Apple pressures music labels to abandon Amazon MP3 Daily Deal

13»

Comments

  • Reply 41 of 55
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by solipsism View Post


    That is like shaving before weighing yourself if you are still using a Mac and/or iDevice to listen to them.



    Really? In that scenario, the financial transfer has already happened. It looked like a statement about new purchases, sunk money is already gone.



    Quote:
    Originally Posted by dreyfus2 View Post


    That is true, but we do know that there are several titles costing $1.29 on iTunes that cost less on Amazon, especially with some big name legacy tracks. And yes, I did verify that just now. Almost every Pink Floyd track on iTunes is listed at $1.29 here and the very same titles are all 98 cents on Amazon... So, I do not know if Apple could get the same special deals, but for sure the RI is trying hard to move buyers from Apple elsewhere. I do not really expect Apple to like that.



    OK, I see what you mean. I didn't see any differences in the regular price on the titles that I compared last time I bought something. I'm surprised Apple doesn't have a clause in the contract to the effect of them getting a matching deal on the wholesale price and all that. There was language similar to that in a retailer contract a major retailer sent me, though I turned them down for other reasons.
  • Reply 42 of 55
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by JeffDM View Post


    Really? In that scenario, the financial transfer has already happened. It looked like a statement about new purchases, sunk money is already gone.



    You're right. I should have inquired if any other Apple products would be purchased in the future.
  • Reply 43 of 55
    hellacoolhellacool Posts: 759member
    Quote:
    Originally Posted by dreyfus2 View Post


    That is true, but we do know that there are several titles costing $1.29 on iTunes that cost less on Amazon, especially with some big name legacy tracks. And yes, I did verify that just now. Almost every Pink Floyd track on iTunes is listed at $1.29 here and the very same titles are all 98 cents on Amazon... So, I do not know if Apple could get the same special deals, but for sure the RI is trying hard to move buyers from Apple elsewhere. I do not really expect Apple to like that.



    Is it possible that Amazon takes less of a profit off of its music sales and passes the savings on to its consumers? Would love to see a break down.
  • Reply 44 of 55
    dreyfus2dreyfus2 Posts: 1,070member
    Quote:
    Originally Posted by Hellacool View Post


    Is it possible that Amazon takes less of a profit off of its music sales and passes the savings on to its consumers? Would love to see a break down.



    This is certainly possible, unless the price on Amazon is set by the labels. I can't find anything authoritative on who is setting prices for Amazon downloads, so I would have to speculate... not much help. If the price Amazon pays to the labels is anywhere close to the price Apple is said to be paying (around 65% of the selling price), this would mean that Amazon is selling these songs (those going for $1.29 on iTunes) with only a 13-14% margin before expenses - if somebody buys only one song, the credit card company's transaction charge would be about twice as high as the margin (and this does still not cover operation, hardware, bandwidth, support, marketing). Possible, but really tight and there are too many variables to say for sure.



    Anyhow, it is not helping with the competitive situation, as Apple is definitely not setting the sales prices on iTunes - the labels do (at least that is what Phil Schiller said when introducing the tiered pricing). So, even if Apple would like to lower the prices (and swallow the difference), they can't.
  • Reply 45 of 55
    gfizgfiz Posts: 32member
    Quote:
    Originally Posted by Hellacool View Post


    Is it possible that Amazon takes less of a profit off of its music sales and passes the savings on to its consumers? Would love to see a break down.



    I'd say it's very possible. Amazon has always shown a desire to gain share, even at reduced profit or even a loss. Apple is all about maximizing profit margins.
  • Reply 46 of 55
    robin huberrobin huber Posts: 3,246member
    Why doesn't Apple cut out the middle man and just get into the music publishing business itself? There's already a label with it's name on it. Just buy Apple Corps and start negotiating artists away from other labels. Then Apple can charge whatever it wants for their own songs, driving down the price of competitors. I'm sure there's a reason why this couldn't happen (anti-trust?), but it's fun to speculate.
  • Reply 47 of 55
    superbasssuperbass Posts: 688member
    Quote:
    Originally Posted by gFiz View Post


    So let me get this straight. Apple wants me to pay more for e-books, and not get any daily deals on music from Amazon? Careful Apple, eventually it might set in you're trying to screw me.



    Don't forget they also have a higher profit margin than basically every other smartphone and computer company out there.
  • Reply 48 of 55
    caliminiuscaliminius Posts: 944member
    Quote:
    Originally Posted by dreyfus2 View Post


    Even if it is true, it does not really sound petty to me. If the record industry is giving Amazon promotional deals they are not offering to other resellers, then they do manipulate the market to some degree.



    But that happens all the time. There's nothing unique about this situation. If you go to Best Buy, there are CDs and DVDs with exclusive tracks or collectibles.



    Quote:

    In every other industry bigger resellers do get better offers (or at least identical ones).



    What about the fact the record industry is giving iTunes entire exclusive albums (like A Fine Frenzy's "Blue Christmas")? That hardly seems fair to Amazon, does it? Or all the exclusive tracks that iTunes gets? Or early access to buy concert tickets for pre-ordering the album? I can't exactly see how Apple isn't getting better promos than Amazon.



    Quote:

    Apple is the number one music reseller and is forced to overcharge its customers, because they can't match pricing or get products later?



    Apple could lower the price of the album to match Amazon's, but they don't. If Apple forfeited the ability to set their own prices, that was their own short-sightedness. Also, it's one product, one day later.



    Quote:

    This has nothing to do with Apple being like MS, they have every right to be annoyed about this kind of treatment.



    Then they should push for better promos from the record labels, not screw over the consumer by asking them to end a promo with a rival company. If it's not Apple being like MS, it's Apple being like Wal-Mart; pick your poison and drink up.



    Quote:

    Where exactly would the music industry be today without iTunes saving their behinds?



    They would be in the exact same position they are today. I wish people would quit repeating this fallacy that Apple saved anything when it comes to the music industry.



    Quote:

    Still, if this story is indeed true, then maybe an open letter by Jobs to the iTunes customers, advising them of them being discriminated by the RI, would have made them look better...



    Yeah, right, give Amazon a lot of free advertising that states you can get a better deal a day earlier if you buy from them instead?



    Quote:
    Originally Posted by dreyfus2 View Post


    This is certainly possible, unless the price on Amazon is set by the labels. I can't find anything authoritative on who is setting prices for Amazon downloads, so I would have to speculate... not much help. If the price Amazon pays to the labels is anywhere close to the price Apple is said to be paying (around 65% of the selling price), this would mean that Amazon is selling these songs (those going for $1.29 on iTunes) with only a 13-14% margin before expenses - if somebody buys only one song, the credit card company's transaction charge would be about twice as high as the margin (and this does still not cover operation, hardware, bandwidth, support, marketing). Possible, but really tight and there are too many variables to say for sure.



    Anyhow, it is not helping with the competitive situation, as Apple is definitely not setting the sales prices on iTunes - the labels do (at least that is what Phil Schiller said when introducing the tiered pricing). So, even if Apple would like to lower the prices (and swallow the difference), they can't.



    Amazon might very well be willing to take a loss on in order to build a sustainable digital presence. It's very much the same thing Microsoft did with the X-Box to get it out there and not worry about profits just to get a valid presence in the video game industry. It only took them 2 tries to dethrone the Sony PlayStation as king of the mountain. Unlike a lot of people in this forum (shareholders mostly, I hope), I don't want Apple to be the "King of All Media". I want viable alternatives. iTunes rarely has sales (most are laughable) whereas Amazon is really good about that.



    Amazon is directly competing with the iTunes juggernaut which has a huge mind share when it comes to digital music. I was at a show the other week and the one singer was in the lobby between sets and I spoke to him briefly. He pitched his new album, saying it was available on iTunes. When I said I didn't buy from iTunes, that pretty much ended his sales pitch. He didn't bother to mention that it was also available from Amazon in both CD and download formats.
  • Reply 49 of 55
    superbasssuperbass Posts: 688member
    Quote:
    Originally Posted by dreyfus2 View Post


    That is true, but we do know that there are several titles costing $1.29 on iTunes that cost less on Amazon, especially with some big name legacy tracks. And yes, I did verify that just now. Almost every Pink Floyd track on iTunes is listed at $1.29 here and the very same titles are all 98 cents on Amazon... So, I do not know if Apple could get the same special deals, but for sure the RI is trying hard to move buyers from Apple elsewhere. I do not really expect Apple to like that.



    Apple sets it own pricing on probably 99% of all tracks in the iTunes store, including the share that the artist/label gets. I'm sure there are 1% or less of bands who have separate deals with Apple. Pink Floyd, which owns it's own publishing, as well as others like the Beatles, Led Zeppelin, Nirvana, etc, who Apple needs/needed to be included in iTunes probably have had enough leverage to set their own WHOLESALE price, and there are many major artists (mostly established, "classic rock" type folks) who are still not on iTunes, probably all due to pricing disagreements.



    Amazon's wholesale prices (as well as basically every distributer of physical CDs and several digital ones), are dictated by the labels and/or the publishers/musicians who produce the content. This goes for physical CD's and DVD's as well as MP3's. Basically each publisher/label/band submits a "one sheet" (in the old days, literally one sheet of paper, nowadays digitally or one copy digital + one hard copy). This includes things like bar code number, price code (wholesale price), publishing info, label info, etc etc. These "one sheets" basically go out to every single store that is going to sell the product. I recently released an album on an independent label which has a pretty bare-bones (cheap) distributer, and we had to give the distributer 500 copies of the CD for their stock + 250 physical copies of our one-sheet, which go out to everybody in their distribution network.



    Larger labels tend to have a 2- or 3- tiered system in place for different acts on their rosters in terms of what kind of price code each band gets assigned, depending on a number of factors. When they make "best of" albums, for example, or digitally remastered/rereleased versions of older albums, or sometimes even just new production runs of successful albums, they might change the price code on the one sheet if they want to influence the pricing in stores.



    Let's say an independent record label along with one of it's artists decides to price a release wholesale at $8 for physical CDs and $6 digitally. With 90% of independents, Amazon has standard profit margin per CD/download that automatically gets applied. However, for marketing reasons, and to get rid of stock, Amazon always has the possibility of selling cheaper than, say $9.99 or $12.99, if they want to.



    Amazon basically is operating the same way physical record stores have always operated, as well as most other industries, letting the content/product supplier decide the wholesale price, while Apple is not. Apple is more similar to Walmart in this respect, which negotiates wholesale prices much more actively (although Apple hasn't forced record labels to move operations and production to China to meet those wholesale goals yet )



    Anyways, pretty much everybody in the music industry likes the pricing flexibility of Amazon better than iTunes/Napster/eMusic, and that's why they toss Amazon a bone once in awhile when asked in the form of "enhanced downloads", one day-exclusivity deals, etc. At the same time, it's also of course important to be available on iTunes for various reasons, and eMusic has really become a place where independent bands can make some good money, even though it has the lowest prices (wholesale and otherwise) by far...



    I've been the part of 3 albums released on Universal/Universal subsidiaries, in which we had no control over the wholesale price due to Universal's control, and I'm also involved in 4 or 5 independent projects which are currently available on iTunes and Amazon, and other places like eMusic, Napster and a physical European distributor. With Amazon and our physical distributor, we've had the ability to set our own wholesale prices, while with iTunes, eMusic and Napster we've been forced to sell our product at their wholesale price.



    The funny thing is that the roles seem to have been reversed with the print industry, as Apple has offered limited pricing flexibility to publishers to try to gain a foothold in that market, while Amazon was setting the digital price itself at $9.99 or so until Apple entered the picture!
  • Reply 50 of 55
    mac voyermac voyer Posts: 1,283member
    A little history lesson:



    1. There was no legit, successful digital distribution model before iTunes.



    2. Apple, against the industry's wishes, kept the price down to $.99.



    3. Apple rules the music world. Labels start making money and gain new customers with the new business model.



    4. Apple grows more powerful; labels get greedier.



    5. Labels fear Apple's new power and want alternatives.



    6. Labels support Amazon as alternative.



    7. Labels give Amazon a lower price, allowing tracks to be sold for $.79 to help them get traction.



    8. We discover that iTunes DRM is a condition of the labels.



    9. Labels give Amazon DRM free tracks at a higher bit rate to give them more competitive advantage.



    10. Apple finally gets the same DRM free tracks but are forced to allow variable pricing which is code for raising the price by $.30.



    11. Labels still not happy and give Amazon music a day earlier than iTunes to give them yet another advantage.



    12. Apple finally pushes back.



    What are most of you people smoking? If Apple had their way, all music in the iTunes store would have DRM free and $.99 or less from day one. The labels would not give that to them then, and they won't give it to them now. Apple is not raising prices on music and trying to stifle lower priced competitors; they are trying to get the same terms as everyone else. That is truly a unique place for the market leader to be in. Apple is not the enemy here any more than Amazon is your friend. It is the record labels that are moving the pieces in this game and have been taking shots at the golden egg laying goose.
  • Reply 51 of 55
    Quote:
    Originally Posted by caliminius View Post


    But that happens all the time. There's nothing unique about this situation. If you go to Best Buy, there are CDs and DVDs with exclusive tracks or collectibles.







    What about the fact the record industry is giving iTunes entire exclusive albums (like A Fine Frenzy's "Blue Christmas")? That hardly seems fair to Amazon, does it? Or all the exclusive tracks that iTunes gets? Or early access to buy concert tickets for pre-ordering the album? I can't exactly see how Apple isn't getting better promos than Amazon.







    Apple could lower the price of the album to match Amazon's, but they don't. If Apple forfeited the ability to set their own prices, that was their own short-sightedness. Also, it's one product, one day later.







    Then they should push for better promos from the record labels, not screw over the consumer by asking them to end a promo with a rival company. If it's not Apple being like MS, it's Apple being like Wal-Mart; pick your poison and drink up.







    They would be in the exact same position they are today. I wish people would quit repeating this fallacy that Apple saved anything when it comes to the music industry.







    Yeah, right, give Amazon a lot of free advertising that states you can get a better deal a day earlier if you buy from them instead?







    Amazon might very well be willing to take a loss on in order to build a sustainable digital presence. It's very much the same thing Microsoft did with the X-Box to get it out there and not worry about profits just to get a valid presence in the video game industry. It only took them 2 tries to dethrone the Sony PlayStation as king of the mountain. Unlike a lot of people in this forum (shareholders mostly, I hope), I don't want Apple to be the "King of All Media". I want viable alternatives. iTunes rarely has sales (most are laughable) whereas Amazon is really good about that.



    Amazon is directly competing with the iTunes juggernaut which has a huge mind share when it comes to digital music. I was at a show the other week and the one singer was in the lobby between sets and I spoke to him briefly. He pitched his new album, saying it was available on iTunes. When I said I didn't buy from iTunes, that pretty much ended his sales pitch. He didn't bother to mention that it was also available from Amazon in both CD and download formats.



    wow, cal. you really brung it with that blast! your reasoning is why i buy my tunes from amzn now. itunes needs viable competition.
  • Reply 52 of 55
    superbasssuperbass Posts: 688member
    Quote:
    Originally Posted by Mac Voyer View Post


    What are most of you people smoking? If Apple had their way, all music in the iTunes store would have DRM free and $.99 or less from day one. The labels would not give that to them then, and they won't give it to them now. Apple is not raising prices on music and trying to stifle lower priced competitors; they are trying to get the same terms as everyone else. That is truly a unique place for the market leader to be in. Apple is not the enemy here any more than Amazon is your friend. It is the record labels that are moving the pieces in this game and have been taking shots at the golden egg laying goose.



    $.99 songs are to music what the $.99 value menu is to food.



    Apple is trying to force the market into a pricing plan that will sell more iPods, and the market is pushing back by rewarding a distributor who lets them price their own product. Why should every track cost the same? Why should every single recorded song cost $.99 and every album cost $9.99? Why I should I support Apple when they use shitty, lossy codecs at their store?



    Why not let the market decide pricing? In the same way that quality food producers don't sell produce or meat to McDonald's just to fit into the $.99 value menu, I think it's cool if record companies, independent labels and independent artists throw their support behind a service that allows them to control their own destinies. Apple didn't "save" the music industry, and if anything the ipod/itunes ecosystem has been at the centre of the world of music piracy. Everybody who thinks that pay-by-the song is a good thing can be comforted by know that they're further helping to tart up the music industry by devaluing real albums in favor of hit singles.



    I think it's hypocritical how so many apple fanboys applaud the high profit margins Apple has on it's hardware but at the same time bitch and complain that the music industry doesn't want to be forced into low-margin pricing by a distributor.
  • Reply 53 of 55
    addaboxaddabox Posts: 12,660member
    Quote:
    Originally Posted by Superbass View Post


    Don't forget they also have a higher profit margin than basically every other smartphone and computer company out there.



    Computers yes, although that's simply an artifact of not competing at the bottom, where the profits are razor thin.



    Cell phones? I'd need to see some citations.
  • Reply 54 of 55
    superbasssuperbass Posts: 688member
    Quote:
    Originally Posted by addabox View Post


    Computers yes, although that's simply an artifact of not competing at the bottom, where the profits are razor thin.



    Cell phones? I'd need to see some citations.



    Do a simple google search:



    http://brainstormtech.blogs.fortune....fit-an-iphone/



    is a recent one that shows almost 60% gross profit margins on the iPhone, way more than any other phone maker.



    Here's another that quickly popped up:



    http://www.ismashphone.com/2009/08/a...facturers.html



    which gives Apple 40% net profit on iPhones, much higher than other (double that of RIM, which is "smart-phone" only, and thus doesn't get skewed due to cheaper phones.



    Do you have proof that netbooks in particular have "razor thin" profit MARGINS? I couldn't find anything convincing to back that up. I only found apple fansites and forums reporting that margins were super low on netbooks, usually given as a reason Apple hasn't created one yet, but all real news sources I could find only mention that net profits (not margins) are low on netbooks, and that Intel, Lenovo, Dell are having problems with their mid-priced offerings being cannibalized by Atom systems. I can imagine margins would be pretty low due to more competition for similar systems across the gamut of Windows PC manufacturers, but that doesn't really change the fact that Apple computers, iPhones, displays, etc etc are all sold at a high profit margin.
  • Reply 55 of 55
    masternavmasternav Posts: 442member
    Let's see, we have the allegation "According to an executive who spoke with Billboard," yet a quick sweep thru all the news item at Billboard.com produces no such reference. So we have an anonymous "executive" ( let's assume a recording industry executive, as it seems to play best that way for the intent of the article) who claims that Apple is "pressuring" recording companies to not using a competing service to iTunes. It is classic market manipulation, if in fact the "quote" is true. Why not get two outlets competing against each other?



    The problem is you have an entrenched and usurious industry being dictated to by its' outlets which is never a happy place to be. The recording industry is losing control of its marketing, losing profitability and unfortunately many artists have tied their fortunes into that particular model which, while it plays them silly, is the only real game in town for them.



    [OT] Superbass, Smartmoney had this to say about pricing and margins on netbooks: http://www.smartmoney.com/spending/t...-for-business/



    Of course since most PC makers don't break out netbook vs. notebook sales (probably wise) you can only extrapolate from volume and revenue from the segment, which is called out in the article. Worse the netbook phenomenon also caused a flattening of the price of other devices in the category, which results in overall lower prices for consumers (good thing), but reduces the ability of a company to innovate and invest in research and design.
Sign In or Register to comment.