Apple victorious in iTunes pricing battle
Apple Computer this week revealed it has renewed contracts with four of the largest US record labels to sell songs through its iTunes music store for just 99 cents each, the Financial Times is reporting.
The agreements, announced Monday, came after months of bargaining, and were a defeat for labels that had been pushing for a variable pricing model.
The music industry?s big four - Universal, Warner Music, EMI and Sony BMG ? were reportedly unavailable to comment.
However, Edgar Bronfman, Warner?s chief executive, and senior executives at EMI and Sony had in recent months supported variable pricing, which would allow the labels to charge more than 99 cents for new tracks from top artists, according to the report.
The negotiations at times had become heated, with Apple chief executive Steve Jobs last year publicly calling the recording industry "greedy."
Although some had speculated that the big labels might sign short-term contracts with Apple as they continued to negotiate towards a variable pricing structure, several music executives privately acknowledge that they had "little leverage over Mr Jobs."
The agreements, announced Monday, came after months of bargaining, and were a defeat for labels that had been pushing for a variable pricing model.
The music industry?s big four - Universal, Warner Music, EMI and Sony BMG ? were reportedly unavailable to comment.
However, Edgar Bronfman, Warner?s chief executive, and senior executives at EMI and Sony had in recent months supported variable pricing, which would allow the labels to charge more than 99 cents for new tracks from top artists, according to the report.
The negotiations at times had become heated, with Apple chief executive Steve Jobs last year publicly calling the recording industry "greedy."
Although some had speculated that the big labels might sign short-term contracts with Apple as they continued to negotiate towards a variable pricing structure, several music executives privately acknowledge that they had "little leverage over Mr Jobs."
Comments
Originally posted by AppleInsider
The negotiations at times had become heated, with Apple chief executive Steve Jobs last year publicly calling the recording industry "greedy."
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good, at least someone in a high position in the tech field has the grapefruits to stand up to them, and not just bend over -- I hope in the next round of negoteations, Apple goes on the offencive -- No DRM, just embed the name of the buyer into the track, to appease the P2P concerns.
Record companies: "We want variable pricing"
Jobs: "No"
Yet this is good news because Apple actually made them shut the hell up. Now if they only listened to the people as well...
Originally posted by melgross
This is good for the consumer. I don't believe than anyone really thought that the labels were interested in fair prices with this variable pricing scheme.
Damn straight! I'm glad Steve was able to use the power of iTunes to get the labels to play fair. However, like all changes to business and in media, the labels will come up with new ways to market their wares and new ways to sell on iTunes.
The 99 cent deal covers singles and I'm sure an album clause was included too, but as soon as you start bundling videos or other extras I'd expect the price to rise.
Originally posted by Xool
Damn straight! I'm glad Steve was able to use the power of iTunes to get the labels to play fair. However, like all changes to business and in media, the labels will come up with new ways to market their wares and new ways to sell on iTunes.
The 99 cent deal covers singles and I'm sure an album clause was included too, but as soon as you start bundling videos or other extras I'd expect the price to rise.
That's true, they do charge more for the "vingles" (video+single), and I'd expect Apple to come up with more creative ways to increase value to consumers. They follow the Wal-Mart strategy of offering the consumer 3 tier pricing... "Good", "Better" and "Best".
Originally posted by drakethegreat
I'm not suprised that it was Sony pushing variable pricing the hardest. Behind every media scam it seems the Playstation maker is leading the field.
Yet this is good news because Apple actually made them shut the hell up. Now if they only listened to the people as well...
Sony wasn't the hardass here. It was Edgar Bronfman.
Originally posted by melgross
Sony wasn't the hardass here. It was Edgar Bronfman.
Did you miss the word AND that referred to Sony?
Originally posted by drakethegreat
Did you miss the word AND that referred to Sony?
I didn't miss anything, did I?
I was responding to your post, not to the article directly. I had already done that.
If you can show me just where in your post you used the word "and", I will give you a mea culpa.
But, the article itself isn't entirely correct as it didn't mention that Bronfman was the one who was pushing the other companies to insist upon variable pricing. That information was in the WSJ, the NYTimes, and others.
Originally posted by melgross
But, the article itself isn't entirely correct as it didn't mention that Bronfman was the one who was pushing the other companies to insist upon variable pricing. That information was in the WSJ, the NYTimes, and others.
Good article about Bronfman here...
http://www.techdirt.com/articles/200...229220_F.shtml
Originally posted by MacCentric
Good article about Bronfman here...
http://www.techdirt.com/articles/200...229220_F.shtml
He's also been slammed about losing most of his families fortune over the years with his bad business deals.
Originally posted by a_greer
I hope in the next round of negoteations, Apple goes on the offencive -- No DRM, just embed the name of the buyer into the track, to appease the P2P concerns.
wow, some serious lack of thinking on that one....
and the first time your laptop gets stolen and a couple thousand songs with your name embedded in them spread like wildfire around the world? multiplied by the number of stolen computers per year (let alone misappropriated boxes, etc.), and you can see why this type of "solution" makes no sense at all.
yes, DRM sucks (i buy nothing with DRM), but let's use our brains a bit!
Originally posted by ascii
Good news for Apple. Also the French parliament has changed the law about DRM. If they win the Apple vs Apple thing they will be 3 for 3.
When did Apple computer change their tune on DRM? I thought their position three years ago was "DRM is bad, but we have no choice for iTMS", now it is "DRM is good, the world will end without it"?
Originally posted by JeffDM
It sounds like a total bluff by the labels. It doesn't sound like they truly were serious enough to take their ball and go home. If music downloads really are the highest margin part of the music industry, then they can't do much more than bluff. Then that's not counting the potential anti-trust or collusion investigations if they had all terminated their contracts in unison.
It's amazing what you can achieve with a near-monopoly in a market. Like MS says, it clearly results in a win for the consumer. And it sure helps kill ITMS competitors. To think that itms is a barely breaking even business unit... that's pretty weak.
Remember that online downloads are just barely more than 5% of total music sales. That's almost trivial.
On the other hand, Apple takes a lot of cash in with this. It also helps drive the vastly larger, and actually profitable iPod sales. Apple also sells accessories that make them profit as well.
Given that, it just seems that the labels could starve Apple of significant income if they didn't sign new contracts. There is no question that iPod sales would slow. Look at Japan, for example, iPod sales are more than double since iTunes opened up. Before that, that were losing marketshare to Sony.
The same thing is true everywhere else.
Originally posted by melgross
I've always though that Apple would be the underdog here.
Remember that online downloads are just barely more than 5% of total music sales. That's almost trivial.
On the other hand, Apple takes a lot of cash in with this. It also helps drive the vastly larger, and actually profitable iPod sales. Apple also sells accessories that make them profit as well.
Given that, it just seems that the labels could starve Apple of significant income if they didn't sign new contracts. There is no question that iPod sales would slow. Look at Japan, for example, iPod sales are more than double since iTunes opened up. Before that, that were losing marketshare to Sony.
The same thing is true everywhere else.
Starving apple as you put it would be illegal. It's called price fixing. There was no risk of apple losing the labels. On the flip side, imagine losing nearly 5% of your turnover. Not a good move at all, especially when that turnover is nearly pure profit (minus marketing cost allocation of course).
Way to go, Steve.