Wednesday, April 13, 2005

Commentary from Engadget:


I don't normally just repost articles from other websites, but I thought this was rather interesting:

Report from Engadget:

Apple's relationship with the record labels starting to sour?

Everyone usually gushes about how brilliant Apple was in being able to corral all the major labels together for the
iTunes Music Store, but is Stevie J.’s insistence on everything being his way or the highway putting Apple’s relationship with the labels at risk? Doesn’t look like anyone is going to be pulling their catalog from the iTunes Music Store any time soon, but CNET does have a story today about the growing tension between the record labels and Apple. Nothing particular surprising—it’s mainly that the record labels want more flexibility in being able to charge more for new hit songs and (supposedly) a little less for older titles and that they’d like Apple to open up its FairPlay DRM to other MP3 player manufacturers because they think it would help them sell more songs (they shouldn’t get their hopes up)—but the twist here is that these dissatisfied labels are taking a good long look at the wireless carriers as alternative partners to Apple.

From the perspective of the record labels, the carriers offer a more secure retail environment (they can DRM all this
stuff like crazy), and since the carriers are also dying to start selling wireless downloads, are probably more likely
to give the labels the pricing flexibility they crave (they think they can get more than 99 cents per song for wireless
downloads, which is probably wishful thinking on their part). Cutting a deal directly with the wireless carriers would
also take advantage of their growing reluctance to carry
handsets like Motorola’s forthcoming iTunes phone
, which they’re not particularly stoked about because it encourages customers to load up their phone with music by syncing it with their PC rather than by downloading it
directly over wireless networks (the carriers are counting on wireless downloads as an additional revenuestream).

So is Apple going to be knocked off its perch? They currently dominate the legal online download market, so it’s hard
to imagine any of the major labels refusing to let Apple sell their music via the iTMS, but it’s also not inconceivable
that they’d use partnerships with wireless carriers (as well as other online stores) to try and gain a little leverage
in their dealings with Apple.


Jack Campbell said...

It's also not inconceivable that the record labels will begin to acquiesce less to Steve Jobs' strident demands for terms and pricing.

I have wondered when the label execs would begin to wake up to the bill of goods they bought from Jobs two-years ago. That awakening might just be happening, finally.

FYT said...

Steve Jobs' strident demands for terms and pricing

iTunes pricing is currently unfair? ... to anyone?

Consumer, Label, Artist?

I have wondered when the label execs would begin to wake up to the bill of goods they bought from Jobs two-years ago.

Yeah they got to be a part of the biggest phenonmenon since the television!

Jack Campbell said...

My position is that Steve's gladhanding proposal to make the iTunes store the center of the industry's experiment in exterminating illegal download losses by offering market competive legal alternatives, based around a generous DRM formula actually resulted mostly in freezing out consideration of other, entirely different approaches for the past two years. iTunes is unarguably a huge commercial success... for Apple. My contention is that it is flawed, from the record industry's end of things. The industry is asking for variable pricing (consumer friendly). Jobs is resisting, insisting on the flat-rate 99-cent fee for all tunes, no matter how old and obsucre. The industry is realizing that wider device compatibility is best, and is asking for that (consumer friendly). Jobs resists. Aside from that, there are entirely different ways to meld digital downloads into the industry's overall marketing scheme, ways that have not been explored at all. Full-catalog non-DRM MP3 sampling, or even non-DRM download stores of all current titles would be a worthwhile experiment. But, with the pro-DRM stance being so adamently embraced by Apple (the largest download store), as its platform lock-in tool to prop up the iPod hegemony, the industry finds itself effectively blocked from such experiments. And, the truth of how much downloads actually contribute to, or hurt CD sales still isn't known.

No, I generally support Apple's approach to things as the better approach to covering both consumer value issues and their own profitability needs. But, the iTunes/iPod platform has been good for nobody but Apple, in that it has chilled the market to innovation for over two-years. That foregone innovation could well have shown evidence that other approaches can be simultaneously (A) more consumer friendly, and (B) more effective at building a profitable market for the record industry (and the artists and other people who earn a living in that industry).

Just one man's opinion.