BBC Newsnight Article on the iPod, iTunes and France
http://news.bbc.co.uk/1/hi/programme...ht/4837834.stm
Just wanted to get your take on this article, personally I found the standard of journalism extremely poor, and this is written by one of the producers of Newsnight.
I found the following flaws on my first readthough:
1 - The article compares the price of a dvd to the price of buying a track on itunes. It mentions that video cost more to make than audio, however it exagerates the 'cheapness' of an itunes song by saying it costs just a few pence (79p per track). It also fails to mention the different lengths of the media ie a song is much much shorter than a film, and also completely ignores the greater cost that physical distribution entails when compared to distribution over the internet (ie physical media costs, manufacture and transportation costs and having to employ people in a store to serve the purchaser. This is a massive cost per item compare to the costs apple faces (paying for bandwidth and storage for the songs as well as support staff)
2 - The article then goes on to compare the price of a DVD player to the price of an iPod. The article comments that a dvd player can be purchased for £20 whereas an iPod costs £219 plus VAT. This for a start is wrong, the 30gb iPod cost £219 inc VAT. The 60gb iPod cost £255 plus VAT, so the figure given is wrong. The articale here is comparing a bottom of the range DVD player to the almost top of the range iPod. The iPod shuffle start at £49 inc VAT. There are definatley DVD players that cost more than this (which are not even DVD recorders!). The article then says that the iPod is not 10 times more sophisticated. Maybe not 10 times but it definately is quite alot more sophisticated. The iPod contains a hard-drive, colour lcd screen and a battery. This link shows the estimated bill of materials for the iPod 30gb, the Hard-drive component ($65) cost rounghly £44 when you include VAT (£37ish without) this is more than the cost of the entire DVD player. The iPod is alot more sophisticated than a DVD player.
The article later talks about iTunes. It says that apple has been selling iPods off the back of iTunes, and making lots of money from it, and the record companies have been loosing money. Now it verymuch seems to me that this is most likely the other way round. If ipods were being sold because of itunes, we would expect that a large percentage of peoples music would have been bought from itunes. Fairly recently was the landmark of 1,000,000,000 songs being sold on iTunes. Apple has now also sold over 40,000,000 iPods. This would give 25 tracks from iTunes per iPod. When you consider that the smallest ipod holds 120 tracks, and the largest 15,000 tracks this is quite a small number (please not these are all approximate numbers but fairly correct as far as i know). Also the iTunes music store was launched after the iPod.
Now as for the record companies loosing money: The record companies recieve a large ammount of the cost of a track on itunes (65% afaik). Approximately 15% of this ammount is passed on to the artist. Apple get a 35% cuts from which they recieve little proffit as the cost for servers and bandwidth eat most of this up. So how are the record industries loosing money? People now have a legal alternative so when the want a song instantly, they can go buy it instead of pirating it, They take aproximately the same ammount of money as they did for physical sales. I cant see any evidence for this statement.
Later in the article they seem to imply that everyone who bought an iPod was a pirate and none of them used legal means to put music onto there iPod (ie ripping from your own CD (although the RIAA now seems to feel this os not fair use )) The article says apple cashed in on this with the record companies by setting up iTunes. But as we have previously established, apple makes little proffit off these sales, and for them the aim must be to make the most seamless integation possible to get music onto your iPod. If anything apple really did the record insustry a favour by proving a source of revenue for them in a market they didnt seem to understand.
The article says the the industry had no choice but to go with apple and try and remake some money from that which they were loosing from illegal downloads, however from my reading it seem to imply the record industry was getting a worse deal than if physical records were sold. As we have established this does not seem to be the case. It then talks about how music downloads cost next to nothing, again exagerating the low cost when you consider a new album cost say £12. On iTunes the same album would cost £7.99. A difference of £4. However this has to cover the difference in production costs of the two formats and you should also take into account that shop album price will drop to nearer the iTunes price after a time, and then surely the record compaines are making more money from the iTunes downloads!
The article then says that the people who produce £20 dvd players can make mp3 players much cheaper than the iPod. Sure if you compare a 512mb player made in China to a 30gb iPod you will find a large difference in price. However if you try comparing similar products rather than those at the ends of the range you will quite clearly see that no manufacturer can undercut apple by a significant margin if any margin at all. The pricing mistake is repeated here.
It then says that apple keeps its lead by DRM. The fact is that it is highly doubtful that the music industry would see music online without DRM and every legal download site (that i know of it) encorporfates DRM into its downloads. In fact IMO apples DRM is the most flexible (in terms of the number of devices you can play songs on)
It then goes onto say that with the french rulling people would not have to use iPods for their iTunes music so why would they buy an iPod when they can get a cheaper mp3 player. You cant get a mp3 of the smae specification for much less.
It then says that apple may boycott the whole country of France.
Then its says the french record industry will prbably be happy with this. I dont really see how. It will be much easier to 'borrow' tracks from a friend. The only people that will really benefit from this are apples competitors in the digital downloads industry as they now have a much larger market.
But anyway tha French iTMS isnt even in France so it will be interesting to see how this plays out.
Sorry about the long post but I was rather dissapointed by the quality of the journalism here especially since it was written by one of the producers of the program.
stu
Just wanted to get your take on this article, personally I found the standard of journalism extremely poor, and this is written by one of the producers of Newsnight.
I found the following flaws on my first readthough:
1 - The article compares the price of a dvd to the price of buying a track on itunes. It mentions that video cost more to make than audio, however it exagerates the 'cheapness' of an itunes song by saying it costs just a few pence (79p per track). It also fails to mention the different lengths of the media ie a song is much much shorter than a film, and also completely ignores the greater cost that physical distribution entails when compared to distribution over the internet (ie physical media costs, manufacture and transportation costs and having to employ people in a store to serve the purchaser. This is a massive cost per item compare to the costs apple faces (paying for bandwidth and storage for the songs as well as support staff)
2 - The article then goes on to compare the price of a DVD player to the price of an iPod. The article comments that a dvd player can be purchased for £20 whereas an iPod costs £219 plus VAT. This for a start is wrong, the 30gb iPod cost £219 inc VAT. The 60gb iPod cost £255 plus VAT, so the figure given is wrong. The articale here is comparing a bottom of the range DVD player to the almost top of the range iPod. The iPod shuffle start at £49 inc VAT. There are definatley DVD players that cost more than this (which are not even DVD recorders!). The article then says that the iPod is not 10 times more sophisticated. Maybe not 10 times but it definately is quite alot more sophisticated. The iPod contains a hard-drive, colour lcd screen and a battery. This link shows the estimated bill of materials for the iPod 30gb, the Hard-drive component ($65) cost rounghly £44 when you include VAT (£37ish without) this is more than the cost of the entire DVD player. The iPod is alot more sophisticated than a DVD player.
The article later talks about iTunes. It says that apple has been selling iPods off the back of iTunes, and making lots of money from it, and the record companies have been loosing money. Now it verymuch seems to me that this is most likely the other way round. If ipods were being sold because of itunes, we would expect that a large percentage of peoples music would have been bought from itunes. Fairly recently was the landmark of 1,000,000,000 songs being sold on iTunes. Apple has now also sold over 40,000,000 iPods. This would give 25 tracks from iTunes per iPod. When you consider that the smallest ipod holds 120 tracks, and the largest 15,000 tracks this is quite a small number (please not these are all approximate numbers but fairly correct as far as i know). Also the iTunes music store was launched after the iPod.
Now as for the record companies loosing money: The record companies recieve a large ammount of the cost of a track on itunes (65% afaik). Approximately 15% of this ammount is passed on to the artist. Apple get a 35% cuts from which they recieve little proffit as the cost for servers and bandwidth eat most of this up. So how are the record industries loosing money? People now have a legal alternative so when the want a song instantly, they can go buy it instead of pirating it, They take aproximately the same ammount of money as they did for physical sales. I cant see any evidence for this statement.
Later in the article they seem to imply that everyone who bought an iPod was a pirate and none of them used legal means to put music onto there iPod (ie ripping from your own CD (although the RIAA now seems to feel this os not fair use )) The article says apple cashed in on this with the record companies by setting up iTunes. But as we have previously established, apple makes little proffit off these sales, and for them the aim must be to make the most seamless integation possible to get music onto your iPod. If anything apple really did the record insustry a favour by proving a source of revenue for them in a market they didnt seem to understand.
The article says the the industry had no choice but to go with apple and try and remake some money from that which they were loosing from illegal downloads, however from my reading it seem to imply the record industry was getting a worse deal than if physical records were sold. As we have established this does not seem to be the case. It then talks about how music downloads cost next to nothing, again exagerating the low cost when you consider a new album cost say £12. On iTunes the same album would cost £7.99. A difference of £4. However this has to cover the difference in production costs of the two formats and you should also take into account that shop album price will drop to nearer the iTunes price after a time, and then surely the record compaines are making more money from the iTunes downloads!
The article then says that the people who produce £20 dvd players can make mp3 players much cheaper than the iPod. Sure if you compare a 512mb player made in China to a 30gb iPod you will find a large difference in price. However if you try comparing similar products rather than those at the ends of the range you will quite clearly see that no manufacturer can undercut apple by a significant margin if any margin at all. The pricing mistake is repeated here.
It then says that apple keeps its lead by DRM. The fact is that it is highly doubtful that the music industry would see music online without DRM and every legal download site (that i know of it) encorporfates DRM into its downloads. In fact IMO apples DRM is the most flexible (in terms of the number of devices you can play songs on)
It then goes onto say that with the french rulling people would not have to use iPods for their iTunes music so why would they buy an iPod when they can get a cheaper mp3 player. You cant get a mp3 of the smae specification for much less.
It then says that apple may boycott the whole country of France.
Then its says the french record industry will prbably be happy with this. I dont really see how. It will be much easier to 'borrow' tracks from a friend. The only people that will really benefit from this are apples competitors in the digital downloads industry as they now have a much larger market.
But anyway tha French iTMS isnt even in France so it will be interesting to see how this plays out.
Sorry about the long post but I was rather dissapointed by the quality of the journalism here especially since it was written by one of the producers of the program.
stu
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stu