Apple earns less than a nickel per iTunes track
Record labels are demanding such a large cut from online music sales that several existing online music stores will eventually be forced to go under, The Independent cautions today.
According to figures obtained by the publication, the labels are profiting more per digital sale than they would by selling the same music on CD.
"Figures from the US show that Apple Computer, the dominant legal download business in Europe and the US, retains just 4 cents from each 99-cent (55p) track sale while 'mechanical copyright' holders - generally the record labels, who own copyright in the song's recording - take 62 cents or more. Music publishers take the rest - about 8 cents," The Independent says.
Meanwhile, copyright owners have reportedly doubled their share of royalties, even though the marginal cost of manufacturing has fallen to almost zero.
The Independent also notes that Apple has somewhat of an advantage, as tracks sold from its iTunes Music Store play only on its profitable iPod digital music player.
iTunes Music Store sales accounted for about half of the 500,000 digital music tracks sold online in the UK last month. In the United States, sources say that Apple is selling around 15 million songs per month, at a rate just shy of 200 million tracks a year.
According to figures obtained by the publication, the labels are profiting more per digital sale than they would by selling the same music on CD.
"Figures from the US show that Apple Computer, the dominant legal download business in Europe and the US, retains just 4 cents from each 99-cent (55p) track sale while 'mechanical copyright' holders - generally the record labels, who own copyright in the song's recording - take 62 cents or more. Music publishers take the rest - about 8 cents," The Independent says.
Meanwhile, copyright owners have reportedly doubled their share of royalties, even though the marginal cost of manufacturing has fallen to almost zero.
The Independent also notes that Apple has somewhat of an advantage, as tracks sold from its iTunes Music Store play only on its profitable iPod digital music player.
iTunes Music Store sales accounted for about half of the 500,000 digital music tracks sold online in the UK last month. In the United States, sources say that Apple is selling around 15 million songs per month, at a rate just shy of 200 million tracks a year.
Comments
I wish there would be a real paradigm shift were artists can bypass the whole recording industry. Even if Apple only gets 4 cents, I wish the rest would go to the artists. However, the recording industry seems to have a stranglehold on the the thing that counts most-promotion.
I wish there would be a real paradigm shift were artists can bypass the whole recording industry. Even if Apple only gets 4 cents, I wish the rest would go to the artists. However, the recording industry seems to have a stranglehold on the the thing that counts most-promotion.
It's inevitable that this will happen. The Pixies are self promoted from what I read. What you need to do as an artist is get your name out there and a following. This may require signing with a Major Label but once you have a following I see them being able to eventually leave the labels and strike out on their own. The next decade will have more and better quality internet radio stations. I'm just about ready to shitecan FM radio because it's Clear Channel dreck. This will be easy once we had auto decks that support iTMS AAC tracks.
Services like CD Baby are going to go a long way towards liberating artists from the blood sucking leaches that inhabit the Majors.
Even with the help of Fans gving Marillion two top 20 single in the UK, they dropped faster than a stone from the charts. I suspect that is because they still get limited airplay and promotion.
On the other hand if the artists get to keep more money from their songs, then they don't have to have incredible sales jsut to make it. I would rather have a world of many moderately famous artists than the world of the small-club-of-superstars.
Originally posted by hmurchison
Services like CD Baby are going to go a long way towards liberating artists from the blood sucking leaches that inhabit the Majors.
For the record, iTMS pays out 65 cents per single or $6.50 per album (assuming the default $9.90 price), CD Baby keeps 9%, and their artists (including the ones in my sig
So we get 59 cents per single, just over $5.90 per album. The profit per single is way, way higher than what a major-label artists grosses from a CD sale. The tradeoff, of course, is that we don't get support from the huge marketing machine we'd have if the label thought we'd sell, but I think that situation will change over time. (CD Baby does provide tremendous resources for self-marketing, though, and for free.)
That's totally the truth. I'd guess that in many cases you can go independant and make the same money that you previously made with a Major with only half the sales. For instance local Seattle Rapper Sir-Mix-Alot said that when he got a call from a exec from the studio doing Charlies Angels about using "Baby Got Back" for the movie she asked him how much for the rights. He hastily said $250k and she said "ok" like it was nothing(it probably was. I'm sure they would have paid twice that and so is he now). Since he owns all the rights to his music and publishing he pockets the whole quarter million. All it takes is one megahit and ownership to really make a mint. Artists are losing their shirts to Major labels because it hasn't dawned on many that they are unlikely to get any appreciable radio play. Hell I turn on the Top 40 and I hear the same 15-20 artists on every station. That's not encouraging.
Next look at how the industry values your profession. Hillary Duff? Lindsay Lohan? Pop music is now about putting a pretty face up that can barely sing. Err what am I thinking it's always been that way(see the lipsyncing fiascos of the 90's)
iTMS will change how music is purchased and played. Apple will eventually have a service that is even with Major label and Independent content.
Originally posted by radiospace
Just another example of the incredible greed and short-sightedness of the record industry. Instead of supporting a healthy internet distribution industry they are squeezing every last drop of blood from the machine. When they've run everybody out of business they'll blame file-swapping teenagers for their problems, raise the price of CD's another dollar, then spend another million dollars marketing no-talent hacks like Britney Spears at Wal-Mart.
Radiospace couldn't have said it better myself.
Originally posted by Carson O'Genic
Its going to end up Apple, Sony, and the Redmond Beast. Every one else will loose their shirts and slowly bow out from selling songs online.
Please! Lest you forget Napster (nee Roxio nee Napster)? A large and semi-profitable company run by intelligent humans wouldn't just dump a profit-maker like their Toast products and go completely music-download unless they expect to be rolling in the dough within the year! And now that they don't have that whole CD-Burning business to distract them, they can concentrate on making the best music-download business around.
Originally posted by Louzer
Please! Lest you forget Napster (nee Roxio nee Napster)? A large and semi-profitable company run by intelligent humans wouldn't just dump a profit-maker like their Toast products and go completely music-download unless they expect to be rolling in the dough within the year! And now that they don't have that whole CD-Burning business to distract them, they can concentrate on making the best music-download business around.
Obviously they're confident about something, but on the other hand AT&T Wireless went from #1 with a bullet to dead last and sinking in record time, and they certainly didn't intend to.
There's a perfectly good possibility that they'll sink into the same sort of marginal existence that many of the other would-be music services have, especially since their attempts to secure contracts with universities are running headlong into the iPod.
Originally posted by Carson O'Genic
I wish there would be a real paradigm shift were artists can bypass the whole recording industry. Even if Apple only gets 4 cents, I wish the rest would go to the artists. However, the recording industry seems to have a stranglehold on the the thing that counts most-promotion.
if you want to support the artists, buy their merchandise, sweaters, tees, patches, if you want to support the record companies, buy the cds/songs!
1. They cannot differentiate themselves from Walmart, MS and whoever else is selling the same WMA Protected format.
2. Their partnership with Samsung for players means nothing because Samsung's players suck.
3. Anytime you have multiple vendors selling the same product it's difficult to have strength amongst the whole linuep. MS' entry is going to make it that much more difficult.
4. I expect Apple to really hit hard with new iTMS compatible hardware next year. Auto playback and Home playback offerings should be stellar by Xmas 2005.
My home will be a stricly iPod/iTMS household and I thing there are a lot of people just like me.
Apple decides to do what any reasonable
owner of a high street real estate (the iTMS software)
would do:
* Rent the space out to retailers like Virgin Mega Store, HMV etc etc.
This way Apple would:
* Not have to deal with record labels themselves
* Serve retailers and records labels with technology on an ASP (applications service provider) basis.
* Increase competition in prices (and usage of iTunes)
by having more than one store in the left column of iTunes. I.e. instead of only iTMS, have both Virgin, HMV, 4AD-stores there. The company that pays for a prime spot in Apples software, get to sell music downloads.
Anyone agrees?
Put another way, if Apple only makes 5 cents a song, whose pocket is Virgin's profit in the enterprise going to come out of?
This, of course, is good.
I thought Apple might think of offering some kind of private-label iTMS for companies like Coke or McDonald's. The idea of "renting the space" might also make sense.
I am hoping (and, frankly, expecting) the rumored impending settlement with Apple Corp. to include a deal for the Beatles music on iTMS. Perhaps even an exclusive iTMS Beatles store.
The final piece of the puzzle...a couple of years from now...might be actually licensing FairPlay to hardware device makers.
Nice to see Apple have a real hit on their hands, and to seem them managing very astutely.
Originally posted by joelbergqvist
well, since they know "the business" a lot better than apple (who should focus on being hardware-software provider) they could do it better. am i wrong
Yes, you're wrong. The iTunes Music Store is all about simplicity and ease of use. Adding multiple vendors to the equation would break it. In fact, what you describe sounds almost exactly like Microsoft's hare-brained plans for the future of the MSN / Windows Media music store.
Consider what a pain in the ass it would be to shop iTunes if your iTunes Virgin store "stocked" different tracks than your iTunes Sam Goody. Not only a pain from the consumer standpoint, but from Apple's as well -- they'd have yet another middle-man to deal with.
Finally, since when have music stores like Virgin been price competitive? A CD at Sam Goody, for example, often costs 30-50% more than the same album at Best Buy or Amazon!
* one music provider per country (Virgin)
* One for movies (even rent-a-movie)
* Software sales
then apple wouldn't have to deal with country specific
rights deal etc. That infrastructure is already existing
And a lot of would-be-competitors would be affiliates...
Maybe rebranding the store?