iTunes or Amazon.

The last point, knowing what you're getting, is perhaps the biggest selling point for piracy vs. digital downloads. That and knowing the purchased content will have some modicum of quality.


Well, there would have to be cassettes to go back to, wouldn't there? Do they still make cassettes? You'd probably have an easier time finding a vinyl record. Yes, I do think that people would go back to their old ways if downloads ceased to exist, either buying the CD or borrowing it and copying from a friend. The few converted pirates would go back to pirating. And the even fewer who didn't understand the concept of a CD would pretty quickly figure it out. As soon as there is a better alternative to an optical disc, I will embrace it, but I won't accept a step back in quality in the process.

Yes, he hired Jobs via buying NeXT then stepped out of the picture. So what? Apple wouldn't be half the company it is today if Amelio had remained CEO until 2007.

$740M loss Q1, $33M loss Q2, $30M profit Q3, $161M loss Q4. That's Amelio's record.

What was Amelio's grand plan? Reshuffling of PL centers. Newton spin-off. Hiring his replacement (probably not intentionally) and being smart enough to realize Jobs > Gassee by several orders of magnitude regardless of NeXT vs BeOS.

Contrast that with Jobs. New BoD, axing clones, MS Office for the Mac and a 5-year cross patent agreement with MS, direct sales of computers over the web and phone. Boom. WHILE running Pixar.