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Apple Pressuring Music Labels Over Participation in Amazon's 'Daily Deal' Program
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I don't really think Apple is being greedy by wanting to charge consumers to pay $11 for a new release....that is typical pricing (given cost increases) for any CD, record or online album in the past two decades...how is that greed?
I also get the impression that Apple does NOT want to sell them at $3-5 an album. INstead I think they want the industry to stop cutting special deals in order to cut into the market share of a dominant company. It is not monopoly that Apple has- yes they have a very large market share, but there is not a lack of competition of people selling music- online or not. There are plenty of places to buy music these days- in fact, many more than decades ago.
I agree that once Amazon gets some market share their practices may change their pricing, which is why this type of practice is usually NOT good for the consumer in the long run.
Yes, and if Apple paid Amazon $1 million dollars for every song they sold, the labels would make even more money!
Hypotheticals are fun. Reality is even more so. The record labels forced tiered price increases at the iTMS during the contract renewals at the end of 2008, while supporting the Amazon store to be able to go even lower (89 cents) in price. Apple can't just sell these songs for whatever they want; it doesn't work that way.
Mind you -- my loyalty is to my pocketbook. I don't make the kind of money that allows me to be chose what set of corporate ethics I prefer; when I buy music at my computer, I buy from Amazon. When I buy from my phone, I obviously buy from the iTMS.
But at no point am I going to be blind to what each side's motivations may be, nor am I going to take an article leaked to Billboard magazine at face value. Whose interests do you think Billboard magazines has at heart -- i.e., who are their readers?
Yes, you guessed it. Music industry executives.
Apparently sarcasm goes right over your head... Even when I put a smily face after it....
I think it's a little bit of both. The two choices you gave aren't necessarily mutually exclusive.
Perhaps I don't understand the law. Isn't Apple free to match the prices on Amazon daily deals? Best Buy offeres low prices on DVD release days, Walmart got an exclusive version of Transformers 2 on Blu-Ray, Gamestop, Amazon, and Best Buy all get exclusive pre-order bonuses that no other retailer has...
Exclusive sales happen all the time. I also don't see how to paint a record company as a bad guy in this case. Are we seriously going to get mad at them for selling DRM free .mp3s at half the normal cost? How spoiled are we now?
... so many negative posts in this thread, claiming Apple is strong-arming, even suing somebody over music pricing is ridiculous.
The labels are the bad guys here. For a long time they have been strong-arming Apple over pricing and rights over DRM-free distribution, with the only purpose of taking full control over digital distribution.
Giving Amazon better prices and exclusive access to DRM-free deals is similar to what MS was sued for.
Amazon cannot offer 50%+ discounts over iTunes prices without preferential treatment from the labels --Apple is making less than 30% on songs.
My guess is most of the negative posts in this thread are in response to the HTC lawsuit. Apple customers or not. Maybe some Android fans
Yet, Android will have a better chance at leading when Google breaks free from having to follow Apple. I think Apple is doing them good.
If the music labels are guilty of price discrimination, shame on them! Labels, IMO, should charge the same rate to all its distributors. And then it's up to the distributors to determine what price they sell the songs at. They could sell something at 10 times what they pay the labels. Or Apple & Amazon could sell the songs at a loss, meaning they sell the songs/albums for less than what they paid for them.
And citi, don't forget, Apple can charge more for a song than the label wants. So if a label wants $7 for an album, instead of taking 30% out of $7, make the $7 the label's 70% cut, meaning apple will get $3 & the buyer will pay a total of $10.
Is Steve getting senile? Seriously!? Apple, you can dominate a market but all these tactics for killing any competition are starting to leave a bad taste in my mouth. /QUOTE]
I dont' see how apple is trying to kill any competition with this? They are not suing anyone, didn't even threaten legal action. The only thing "reported" is that Apple is withdrawing marketing support for albums being sold under this deal- In other words they are not placing them at the top of the iTunes page or on the first group of new releases. That is all-
Also to the person who said Amazon is the little guy in this situation? Ha!
errrrrrr...yes.
You should insert about 5 times:
Number a) Apple changes iTunes EULA to make you agree in their data mining techniques.
(think Album Art, think Genius)
Why so many negatives?
You guys forgot why pricing on iTunes has increased to $1.29? It's all because labels favoring Amazon to give themselves leverage. This is manipulation instead of competition.
If labels give iTunes the same promo pricing as amazon, that would be real beneficial for end users. But if labels use this as a leverage against iTunes, expect the pricing to be even more crazy on iTunes!
You guys forgot why pricing on iTunes has increased to $1.29? It's all because labels favoring Amazon to give themselves leverage. This is manipulation instead of competition.
If labels give iTunes the same promo pricing as amazon, that would be real beneficial for end users. But if labels use this as a leverage against iTunes, expect the pricing to be even more crazy on iTunes!
The funny thing is, before Digital distribution, this is EXACTLY how it used to operate. The label/distributor would sell to all retail markets at a wholesale rate of around 6$. The retailer would then mark up the price based on the labels "suggested retail" pricing. Which would knock the price up to about 9.99-12.99. The Label didn't receive any additional profit for that transaction, that money went to the retailer
EVERYONE WAS GOOD WITH THAT.
Then the labels went digital (CD's not files) and what was suppose to be a cheaper manufactured product turned into increased pricing of 15.99-17.99
NOONE WAS GOOD WITH THAT.
We know what happened with Itunes...
So by Amazon conveniently making these daily deals, in essence, we have come full circle, but now, the consumer is buying at wholesale instead of the retailer. Which makes a little sense, considering there is no actual product and they operate more as a passthrough than anything else.
From the full article:
Apple doesn't like being undercut by a competitor finding ways to fight back against Apple's massive market share. As far as I can tell, no laws are being broken besides The Law of Jobs: "Thou must buy through iTunes".
Probably because Apple is always sueing someone. Probably because Apple has become a complete a**hole-company. Probably because the first underlines the latter.
RidleyGriff said:
Apple isn't really competing though, they are just threatening their suppliers for selling their product cheaper elsewhere. I think Nike does this with their more expensive shoes. Some chains get exclusive access to some shoes because they will sell them at a higher price.
While probably legal, it just comes off as being whiny.
Apple is simply looking for fair competition. What part of that don't you understand?
Exactly. Finally, someone who gets it.
I guess you're missing the entire point. Apple has TRIED to get the same deals, but the labels want to give Amazon a better deal. It's really very simple.
As for legal action - can you point to any law suit that Apple has filed against Amazon or the record labels? Since there hasn't been one, you're basing your entire argument on your own delusions.
As for 'stealing', what Jobs was clearly referring to was 'stealing' ideas that are in the public domain. He never advocated infringing patents. Even a rabid Apple-hater like you ought to be able to see the difference.
It does go on, but almost always, the better price is obtained by the company with larger share. Can you imagine a mom and pop store getting a better price than Walmart? Clearly, the labels are using their power to try to undercut Apple.
When did Apple sue Amazon or the record labels in this case? You're entire argument is based on delusions.
Exactly.
That's the standard modus-operandi here. People who don't have any clue what they're talking about decide they hate Apple for some ridiculous reason (usually because Mommy won't buy them a Mac, apparently) and then lash out at Apple with mindless comments that don't even make sense.
OK. Then explain this: Apple pays the label 70%. In some cases, the price on iTunes is 2-3 times the price on Amazon. Just how in the world could the labels be making more money on Amazon? Clearly, they're not - they're offering Amazon a better deal in order to try to regain some control over the industry.
Not even close to being true. Microsoft was not fined for unfair competition. They were charged with illegal abuse of monopoly power (I don't believe they even paid fines in the U.S., but may be wrong about that). Apple doesn't have a monopoly, so they can't be charged with illegal abuse of monopoly power. Furthermore, Apple is simply asking (not even demanding, according to the story) that record companies give them the same deal as the competition. That's not illegal, nor is it an abuse of Apple's market power.
Yes.
8) Mac bashers on MacRumors whine endlessly about the subject without having the facts, without understanding the law, and without even apparently reading what actually happened.
Who cares what Apple's motives are? They are in business and no one in their right mind expects them to put the record labels' wishes over their own. That's what this whole thing is about.
Do the math. There are albums that are 2-3 times as expensive on iTunes. Even if Apple doesn't give up their 30%, the record labels are making far more than if they sell it to Amazon at less than half the price. So the record companies are taking LESS money in order to hurt Apple.
Not to mention, of course, the fact that they allow Amazon to sell their records a day early.
Perhaps I don't understand the law. Isn't Apple free to match the prices on Amazon daily deals? Best Buy offeres low prices on DVD release days, Walmart got an exclusive version of Transformers 2 on Blu-Ray, Gamestop, Amazon, and Best Buy all get exclusive pre-order bonuses that no other retailer has...
Exclusive sales happen all the time. I also don't see how to paint a record company as a bad guy in this case. Are we seriously going to get mad at them for selling DRM free .mp3s at half the normal cost? How spoiled are we now?
Apple is free to match the prices, but at the current pricing scheme, Apple would lose money each time (they have to pay the record companies 70% of the negotiated list price even if the actual selling price is below that).
Not to mention, of course, that Apple can't sell the music AT ALL on Amazon's first day.
Are we going to get mad at the record labels for selling music at half cost? Sure as heck if they're doing it to damage the free market. And they are.
Because their Mommy wouldn't buy them a Mac and all the other kids are making fun of them for using their clunky Dell computer so they spend their time on MacRumors and other Mac forums whining about Apple.
There's no 'if' about it. That's exactly what the labels are doing.
Apple is making me want to switch back to Windows. Seems like all they do now is whine about so and so is stealing this, so and so is offering a better deal than us. Someone call a Wahbulance. Google was actually nice enough to HOLD OFF implementing multi-touch in the Google phone even when they didn't have to - and only implemented it when Jobs made an ass of himself concerning Google and their phone at the Apple employee meeting.
Maybe Apple should make a stink about not being allowed to offer the same kind of MP3 deals instead of trying to take it away from the consumer. Seems like, in the end, WE are always the biggest losers. Go Google HTC and go Amazon! I hope Apple loses every stupid lawsuit they file, and get countersued just on principle.
Maybe Apple should make a stink about not being allowed to offer the same kind of MP3 deals instead of trying to take it away from the consumer. Seems like, in the end, WE are always the biggest losers. Go Google HTC and go Amazon! I hope Apple loses every stupid lawsuit they file, and get countersued just on principle.
Steve Jobs said:
It seems like all we hear coming out of Cupertino is Steve's incessant whining.
Guess this is why you are a lawyer and not a business man.
Citi, your analysis makes no sense either. 30% of an $11 album on itunes is $7.70 to the record company vs. the daily deal on Amazon for the same album at $5.99. So, even if amazon lost money on the sale (Giving all of the proceeds to the record company is a loss to amazon for hosting, maintenance, marketng, and credit card processing), the record companies still take home more profit under Apple for that same album selling at $11 on the iMS.
Both of you are throwing out this 30% number as if sucking it up and making no $$ on Apple's end solves all problems. Amazon is selling an album at $5.99 and Apple has it for $11. Amazon's price is about 45% less than Apple's. So even if Apple was taking a 30% cut, they would have to sell at a loss to equal these daily deals. There lies the problem.
I also do not think amazon is selling these Daily deals for no $$$ or in fact a huge loss. What is the incentive? In the case of the eBooks, it's to sell the hardware (Kindle). Not the case in terms of music. Amazon has no incentive. The record companies do though.
I also do not know where the 30% number comes from. Even if it is, the PROFIT is not 30%. I have found an old analyst's report that talked apple's revenue on music sales. For each .99 song the record companies take .65 for each sale. But, Apple has expenses such as server hosting, marketing, maintenance of the iMS, Not to mention the constant updating of iTunes software across both Mac & windows platroms, credit card processing of approx .25 per transaction and a fee of approx 2-3%. As a business that takes credit cards, this can be even upwards of this if users are using rewards based cards. Apple tries to keep this low by grouping all transactions purchased within a day. The "profit" was more in the range of .10 per song.
None of this has anything to do with the percentage that Apple makes or takes per song as stated above. It has to do with the record companies allowing Amazon to sell the albums/songs at a much lower rate than they will allow on the iTunes Music Store period. In normal business the business that sells more of your product(s) get the better price, not the other way around.
Others have hit the nail on the head. Once Sales volume increases significantly on Amazon, the record companies will pull the plug. At that point, record companies will be free to raise prices and have more control since their distribution is not being dictated by a majority "distributor". Apple has been the one trying to keep pricing low and the record companies are not happy. This is also the reason why movie & TV studio's are reluctant to bring more content and lower pricing to Apple. They fear that this will drive pricing downward due to Apple being a dominat player.
I don't get why Apple can't just lower the prices. If it means reducing their percent of revenue, so be it.
The record deals gave Amazon a better deal. It's called capitilism and the record labels can do whatever the hell they want.
Apple is getting too powerful for it's own good. The labels should ban iTunes from selling any of their products for a month and watch as iTunes (as well as the Touch and AppleTV) sales plummett.
Then maybe Apple will be more grateful and take what their given. Freakin whiny crybabies. I think Steve Jobs needs a balls transplant as well.
The record deals gave Amazon a better deal. It's called capitilism and the record labels can do whatever the hell they want.
Apple is getting too powerful for it's own good. The labels should ban iTunes from selling any of their products for a month and watch as iTunes (as well as the Touch and AppleTV) sales plummett.
Then maybe Apple will be more grateful and take what their given. Freakin whiny crybabies. I think Steve Jobs needs a balls transplant as well.
What has Apple actually done?
They've told the record labels that if they're going to give Amazon preferential treatment, that they're not going to get preferential treatment on iTunes. It's that simple.
Apple didn't sue anyone.
Apple didn't cut any record labels (or even songs) out of iTunes.
Apple didn't threaten anyone.
Simply "if you want to be a preferred label with a favored position on iTunes, then you need to start acting like one. You can't have it both ways".
Frankly, it amazes me that so many Mac-bashers insist that Apple should continue to give special arrangements to companies who go out of their way to hurt them. That's no more logical than getting shot in a robbery and then giving the shooter more bullets when he runs out.
I'm also a bit shaky as to wether to finish my Obj-C Cocoa book or not. I might, just for the skills and programming knowledge.
TBH, I'm waiting to see what happens when SJ falls off his perch. To see if hes the source of the **** storm or holding it back.
---
What I don't get the most is, Amazon is using the base core principle that Microsoft used on the PC world and people are calling it competition?
Thanks MacRumors for posting this story. Thanks Apple for being such a baby. I was going to purchase an album from iTunes this past weekend for $10.99 but didn't. After seeing this story, I checked Amazon MP3 and found the same one for $8.99!
I've never bought MP3's or albums from Amazon before. I buy books and other stuff. I never really thought of comparing prices for music, but after seeing how well they integrate with iTunes I will be shopping there from now on!
I've never bought MP3's or albums from Amazon before. I buy books and other stuff. I never really thought of comparing prices for music, but after seeing how well they integrate with iTunes I will be shopping there from now on!
Guess this is why you are a lawyer and not a business man.
Citi, your analysis makes no sense either. 30% of an $11 album on itunes is $7.70 to the record company vs. the daily deal on Amazon for the same album at $5.99. So, even if amazon lost money on the sale (Giving all of the proceeds to the record company is a loss to amazon for hosting, maintenance, marketng, and credit card processing), the record companies still take home more profit under Apple for that same album selling at $11 on the iMS.
Both of you are throwing out this 30% number as if sucking it up and making no $$ on Apple's end solves all problems. Amazon is selling an album at $5.99 and Apple has it for $11. Amazon's price is about 45% less than Apple's. So even if Apple was taking a 30% cut, they would have to sell at a loss to equal these daily deals. There lies the problem.
That is their standard transaction rate. APPS, Music and soon to be books
I also do not think amazon is selling these Daily deals for no $$$ or in fact a huge loss. What is the incentive? In the case of the eBooks, it's to sell the hardware (Kindle). Not the case in terms of music. Amazon has no incentive. The record companies do though.
Keeps people coming back...
I also do not know where the 30% number comes from. Even if it is, the PROFIT is not 30%. I have found an old analyst's report that talked apple's revenue on music sales. For each .99 song the record companies take .65 for each sale. But, Apple has expenses such as server hosting, marketing, maintenance of the iMS, Not to mention the constant updating of iTunes software across both Mac & windows platroms, credit card processing of approx .25 per transaction and a fee of approx 2-3%. As a business that takes credit cards, this can be even upwards of this if users are using rewards based cards. Apple tries to keep this low by grouping all transactions purchased within a day. The "profit" was more in the range of .10 per song.
That has nothing to do with label profit. If it takes 29 percent out of the 30 percent so be it. That has nothing to do with this. Neither does itunes for windows and mac. They wanted to be in this business, and I guarantee you, their operating costs are considerably lower now. CC transactions, really? You don't think they negotiated a much lower rate? As i said in another post, itunes was made to sell ipods. They are selling ipods. It doesn't matter who they buy from as long as an ipod gets sold. Now if Amazon makes a real portable media player, that's a different story.
None of this has anything to do with the percentage that Apple makes or takes per song as stated above. It has to do with the record companies allowing Amazon to sell the albums/songs at a much lower rate than they will allow on the iTunes Music Store period. In normal business the business that sells more of your product(s) get the better price, not the other way around.
Who forced the labels into this pricing structure? Apple. Now it's biting them in the a$$
Others have hit the nail on the head. Once Sales volume increases significantly on Amazon, the record companies will pull the plug. At that point, record companies will be free to raise prices and have more control since their distribution is not being dictated by a majority "distributor". Apple has been the one trying to keep pricing low and the record companies are not happy. This is also the reason why movie & TV studio's are reluctant to bring more content and lower pricing to Apple. They fear that this will drive pricing downward due to Apple being a dominat player.
I guarantee you the Label is still recouping cost. They may not have a high profit margin like in Apples model, but making more money than you think
Thanks MacRumors for posting this story. Thanks Apple for being such a baby. I was going to purchase an album from iTunes this past weekend for $10.99 but didn't. After seeing this story, I checked Amazon MP3 and found the same one for $8.99!
I've never bought MP3's or albums from Amazon before. I buy books and other stuff. I never really thought of comparing prices for music, but after seeing how well they integrate with iTunes I will be shopping there from now on!
exactly, most people don't even know that Amazon sells music, let alone at a cheaper price. I have been a happy Amazon mp3 consumer for 2 years. I don't barely buy any music from Apple anymore because I need to be able to use the music in any way I see fit. The first time, not after I had to reup for the drm free copies.