Downloadable music to fail, say rivals
This article was fun to read:
http://www.usatoday.com/tech/product...oft-subs_x.htm
One of the comments I found especially funny was:
"Selling 99-cent singles isn't working as a business model for us or for consumers," says Dave Goldberg, who runs Yahoo's music division. It includes Musicmatch, which offers both downloads and subscriptions.
"We sell hundreds of downloads," Goldberg says. "But we don't make money on them. Subscriptions is a much better business for us."
Translation:
"Apple really screwed everyone that is selling downloadable music by setting a price point that consumers (obviously) want but no one can make any money at!"
Personally, I am confident that Apple is correct about this (in the short and long term)...that consumers don't really want to "rent" music...they want to own it. Furthermore, I firmly believe that if Apple finds themselves wrong about this...they can "flip a switch" and turn on subscriptions. I expect they have the pieces in place, but simply are not enabling it. Much like the WMA capability on the iPod...it's there...but not enabled.
http://www.usatoday.com/tech/product...oft-subs_x.htm
One of the comments I found especially funny was:
"Selling 99-cent singles isn't working as a business model for us or for consumers," says Dave Goldberg, who runs Yahoo's music division. It includes Musicmatch, which offers both downloads and subscriptions.
"We sell hundreds of downloads," Goldberg says. "But we don't make money on them. Subscriptions is a much better business for us."
Translation:
"Apple really screwed everyone that is selling downloadable music by setting a price point that consumers (obviously) want but no one can make any money at!"
Personally, I am confident that Apple is correct about this (in the short and long term)...that consumers don't really want to "rent" music...they want to own it. Furthermore, I firmly believe that if Apple finds themselves wrong about this...they can "flip a switch" and turn on subscriptions. I expect they have the pieces in place, but simply are not enabling it. Much like the WMA capability on the iPod...it's there...but not enabled.
Comments
Originally posted by Chris Cuilla
"We sell hundreds of downloads," Goldberg says. "But we don't make money on them. Subscriptions is a much better business for us."
First off: hundreds?
Second: Note the emphasis there. This is not the PR guy speaking, I hope.
Third: sell iPods or some other more profitable vehicle with the downloads as a major feature, and your download service will make more sense.
Originally posted by BuonRotto
First off: hundreds?
Second: Note the emphasis there. This is not the PR guy speaking, I hope.
Third: sell iPods or some other more profitable vehicle with the downloads as a major feature, and your download service will make more sense.
Yes, these were my sentiments exactly.
I think many people don't realize how incredibly clever of Apple it was to set the iTMS to NOT make money (not lose it either). Those that keep hoping/thinking/maybe/someday Apple will make $ on the iTMS don't understand the strategy...and this article begins to expose it.
Unless you have something else to sell (i.e., iPod) having only a music store is just dumb. And then there is this...even if you offer a store (say Dell does this)...are you going to run it break-even indefinitely only to sell people music for other vendors players? I mean Dell will surely sell some players...but they have no incentive to run the store.
So what do we have:
1. Can't make any $ selling the music.
2. Since all other hardware vendors can sell the same thing as you, there is no incentive to run a (non-profitable) music store.
so...who will run it? Microsoft?
3. Microsoft then competes with all of the music store vendors they've bribed to get going to sell WMA...and they don't get any licensing revenue...so what's the point?
The point would be long-term domination of course...but Apple has laid this out fairly well.
Finally, Apple is very wisely (but carefully) introducing more price-competitive iPods so that Microsoft/WMA/Dell/Rio don't slowly eat away from the bottom up. (assuming iPod micro is true)
Now...here comes the final part of the strategy (maybe)...
Apple skims all of the high profit margins from the market. as price pressure begins to lower margins...then they decide to license Fairplay to hardware vendors on a per device basis...say $5-10/device.
Now they can open the market to anyone not wishing to buy an "Apple" product (of course they effectively ARE anyway)...but Apple gets paid no matter who buys from who!
(cue big evil world domination laugh)
Yes Gorog. There are teams of MS people right now working on ways they can apply their technology and desktop market dominance to make OTHER companies like Napster millions of dollars in revenue in the online music business.
It's neither the price nor the inability to rent music to consumers that kills profits. It's obviously the price that the music services are paying to the labels. The entire music industry is in upheaval because the roll of record labels is about to change drastically.
Musicians and consumers don't need the labels in their current form. Yet we're all chipping in nearly the entire share of each sale straight to a bunch of billionaire media moguls. Eliminate them from the loop and everyone wins... all of a sudden online music retailing becomes extremely profitable.
What are the labels doing to deserve such a huge portion of the pie? They used to provide a valuable service, marketing, production, and distribution of acts who would otherwise go unnoticed. However, the WWW and the mp3 revolution changed everything. Production and distribution are pretty much free. Publicity is still a marketable service by the labels, but less so than it used to be.
I have a feeling that people will wake up to these realizations over the course of the next few years.
Originally posted by dfiler
Amazing, they still have it all wrong!
It's neither the price nor the inability to rent music to consumers that kills profits. It's obviously the price that the music services are paying to the labels. The entire music industry is in upheaval because the roll of record labels is about to change drastically.
Musicians and consumers don't need the labels in their current form. Yet we're all chipping in nearly the entire share of each sale straight to a bunch of billionaire media moguls. Eliminate them from the loop and everyone wins... all of a sudden online music retailing becomes extremely profitable.
What are the labels doing to deserve such a huge portion of the pie? They used to provide a valuable service, marketing, production, and distribution of acts who would otherwise go unnoticed. However, the WWW and the mp3 revolution changed everything. Production and distribution are pretty much free. Publicity is still a marketable service by the labels, but less so than it used to be.
I have a feeling that people will wake up to these realizations over the course of the next few years.
It'll change the minute Apple resolves their issues with Apple Records and is able to sign artists to contracts. I can definitely see that happening.
Originally posted by applenut
It'll change the minute Apple resolves their issues with Apple Records and is able to sign artists to contracts. I can definitely see that happening.
There will definately be fascinating rivalries and alliances formed in the next couple years.
It's obvious that the web (or iTMS) is the future of music distribution. Currently, Apple has a head start with the iTMS. Yet, the labels are still the ones in charge. Their huge libraries of copyrighted material are vital to any music store.
A couple of strategic alliances could drastically change the playing field. Apple needs to maintain it's contracts with the major labels in order to succeed. Yet, the optimal business model would seem to be musicians bypassing the middle man and submitting songs for distribution straight to the iTMS. Of course, the labels wouldn't be too pleased by this... things are getting interesting.
Once everyone in the music chain (artists, radio stations, brick & mortar music stores, consumers) gets used to finding/playing bands w/o major label backing the labels are going to get kicked to the curb. The change is starting and picking up steam.