Apple In Strong Position For iTunes Store Contract Extensions?

[MacRumors]

http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Apple is in a strong negotiating position (http://investing.reuters.co.uk/news/articleinvesting.aspx?type=allBreakingNews&storyID=2007-04-20T135344Z_01_N18321657_RTRIDST_0_APPLE-MUSIC.XML&pageNumber=0&imageid=?=&sz=13&WTModLoc=InvArt-C1-ArticlePage3) to seek further concessions from record companies when it comes time to re-negotiate iTunes Store contracts, according to Reuters.

Last year, record companies tried unsuccessfully to introduce tiered pricing (http://www.macrumors.com/2006/04/23/apples-ongoing-itunes-negotiations/) of individual tracks into iTunes. Instead, an extension was signed (http://www.macrumors.com/2006/05/01/apple-renews-itunes-pricing-at-99-cents/) with no real perceivable difference in terms.

This year, Reuters reports that Apple is in an even stronger position after having signed up EMI to offer "premium" tracks (http://www.macrumors.com/2007/04/02/emi-apple-press-conference-coverage/) without DRM for an additional fee.

"EMI struck a deal that puts all of us at a disadvantage," said a music executive who spoke on condition of anonymity. He said EMI had agreed to let Apple sell its music without anti-piracy protection to please shareholders concerned that the record company was behind in the digital music race.

Despite this, the record companies will most likely still try to gain concessions such as a higher wholesale price or the addition of a subscription model.

"The record companies like the idea of the recurring revenue," said Gartner analyst Mike McGuire. "The challenge will be to convince Apple that it's worth the extra costs involved in setting it up."

[Salasm]

i like the fact steve has the music execs by the balls.

werd. :cool:

[4God]

Hmmmmmm.....seems like Apple is at the top of the mountain now (or at least very close). :D

[jesteraver]

i just want itunes canada to let me buy movies and tv shows already christ!

[zoltamatron]

I kinda doubt that apple is going to go towards a subscription model....regardless of what the music execs want. Seems like with the EMI deal that apple wants to go towards less DRM.....the subscription model would go for even more of it since you would basically not own any of the music.....just simply renting it.

[Doctor Q]

Individual tunes don't have tiered pricing, but albums already do, with some less than $10 and some more than $10. I wonder how much negotiation is involved in album pricing.

[siurpeeman]

i actually wouldn't mind a subscription model in addition to the current pricing scheme. it would allow me to sample more songs, especially whole albums where i would otherwise be interested in only the singles. i don't think it would stop me from buying music. i actually think it would encourage me to buy more, especially whole albums. but i'm guessing i'm in the minority here. oh well. :confused:

[Lixivial]

I wonder how much negotiation is involved in album pricing.

I was always under the impression that album pricing was, for the most part, left up to the labels themselves to decide. They're kinda in a bind, of course, due to the 99 cent individual tracks, but could get around it by implementing "Album only" songs.

And I could have sworn I pulled that from one of Apple's conference calls, but this one from 2004 (http://www.macobserver.com/article/2004/04/29.9.shtml) is the closest I could find.

Steve Jobs: Well, let me tell you how we...first of all, that the USA article was inaccurate. There clearly are some albums on iTunes, there's a few of them, that are priced a little higher, but the vast majority of albums are $9.99 or below and, you know, believe me, they're, you know, they're aggressively priced. But the way we do it is that every song on iTunes is 99 cents, but the album prices do float around a little bit based on what the labels want to charge for them, and we encourage the labels to price them aggressively because, as you may know, over 40 percent of the songs sold on iTunes are sold as albums. I think it actually approaches 50 percent. And so, the more, you know, the more reasonably priced the albums are, the more it encourages users to buy the full album rather than their three favorite songs and everybody wins that way.

[Telp]

i like the fact steve has the music execs by the balls.

werd. :cool:

:cool: ooooh yeahhhhhh :D

[CJD2112]

i like the fact steve has the music execs by the balls.

werd. :cool:

lol seriously

wonder if Apple will go into the music recording biz :p

[Rocketman]

1. lo-res music one price, albums a higher price
2. hi-res music one price, albums a higher price
3. lo-res TV shows one price, seasons a higher price
4. hi-res TV shows one price, seasons a higher price
5. lo-res movies one price, series a higher price
6. hi-res movies one price, series a higher price

[PlaceofDis]

good news for apple. and they surely are in a pretty good position with the EMI deal. hope the other labels follow suit.

[j33pd0g]

The record companies like the idea of the recurring revenue... I don't care what they like. It's my money, and I will spend it on the songs I like. I don't want to rent my music or juggle my playlist using some subscription system.

[ijak]

We have to keep our eye on what the music industry is trying to do with subscriptions. They are trying to behave like a cable company, and charge us a monthly fee forever to listen to any music.

With digital media and good backups, once we buy a song, we never need to buy it again. The music moguls want to treat it like heroin. They want to get you hooked on the subscription, and coming back for more.

[PlaceofDis]

subscriptions are more likely for movies than music imo. but thats just my speculation and opinion on the matter.

[pgwalsh]

Apple will give them tier pricing. $0.99 for DRM music and $1.29 for DRM free music. There's your tier pricing, enjoy. :D

[twoodcc]

well i guess this is good news for apple. we will see

[zim]

We have to keep our eye on what the music industry is trying to do with subscriptions. They are trying to behave like a cable company, and charge us a monthly fee forever to listen to any music.

With digital media and good backups, once we buy a song, we never need to buy it again. The music moguls want to treat it like heroin. They want to get you hooked on the subscription, and coming back for more.

You said it. Subscriptions = greed.

[Cult Follower]

I wish the record companies would stop being soo greedy, and focus on the customer.

[Bonte]

I kinda doubt that apple is going to go towards a subscription model....regardless of what the music execs want. Seems like with the EMI deal that apple wants to go towards less DRM.....the subscription model would go for even more of it since you would basically not own any of the music.....just simply renting it.

And quadruple the server load, or more. I don't think the internet is ready for a mass use of "all you can eat" music and video, still some years away.

[robPOD]

sweet cheaper music.

[cannonball]

I never liked the idea of subscriptions when it was just music, but think about it; now there is so much more content. My wife and I are considering a netflix-type subscription and I can't decide whether or not to buy a season pass for our favorite TV show. If Apple offered a subscription service that included their video content, I would do it in a heartbeat... and I would consider paying more than $25/mo. for it.

We could still buy the programming we wanted to keep, and finding good programming would be SO much easier (read: "less expensive").

I vote yes.

-Chris

[surferfromuk]

Hold out your hands, here come the 'soft-cuffs'. This is nothing less than corporate communism - You own nothing - the corps own everything.

Next stop 'Zune-like' count based restricted playback.

The $9.95 subscription package offers you unlimted playback on an incredible 100 tracks and 5 plays per month on a further 1000!. You have the freedom to pick and choose from an incredible 100,000 artists.

Upgrade to the $19.95 package and have unlimited playback on a further 1000 tracks!

and people will cry 'You've never had it so good!!..yeeahhaa!!Hooray for the Zune!!'

Thank God for Steve Jobs and his hacker revolutionary roots!!

Accept this and 50 years from now Nabisco will own the gas from your farts...

I firmly believe in capitalism - a good product for a good price but this *could be* something else...

[Counter]

Coming in 2009, the ability to own real hard copies of music with real artwork in real boxes at the best possible audio quality delivered directly to your door for the same price as a lossy drm'ed download! Amazing advances in production and logistics have made this leap in music purchasing possible! Now you can really touch your music! Also, as your collection grows, it doubles as the coolest feature of any room! You heard it here first! Bring on 2009!

[reallynotnick]

I personally would love to see this for TV shows and movies, because I only want to see them once and I am done with them. With music I want to keep it all and listen to it over and over again.

I am still sort of pissed at the higher pricing for the unDRM'ed music, I mean sure it is higher quality but we are paying for the song right? Not the way it is made in like 10 seconds.

[PlaceofDis]

I am still sort of pissed at the higher pricing for the unDRM'ed music, I mean sure it is higher quality but we are paying for the song right? Not the way it is made in like 10 seconds.

remember that is only for single song purchases, not albums.

[Yvan256]

This year, Reuters reports that Apple is in an even stronger position after having signed up EMI to offer "premium" tracks without DRM for an additional fee.

The higher fee is not only for a DRM-free song, it's also for a song encoded at twice the bitrate, which means only the highest of purists will complain about artifacts (i.e. they also complain about CDs to begin with).

It means digital downloads are finally good enough to stop buying CDs altogether. No DRM also means our purchased music will still be playable in 50 years.

And only single tracks are priced higher, albums prices are the same. Which means a better incentive to buy whole albums if enough tracks are worth buying.

[Doctor Q]

And only single tracks are priced higher, albums prices are the same. Which means a better incentive to buy whole albums if enough tracks are worth buying.Coupled with the "Complete My Album" feature, this should lead to increased album sales.

[mashny]

How many artists have been screwed by the record companies over the years? How many artists have been given a few thousand dollars for an album, only to have the record companies make millions on that same album, giving not a penny to the artist? And what do the record companies say? "Hey, they signed a contract..." So for the record companies to suddenly become altruistic and say that piracy, iTunes, no DRM... hurts the artists is disingenuous (aka a bloody lie).

Apple is finally--after surviving the 1990s, thanks to Steve Jobs--reaping the fruits of its vision. And what is that vision? Providing the best-made, best-designed, most versatile, most advanced, and most innovative products for its customers. iTunes is a product of that vision, and, like other Apple products, it has changed people's perception of what the computer is capable of. The record companies never had trouble with new technologies before--they went from records and tape (eight-track and cassette) to CD and various recording technologies without any trouble--but now that they no longer have a vertical monopoly on music production and distribution, technology is suddenly an obstacle. Like Bob Dylan wrote (which record company has the right to his songs???), the times they are a-changin'. Record companies love exploiting fads and popular culture, except, it seems, when that culture marginalizes them.

It's time that the record companies took a bit of their own medicine and had the terms of their deals dictated to them instead of the other way around. Sure, Steve Jobs should negotiate and try to give them something they want, but as the driving force behind Apple--and the 2.5 billion or so songs sold to date on iTunes, most of the money from which goes to the record companies--he deservedly has the upper hand. He had the courage to battle Microsoft at a time when Microsoft seemed omnipotent and Apple's future uncertain, so there's no reason he should listen to the dictates of the music executives now that he can negotiate from a position of strength.

Just my opinion...

By the way, I just stumbled across the http://www.roughlydrafted.com website. If you're not familiar with it (which was me yesterday), it has a bunch of in-depth articles (several new ones appearing each week) revolving around Apple, its history, its products, its outlook... Check it out.

mashny

[ogee]

I can not see any advantage to a subscription service to me. If I was forced to go this route I doubt I would use iTunes any more. I dont rent movies, I wont rent music.

Further I wont be forced to buy x number of tracks per month. I buy what I want when I want.

[mashny]

Regarding the whole DRM/Subscription thing, check out this link: http://ce.seekingalpha.com/article/32487

[swingerofbirch]

I hope that when Apple goes to negosh with the TV and movie industries, that said industries push Apple to encode their shows/movies at higher rates (like 720 p would be awesome). Because ABC has streaming shows on its website for free that seem to me to be at least the quality of iTunes downloads. I imagine that the decision at what to encode it at is Apple's. I can't imagine the networks have anything to lose from having the highest possible encoding?

[swingerofbirch]

remember that is only for single song purchases, not albums.

So if you can upgrade each track for $.30 but you already own the whole album and albums don't have a higher price for the non-DRM version, could you upgrade your whole album for free and avoid the $.30 per track surcharge?

Also, do you think they'll sell DRM/non-DRM albums at the same price, or will they eliminate the sale of the DRM album?

[cannonball]

Regarding the whole DRM/Subscription thing, check out this link: http://ce.seekingalpha.com/article/32487

Interesting. If this is where the whole rumor started, I have less faith in the whole thing (Besides the fact that Apple would almost surely write their own DRM, let's not forget they are a software company).

There is so much steam around here about subscription service... I don't think it's going to be subscribe-or-die... that would be supid! Surely we'll be able to buy what we want to keep. But consider how ?TV could play into the user experience if it were subscription:

You're sitting on the couch, rifling through your video library on your ?TV, nothing looks interesting because you've seen them all three times before. You are in the mood for something new, and you've been wondering what the big deal is about "Grey's Anatomy" or Whatever movie your friends have been talking about. Well, if you're a subscriber, and you've paid your $X.99 for the month, browse to your flick, get it, and start watching it in a few seconds when the cache is built up...

you'd find so much more material that you liked because each download is no longer explicitly linked to a purchase. Now, when you're crazy about a movie, or tv show, You can STILL buy it!. And, of course, you can still BUY your music.

If you rent movies on ANY regular basis, this idea should be attractive to you... Of course, I REALLY wish they would start adding special feature content.

Now, as for DRM, There will have to be for subscription... but that doesn't mean there has to be for purchases... or at least for MUSIC purchases (I doubt the movie execs will be half as willing to listen to ex-DRM talk as the music folks).

Anyway, I'm holding off netflix to hear what Apple will do, and if they do offer a subscription for video content, I'll not only sign up, I'll buy an ?TV to boot.

[mangoduck]

"The record companies like the idea of the recurring revenue," said Gartner analyst Mike McGuire

of course they do. that way they can make bank repeatedly on the same old tired material without getting off their ass to promote it, much less seeking new talent altogether. why be helpful and increase musical richness and diversity by giving plethoras of indie artists a hand up when you can continue to be fat and lazy while making things difficult for them and real paying customers?

[Porchland]

1. lo-res music one price, albums a higher price
2. hi-res music one price, albums a higher price
3. lo-res TV shows one price, seasons a higher price
4. hi-res TV shows one price, seasons a higher price
5. lo-res movies one price, series a higher price
6. hi-res movies one price, series a higher price

Wow, you could be a brand manager for Adobe CS3 or Microsoft Vista!

[marmotte]

i actually wouldn't mind a subscription model in addition to the current pricing scheme. it would allow me to sample more songs, especially whole albums where i would otherwise be interested in only the singles. i don't think it would stop me from buying music. i actually think it would encourage me to buy more, especially whole albums. but i'm guessing i'm in the minority here. oh well. :confused:

I just don't like renting music. Period.