Amazon #2 Online Retailer Behind iTunes

[LagunaSol]

You claim to be against DRM and yet suggest people get 'hooked' on a DRM service.

Funny, I don't see me arguing the beauty of DRM. So if I argue that iTunes is a great online music store it means that I'm a lover of DRM? Did I not just tell you that I buy very little music from iTunes because I don't like DRM and I don't like 128 kbps music? Yet you're intent on proving that, in fact, I love both? Interesting approach.

Is this how people debate on your planet?

Keep grasping at straws.

Since you're so good at fabricating my positions for me, why don't I just let you argue with yourself for awhile. You can be me and you. Have at it.

Oh wait, you're already doing it...

 

[BongoBanger]

Apparently someone doesn't know where many of the music companies also have their headquarters.

Warner Music Group and Sony BMG have their headquarters in New York. Universal's is in Santa Monica and EMI has its headquarters in London.

Yup, looks like someone doesn't.

Is the Hollywood/Los Angeles connection too abstract for you to comprehend or do I actually need to say "the greater Los Angeles area" for your brain to compute what I'm saying? Or perhaps you need an actual street address?

Or perhaps you could have looked up where their HQs are before making a fool out of yourself?

Ah, more straw man nonsense. Did I ever say "iTunes 128 kbps w/DRM = GOOD!" Why, no I did not! Reading, you see, is fundamental.

Sure, that's why I read the part where you felt it would be better to use iTunes than Napster. I didn't, however, notice you saying "look, don't bother with either because they're both have DRM and poor bit rates".

Incidentally, Napster goes DRM free in Q2 this year too so there's some more competition for you.

And as I clearly said, if Universal Music (and the others) came to Apple today and said "OK, DRM-free and 256 kbps are fine with us!" that we'd see Apple announce it immediately.

But you see, it's for Apple to go to Universal, not the other way round. Just as Amazon went to Universal to agree terms.

You pretend that 1) Apple is perfectly content with the DRM model

Oh it was until Steve Jobs got wind of the fact that other parties were exploring the option of DRM free distribution which resulted in his famous letter blaming the big bad record companies when, in fact, it was Apple's inflexible business model that caused the problem as demonstrated when Amazon negotiated deals with the big four and were able to sell at $0.99 a track as opposed to the $1.29 Apple wanted for high bit rate non DRM music from EMI (which they later had to drop to $0.99 to stay competitive).

2) that I'm perfectly content buying DRM'ed music through iTunes.

I don't believe you are but you are happy enough to recommend that others should.

But please, enjoy this argument you're having with this imaginary, unseen proponent of iTunes DRM and 128 kbps music that apparently I'm representing by proxy.

I'm not arguing against that, I'm arguing against the fact that you're making a hysterical case against something without understanding why it's happening and the facts behind it.

Now really, you need to cool off and actually think what you're typing before you look even sillier than you do.

 

[LagunaSol]

Or perhaps you could have looked up where their HQs are before making a fool out of yourself?

Having lived in the area for 9 years, I'm perfectly aware of how much music business is done in the Hollywood/Los Angeles area, thank you very much. Maybe you should visit the famous Capitol Records building sometime. You know, in Hollywood?

Not that it has anything to do with the topic at hand, but I guess you'll continue to cling to the immaterial just to have something to say.

Now really, you need to cool off and actually think what you're typing before you look even sillier than you do.

Did you actually manage to type that with a straight face?

 

[BoMo]

But you see, it's for Apple to go to Universal, not the other way round. Just as Amazon went to Universal to agree terms.

I can't believe I am getting involved in this, but, BongoBanger, you have it backwards.

Apple already has gone to the labels, including Universal. Apple is all for DRM free music and has publically asked all labels to get rid of it. It is the labels who refused. Do you not remember the "Thought on Music" memo Steve Jobs made public in January 2007? Here's the link to it: http://www.apple.com/hotnews/thoughtsonmusic/

 

[BongoBanger]

Having lived in the area for 9 years, I'm perfectly aware of how much music business is done in the Hollywood/Los Angeles area, thank you very much. Maybe you should visit the famous Capitol Records building sometime. You know, in Hollywood?

The big four's HQs aren't in Hollywood. You were wrong. Deal with it.

Oh and Capitol are owned by EMI. That's the ones based in London.

Did you actually manage to type that with a straight face?

Well, yes. It was sound advice which, unfortunately you didn't heed and, sadly, once again made a fool out of yourself.

Now I'm not going to respond to you any more because I honestly don't believe in kicking people when they're down.

 

[BongoBanger]

I can't believe I am getting involved in this, but, BongoBanger, you have it backwards.

Apple already has gone to the labels, including Universal. Apple is all for DRM free music and has publically asked all labels to get rid of it. It is the labels who refused. Do you not remember the "Thought on Music" memo Steve Jobs made public in January 2007? Here's the link to it: http://www.apple.com/hotnews/thoughtsonmusic/

Yes, that's the letter I'm refer to. There is, however, a big difference between asking someone to drop something and providing them with commercial incentives for doing so. Amazon did, Apple did not.

Apple need to go to Universal and the other two with an attractive business proposition otherwise all the fine words in the world will not help.

 

[LagunaSol]

The big four's HQs aren't in Hollywood. You were wrong. Deal with it.

Are you serious??? What the hey does the location of the big four's HQs have to do with anything??? I say "Hollywood" when talking about the media industry and you're going to form an entire counter argument about the fact that technically "Hollywood" means "movies" in the traditional sense and not music? And although Capitol Records has their famous building in Hollywood they are technically owned by another company based in London? WHO THE CRAP CARES!

You're desperate to make a coherent point in any way possible. And failing badly.

You're an idiot. Begone, troll.

 

[BoMo]

Yes, that's the letter I'm refer to. There is, however, a big difference between asking someone to drop something and providing them with commercial incentives for doing so. Amazon did, Apple did not.

Okay, what incentives did Amazon make? More money? No, they are actually authorized by the labels to sell for less. More sales? No, still far behind iTunes.

The only incentive Amazon gave the labels was an opportunity to try and knock iTunes down. The labels gave Amazon exactly what they refused to give Apple only so they can weaken Apple, get their power back, and eventually charge more for less.

 

[BongoBanger]

Okay, what incentives did Amazon make? More money? No, they are actually authorized by the labels to sell for less. More sales? No, still far behind iTunes.

Establishment in the market is the initial goal.

The only incentive Amazon gave the labels was an opportunity to try and knock iTunes down.

It's not about knocking iTunes down, it's about removing a monopoly. This isn't a case of everyone ganging up on Apple, this is about establishing an open market.

The labels gave Amazon exactly what they refused to give Apple only so they can weaken Apple, get their power back, and eventually charge more for less.

Incorrect. Napster are going DRM free too and I expect others to follow suit. There seems to be a mistaken belief that the labels want to replace one monopoly with another which is simply not the case. There will be multiple on-line distributors in the near future which is better than a monopoly as far as the consumer is concerned. The belief that Apple have been keeping those pesky record companies in check is quite wrong.

Apple will maintain a handsome market share, it just won't absolutely be on their terms as it has been. The idea that the record companies can charge more for less if there are more distributors is wrong as has been demonstrated in the retail world - once big retailers like ASDA and Tesco entered the market they were able to bargain the labels pricing down resulting in cheaper CDs for the consumer.

 

[BaldiMac]

Yes, that's the letter I'm refer to. There is, however, a big difference between asking someone to drop something and providing them with commercial incentives for doing so. Amazon did, Apple did not.

Apple need to go to Universal and the other two with an attractive business proposition otherwise all the fine words in the world will not help.

Everything that I have read has indicated that Amazon is paying the same $.60 to $.70 per download that Apple pays. The labels will not sell them to Apple at that price.

The major labels disagreement with Apple is about flexibility in pricing. They want to be able to charge more for popular music. They are not making this same demand of Amazon, as evidenced by the fact that Amazon's tracks are all $.99 or less.

Apple was willing to go up to $1.29 for drm free tracks from EMI. Don't forget that Apple is operating the music store at a little more than break even. Their goal is not too make a huge profit on downloads, but to provide a good experience to their customers so that they buy more iPods.

 

[BongoBanger]

The loss leader angle is a myth as this article explains:

http://daringfireball.net/2007/09/more_amazon_mp3_store

It also gives a pretty good explanation of why Amazon can charge the labels less (or the same) and still make money which are mainly around economies of scale in transaction processing.

 

[BoMo]

Establishment in the market is the initial goal.



It's not about knocking iTunes down, it's about removing a monopoly. This isn't a case of everyone ganging up on Apple, this is about establishing an open market.



Incorrect. Napster are going DRM free too and I expect others to follow suit. There seems to be a mistaken belief that the labels want to replace one monopoly with another which is simply not the case. There will be multiple on-line distributors in the near future which is better than a monopoly as far as the consumer is concerned. The belief that Apple have been keeping those pesky record companies in check is quite wrong.

Sorry, but you are wrong. When the record labels asked Apple to charge more for their new releases, Apple refused. The labels choices were to either stick with Apple's $0.99 model or pull their content. As Apple provided the only legitimae source for downloaded music, pulling their content would have cost them millions.

Now with others in the download business like Amazon and Napster, the labels have more power. When Apple refuses to charge more through iTunes for new releases, the record labels can pull their content from iTunes because there will be other places to sell it online.

The result of all of this will be that the consumers will eventually be faced with a tiered price structure and pay more for new releases. In this case, knocking out the monopoly isn't necessary good for the consumer.

 

[BaldiMac]

The loss leader angle is a myth as this article explains:

http://daringfireball.net/2007/09/more_amazon_mp3_store

It also gives a pretty good explanation of why Amazon can charge the labels less (or the same) and still make money which are mainly around economies of scale in transaction processing.

I didn't say that it was a loss leader. As stated in Apple's financial updates, the music store operates at a small profit. When you are talking a billion sales, "small" is relative.

 

[BongoBanger]

Sorry, but you are wrong. When the record labels asked Apple to charge more for their new releases, Apple refused. The labels choices were to either stick with Apple's $0.99 model or pull their content. As Apple provided the only legitimae source for downloaded music, pulling their content would have cost them millions.

That was then. This is now.

Now with others in the download business like Amazon and Napster, the labels have more power. When Apple refuses to charge more through iTunes for new releases, the record labels can pull their content from iTunes because there will be other places to sell it online.

All of which will have their own pricing models. Again, as explained, exactly the same thing happened in the terrestrial market - the big supermarkets hammered out deals with the labels because they gave them more opportunities to reach customers. The result was decreased prices for everyone.

The result of all of this will be that the consumers will eventually be faced with a tiered price structure and pay more for new releases. In this case, knocking out the monopoly isn't necessary good for the consumer.

In the terrestrial market new releases are actually cheaper than back catalogues because the pricing models of the distributors are geared that way. I suspect Amazon and others will manage this by aggregate pricing so, for example, they may pay the labels $0.80c for new releases and $0.70c for older ones whilst maintaining a consistent customer price of $0.99. Volume of sales should keep profit margins relatively healthy.

In other words, the labels may want charge more but this will not be reflected in end prices. The terrestrial market proves this.

 

[BongoBanger]

I didn't say that it was a loss leader. As stated in Apple's financial updates, the music store operates at a small profit. When you are talking a billion sales, "small" is relative.

I agree but it's still in the region of tens if not hundreds of millions of dollars profit which isn't small change. Amazon have bigger scale in terms of sales distribution and better cost economies in terms of bandwidth agreements, sales processing and accounting which is why they can undercut Apple whilst being flexible with the labels.

 

[LagunaSol]

That was then. This is now.

An odd line coming from you, as 90% of your anti-iTunes arguments have focused on the "then" and not the "now."

 

[BongoBanger]

An odd line coming from you, as 90% of your anti-iTunes arguments have focused on the "then" and not the "now."

I'll answer this one because it's relevant to the topic:

bmoorhouse quite correctly states that Apple refused to charge more for new content and had the power to enforce this given their monopoly, however, this is not the same as maintaining customer price whilst absorbing cost. I've given an example of how Amazon's business model can work whilst paying the labels more for new music.

Flexible pricing in itself does not means increased consumer cost as the terrestrial market shows.

 

[BaldiMac]

I agree but it's still in the region of tens if not hundreds of millions of dollars profit which isn't small change. Amazon have bigger scale in terms of sales distribution and better cost economies in terms of bandwidth agreements, sales processing and accounting which is why they can undercut Apple whilst being flexible with the labels.

I would bet that Apple would be willing to take the current deal that the labels have offered Amazon.

 

[BongoBanger]

I would bet that Apple would be willing to take the current deal that the labels have offered Amazon.

Perhaps. We'll need to wait and see but I expect to see Apple sort something out with them in the near future.

 

[BaldiMac]

I'll answer this one because it's relevant to the topic:

bmoorhouse quite correctly states that Apple refused to charge more for new content and had the power to enforce this given their monopoly, however, this is not the same as maintaining customer price whilst absorbing cost. I've given an example of how Amazon's business model can work whilst paying the labels more for new music.

Flexible pricing in itself does not means increased consumer cost as the terrestrial market shows.

I have not seen any analysis that Amazon pays the labels more than Apple.

 

[BongoBanger]

I have not seen any analysis that Amazon pays the labels more than Apple.

At the moment they probably don't, however - as I said - their business model allows them to if needed.

The important part to remember is that even if the labels insist on flexible pricing it doesn't follow that any additional costs are passed onto the customer.

 

[BaldiMac]

At the moment they probably don't, however - as I said - their business model allows them to if needed.

The important part to remember is that even if the labels insist on flexible pricing it doesn't follow that any additional costs are passed onto the customer.

Evidence points to the contrary. If Apple made the same $.30 or so (a big if, but all these numbers are estimates), EMI was getting $.89 to $.99 per download for drm free music. Obviously, that was not enough for the rest of the labels for at least some songs. I have seen reports that they are looking for popular songs to cost more the $2.

 

[WildCowboy]

We can do without the insults, folks...disagreements are fine, but petty squabbling is not. Keep it civil, please.

 

[redfirebird08]

I only look at iTunes if Amazon doesn't have something. But if that's the case, usually iTunes has a ridiculous price or doesn't have it either. Amazon just has better advantages:

1. Lower price most of the time.
2. No DRM on any of their songs.
3. No sales tax is very nice.

 

[w00master]

I only look at iTunes if Amazon doesn't have something. But if that's the case, usually iTunes has a ridiculous price...

Ok, I'm a big fan of Amazon's MP3 service (see my previous posts), but I do have to comment on this. Please explain to me how iTunes has "a ridiculous price?" Is $0.99 *really* a "ridiculous price?"

Let's bring this back down to some reality.

w00master