Apple Pressuring Music Labels Over Participation in Amazon's 'Daily Deal' Program

[ItsGavinC]

Boo hoo...Apple's crying because there's competition.

Not exactly. They are crying because a supplier is allowing cheaper prices to be charged by the competition.

What's wrong, you wouldn't like cheaper iTunes prices? Sheesh. I appreciate the Amazon prices and would like similar prices on iTunes. That's my consumer stance.

 

[ItsGavinC]

Probably because Apple is always sueing someone. Probably because Apple has become a complete a**hole-company. Probably because the first underlines the latter.

<sigh>. You are right, Apple shouldn't even try to protect it's IP. Suing somebody makes you the bad guy. Nevermind if the court determines the other party is guilty.

 

[TennisandMusic]

So you don't read the thread, then complain that you don't understand the arguments being made. *Sigh*

<Wait for retort about being "too busy to read the entire thread">

Okay. Let's break it down for you.

When a monopoly -- the record industry -- practices price discrimination by giving unfair competitive advantage to one retailer over another it prevents the free market from working because that monopoly is pre-determining who the vendor of choice will be. THEY are choosing, not the consumer. It's not about Amazon wanting to give a better deal to the consumer, or providing a better experience -- it's literally the monopoly allowing Store A (amazon) to sell a product for 1/3 of the price of Store B (Apple in this cases). Store B cannot compete.

That's not the free market. That is vertical integration. At least with Wal-Mart they have bulk purchasing that enables their negotiating power. This is the record industry directly manipulating the market.

Do you understand how that's detrimental?

Now, Apple's response, obviously, is to use their muscle to get the playing field leveled in negotiations. That's one of saying what's happening. Another way would be to say "Apple's trying to get Amazon to stop the Daily Deal". I bet Apple would love to offer the Daily Deal, too, but it all depends on what information you want to leak out and what impression you want to give, right?

That this article appeared in Billboard magazine -- a record industry mag tailored to record industry execs -- gives you a pretty good idea of which side of the disagreement leaked the info. And it wasn't Apple.

So you have the record companies leaking this info to try to hop on the anti-Apple sentiment that is going around right now, to hellp leverage their negotiating position.

And no offense, but you are falling for it.

A lot of you folks talking about how much Apple sucks for this -- and there are things they do that are unsavory, no doubt -- but in this case, you are being played by a much of corporate thugs who want nothing more than to take you for your hard-earned cash, just like they did for the last 30 years.

So wake up. Your personal hatred or love for Apple and Steve Jobs is irrelevant to this argument. It is business, and the record industry are bad guys here, and they will have no qualms about ripping away the deals you think Amazon are so great for giving you the minute they feel Apple's lost enough dominance to do so.

Couple of quick questions...how is the "music industry" a monopoly? There are several music labels/companies, and it is easier than ever to put your own music on iTunes. I know, because I have done this. Isn't that like calling the "movie industry" or the "computer industry" a monopoly? Of course the "industry" is a "monopoly" of a certain market.

Second, are you sure your interpretation of events is correct? Apple is the unfairly maligned one here? We have no certain idea how Apple interacts with their music partners, outside of known business practices. I have a suspicion they aren't well liked. If Amazon can negotiate better deals with the music industry, how is that not ok? Do you REALLY think Apple wants to have lower priced music specials, and free music offers? Really? Can you point to a single example of them wanting to do that sort of thing for customers lately? It seems much more likely that Apple is just crying over their spilled milk. Notice Apple didn't say "Please let us do these deals too!", it was more like "keep doing this and we are cutting you off." If I wanted something, I would ask for it, not threaten for someone else to stop.

Secondly, if this is purely about corporate "thugs" trying to get our money, why is the issue the availability of lower priced and free goods? Wouldn't the "thugs" in this case have to be the company with the higher prices threatening the other one to stop giving away such value?

I am not saying you are wrong, but I think there are two sides to the coin of course. I don't think Apple is being screwed here, Jobs is notorious for his way or the highway type thinking. There is reason to think Amazon just treated their partners with more respect and therefore get better deals. Deals which Apple is unable to negotiate because of their selfishness, and pig headedness. Nothing for certain of course, but isn't it at least possible it happened this way?

 

[RidleyGriff]

Thanks for the explanation! Perhaps next time when someone asks a question politely, and adds winky emoticons next to their light hearted jabs at apple, you could take the time to get off your high horse before replying.

See how easy it is to reply nicely?

Damn. You know, I did misread the tone of your post -- perhaps a disadvantage of following this thread all afternoon -- but that's not really any excuse. Thanks for calling me out -- this is obviously an issue I'm extremely passionate about, but no reason to ride off the rails about it.

 

[Erwin-Br]

Maybe Apple should go back to the Apple History Book of the early 90s and see that the same crying and acting like a baby and threatening their business partners (aka: biting the hand that feeds you) almost put the company out of business.

I swear Apple never learns when it comes down to business practices. I'm not talking about product development.


-Eric

Funny you mention that. I just saw a show on YouTube where Steve Jobs admits Apple never was good at partnering with other companies.

Transcript: (http://d5.allthingsd.com/20070531/d5-gates-jobs-transcript/)

Steve: You know, because Woz and I started the company based on doing the whole banana, we weren’t so good at partnering with people. And, you know, actually, the funny thing is, Microsoft’s one of the few companies we were able to partner with that actually worked for both companies. And we weren’t so good at that, where Bill and Microsoft were really good at it because they didn’t make the whole thing in the early days and they learned how to partner with people really well.

And I think if Apple could have had a little more of that in its DNA, it would have served it extremely well. And I don’t think Apple learned that until, you know, a few decades later.

I'd say Steve needs to reflect and think about what he's doing lately. Back to the basics, Steve!

 

[MorphingDragon]

total bs, you guys forgot so quickly why NBC pulled out from iTMS last year?

because Apple controls the price and refuses flexible pricing proposed by the labels, which is exactly what amazon is doing!

unfair? not from labels, but from fanboys.

I would take more credit to your statement if the Record labels actually used the lower prices in Apple tiered pricing plan.

Everything $2.99($1.29) Not if ands or butts.

 

[TennisandMusic]

I would take more credit to your statement if the Record labels actually used the lower prices in Apple tiered pricing plan.

Everything $2.99($1.29) Not if ands or butts.

How do you know this isn't a result of the margins that Apple wants? That makes a difference of course. For the labels, they want a certain return on their investments. If Apple makes it harder to do so as a result of the pricing structure, in their view, they don't have much choice. There are several factors that go into this kind of thing...

 

[MorphingDragon]

How do you know this isn't a result of the margins that Apple wants? That makes a difference of course. For the labels, they want a certain return on their investments. If Apple makes it harder to do so as a result of the pricing structure, in their view, they don't have much choice. There are several factors that go into this kind of thing...

Yes but the only songs Ive seen in the lower pricing is 20 year old country music!

Remember, amazon has a commission too.

 

[TennisandMusic]

Yes but the only songs Ive seen in the lower pricing is 20 year old country music!

Remember, amazon has a commission too.

Maybe no one is buying 20 year old country music and therefore they must price it really low? I've seen older jazz being cheap as well.

Amazon having commissions is exactly the point. Do we know what they are? That is not rhetorical btw. I would guess there is a GOOD chance Amazon wants less, and therefore the record companies allow the goods to be sold for less, since their cut would be the same or similar. Also lower prices would breed higher sales.

I can fully see Apple "wanting" to price things lower, but because they want a high cut of things, the record labels can't "afford" to put their stuff out at the cheaper levels.

 

[ericinboston]

Not exactly. They are crying because a supplier is allowing cheaper prices to be charged by the competition.

That's what I implied...and that's what competition always implies (cheaper prices)...competition also implies other points like better products and availability.

I'm all for cheaper prices for anything in this world.

Apple's just being a big baby about it. It's called competition...and if Apple doesn't like competition then they might as well close their doors. Business 101 that competition will always exist.

-Eric

 

[MorphingDragon]

Maybe no one is buying 20 year old country music and therefore they must price it really low? I've seen older jazz being cheap as well.

Amazon having commissions is exactly the point. Do we know what they are? That is not rhetorical btw. I would guess there is a GOOD chance Amazon wants less, and therefore the record companies allow the goods to be sold for less, since their cut would be the same or similar. Also lower prices would breed higher sales.

I can fully see Apple "wanting" to price things lower, but because they want a high cut of things, the record labels can't "afford" to put their stuff out at the cheaper levels.

But we dont know either of the commission percentages so we have no clue what to assume.

 

[TennisandMusic]

But we dont know either of the commission percentages so we have no clue what to assume.

Exactly, but you can use deductive reasoning. Seeing how Apple and Amazon publicly conduct themselves, and seeing as how Amazon is all about low prices, and Apple is all about high prices, why would anyone assume that for some reason the music industry is colluding with Amazon for...low prices? It doesn't really make sense. The industry wants to sell songs. iTunes is still the most popular online model. If they felt they would make more by lowering prices at iTunes, they would do it. There must be some reason that stops them from allowing Apple to sell at lower prices, but what could it possibly be? There really aren't many choices. The obvious one is margins.

Now of course this could be patently wrong, but I tend to think it would be closer to the mark than thinking that Apple is being picked on by the Music Industry and Amazon bullies. I mean when you look at the bigger picture of what these companies are like, I just don't see it...

 

[MorphingDragon]

Exactly, but you can use deductive reasoning. Seeing how Apple and Amazon publicly conduct themselves, and seeing as how Amazon is all about low prices, and Apple is all about high prices, why would anyone assume that for some reason the music industry is colluding with Amazon for...low prices? It doesn't really make sense. The industry wants to sell songs. iTunes is still the most popular online model. If they felt they would make more by lowering prices at iTunes, they would do it. There must be some reason that stops them from allowing Apple to sell at lower prices, but what could it possibly be? There really aren't many choices. The obvious one is margins.

Now of course this could be patently wrong, but I tend to think it would be closer to the mark than thinking that Apple is being picked on by the Music Industry and Amazon bullies. I mean when you look at the bigger picture of what these companies are like, I just don't see it...

They might want to break away from Apple.

 

[RidleyGriff]

Couple of quick questions...how is the "music industry" a monopoly? There are several music labels/companies, and it is easier than ever to put your own music on iTunes. I know, because I have done this. Isn't that like calling the "movie industry" or the "computer industry" a monopoly? Of course the "industry" is a "monopoly" of a certain market.

Hi there. I'm definitely shorthanding here; there has been a lot of suspicion that the Big Four have colluded over the years vis a vis CD price fixing, and now digital price fixing. Not technically a classical "monopoly" from a consumer perspective, but from a corporate reseller perspective (like Apple or Amazon), I think the term is apt. I'm sure we can agree on a term while agreeing their business practices aren't in the best interests of consumer, recording artist, or reseller, however.

Second, are you sure your interpretation of events is correct? Apple is the unfairly maligned one here? We have no certain idea how Apple interacts with their music partners, outside of known business practices. I have a suspicion they aren't well liked. If Amazon can negotiate better deals with the music industry, how is that not ok? Do you REALLY think Apple wants to have lower priced music specials, and free music offers? Really? Can you point to a single example of them wanting to do that sort of thing for customers lately? It seems much more likely that Apple is just crying over their spilled milk. Notice Apple didn't say "Please let us do these deals too!", it was more like "keep doing this and we are cutting you off." If I wanted something, I would ask for it, not threaten for someone else to stop.

Obviously, we're all reading tea leaves to a certain degree, but there are some things we do know for a fact, that allow us to make some conclusions.

1) Apple is a hardware company, and they make handsome profits from their hardware. Music sales and app sales are a miniscule element of their bottom line, and serve primarily to add value to their hardware platforms.

2) The more songs the average consumer buys through iTunes -- even DRM free songs that can play anymore -- the more likely they are to stay within the Apple ecosystem when it comes to their music player, or phone, etc. Call it laziness lock-in.

3) We know that Apple came up with the 99 cents concept, and was trying to hold onto it all the way up until January of 2009, where they finally had to cave to tiered pricing or Warners was going to walk.

4) Tiered pricing gave the labels the ability to set what content cost what, and what that has turned into is $1.29 for almost all popular music.

This tells me that Apple wants to keep song prices as low as possible to keep the sales flowing, because that investment will translate into people staying on their platforms. Raising song prices doesn't help Apple in any appreciable way. They make $15 Billion a quarter; music's been estimated at something like $100M a year for them -- and that's just their entire gross 30%. It's not a money maker for them.

Which is of course why they're not liked by the record labels -- and I don't disagree with you that they're very likely despised. The record labels had a sweet thing going for years, until the internet ruined everything. And then Apple came along and found a way to monetize it, and built up a huge brand to boot. The record labels, as I'm sure you remember, tried to get their own downloading services going, and couldn't. Apple had been the only game in town.

So the labels have been investing in Amazon as a competitor. I don't think that this is a matter of Amazon negotiating better deals because as some people have pointed out, the disparity between prices is too high. Apple sells an album on day of release for 9.99, Amazon has it the day before for 2.99. One of two things is happening -- Amazon is either getting the album for less from the label, or they are taking a huge bath on each and every sale.

Amazon has no incentive to take a bath in this market. They own the CD market, and unlike with ebooks, where they are trying to build up the Kindle, they're not offsetting their loss with anything. The only other option is that these low prices are being subsidized by the labels themselves. And the only reason the labels could have for doing that, would be to try to wrest market control away from Apple.

Secondly, if this is purely about corporate "thugs" trying to get our money, why is the issue the availability of lower priced and free goods? Wouldn't the "thugs" in this case have to be the company with the higher prices threatening the other one to stop giving away such value?

I'm going to address your points in reverse order;
Wouldn't the "thugs" in this case have to be the company with the higher prices threatening the other one to stop giving away such value?

This is one that is really hard to know without being there, but let me suggest this: If Apple is negotiating with the labels, and says "You are giving an unfair advantage to Amazon", I could then run and say "Apple is trying to get the labels to stop the Daily Deals", couldn't I?

On the other hand, I could also look at the same negotiation and say "Apple is trying to get the same rights for the iTMS as Amazon has." A matter of perspective.

Once again, I'm not saying that this is what is happening, I'm just playing Devil's Advocate. As I said up above, this story was leaked to Billboard -- a music industry magazine -- so I think it is quite fair to be suspicious of the framing presented.

Secondly, if this is purely about corporate "thugs" trying to get our money, why is the issue the availability of lower priced and free goods?

To put it bluntly, it's a bait and switch. Apple has every interest in keeping music prices as low as possible for the consumer. The record labels do not. (Amazon does too, as well, but they'd be just fine if the de facto standard for songs was $3 or $1. They'll just be on parity with everybody else).

If we agree on the premise that the labels are giving Amazon a leg-up to help break iTunes dominance in the marketplace, everything follows from there.

I am not saying you are wrong, but I think there are two sides to the coin of course. I don't think Apple is being screwed here, Jobs is notorious for his way or the highway type thinking. There is reason to think Amazon just treated their partners with more respect and therefore get better deals. Deals which Apple is unable to negotiate because of their selfishness, and pig headedness. Nothing for certain of course, but isn't it at least possible it happened this way?

I could very well be wrong, and Jobs is obviously a total hothead. Would love to listen in on some of the negotiations he is part of. I'm sure looking back at this era there will be a lot of lessons learned in the way certain companies and industries acted and reacted. But I will say that I don't have a lot of faith in terms of good business practices from the recording industry.

And when it comes to Amazon, I think one only needs to look as far back as they way they treated Macmillan when Macmillan wanted to negotiation different terms for ebooks to see how ruthless Amazon is. I use their service all the time, but they are as hardcore as WalMart when it comes to leveraging their buying power against suppliers. They are no angels. Neither is Apple. (And, just to close the loop on all the Apple hate, neither is Google. LOL.)

 

[gnasher729]

Exactly right. Apple is behaving appallingly in this case by abusing their monopoly.

And here I was thinking that the record companies had been using their monopoly for a very long time to force Apple to sell music with DRM while Amazon was allowed to sell the same music without DRM, and they are using their monopoly to damage Apple sales by selling the same music cheaper to Amazon than they sell it to Apple.

And Apple says: Well, no free advertising and marketing for you if you sell the same music to Amazon at half the price. And that is somehow Apple "abusing your monopoly"?

 

[diabolic]

And Apple says: Well, no free advertising and marketing for you if you sell the same music to Amazon at half the price. And that is somehow Apple "abusing your monopoly"?

It's called leverage. And since Apple has nothing close to a monopoly here, there is no anti-trust issue at all.

 

[gnasher729]

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.

This is about the most irrational thing you could have written.

So the record deals [sic] gave Amazon a better deal and that is called capitilism [sic]. And Apple tells the record companies: No free advertising if you give Amazon a better deal. But according to you, that isn't capitalism, that is being "crybabies".

And if Apple is supposed to take a cut of 30% off a $1.29 song, and Amazon sells the same song for $0.49, how can Apple match that price by reducing their percent [sic] of revenue? Your suggestion that "[t]he 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 [sic]" would of course get them severely punished for anti-competitive behaviour. But I don't think you understand the difference between competing and being anti-competitive.

And I somehow think that the expression "having balls" doesn't mean what you think it means.

 

[jragosta]

How do you know this isn't a result of the margins that Apple wants? That makes a difference of course. For the labels, they want a certain return on their investments. If Apple makes it harder to do so as a result of the pricing structure, in their view, they don't have much choice. There are several factors that go into this kind of thing...

Exactly, but you can use deductive reasoning. Seeing how Apple and Amazon publicly conduct themselves, and seeing as how Amazon is all about low prices, and Apple is all about high prices, why would anyone assume that for some reason the music industry is colluding with Amazon for...low prices? It doesn't really make sense. The industry wants to sell songs. iTunes is still the most popular online model. If they felt they would make more by lowering prices at iTunes, they would do it. There must be some reason that stops them from allowing Apple to sell at lower prices, but what could it possibly be? There really aren't many choices. The obvious one is margins.

Now of course this could be patently wrong, but I tend to think it would be closer to the mark than thinking that Apple is being picked on by the Music Industry and Amazon bullies. I mean when you look at the bigger picture of what these companies are like, I just don't see it...

You could be patently wrong AND YOU ARE.

Apple's pricing scheme is public. Apple gets 30% of every sale (gross). The label keeps the rest - and pays the artist from their portion. At one time, Apple dictated the song prices, but they no longer do so - the song prices are set by the labels. Apple widely reports that the iTMS is not very profitable as revenues barely cover distribution and marketing costs.

So, the labels set the iTunes selling price. Apple keeps a fixed percentage. All of your hypotheses are therefore false - and you would have known that if you had taken even a moment to look.

The labels drive the pricing - and are allowing Amazon to sell for less than Apple has to pay the label. There is absolutely no way in the world to explain that as Apple being greedy and keeping too much of the margin split.

 

[Fukui]

The two main things that bother me about Apple are:

1. Apple's reliance on legal action as the main method of maintaining their competitive advantage.
2. Steve Job's hypocrisy, especially when it comes to Apple's recent lawsuit against HTC where he was quoted as he didn't think other companies should steal their ideas.

That's a pretty different tune from what Steve Jobs was singing in 1996.

"At Apple, we've always been shameless about stealing ideas we thought were cool." -- Steve Jobs in the 1996 PBS documentary Triumph of the Nerds.

Little bit of a double standard there Steve?

Um, patents aren't ideas, they're methods. He said that and I quote, "stealing our technology." Tech != ideas.

...not that apple/steve isn't acting like a crybaby in any case. BUT, if HTC is copying their implementation (patent) then they have every right to sue... otherwise, whats the point of getting a patent? (note i'm not saying apples patents in this case stand up as defensible)

 

[Imola Ghost]

I won't buy any of iTunes music until the offer LOSSLESS audio. So, why doesn't Apple instead of moaning, offer up something that other people aren't. They'll win some customers back.

 

[jragosta]

I won't buy any of iTunes music until the offer LOSSLESS audio. So, why doesn't Apple instead of moaning, offer up something that other people aren't. They'll win some customers back.

Yeah, they might win back both people who demand lossless audio.

 

[charlituna]

It's called competition Apple, get over it. They seem to be losing it more and more everyday.

The catch is that it's not fair competition.

The whole notion of Street Dates was so that everyone sold an album, movie, book starting at the same time. That way no one could grab sales by having it before everyone else.
But that is exactly what this daily deal thing is doing. Amazon is getting an earlier release date on items. Grabbing sales while everyone else has to sit on their hands and wait.

THAT is what has Apple pissed. Either hold everyone to the same date or drop the very idea of street dates

That's exactly what Microsoft did. And guess what? It's called unfair competition, and they got fined big time.

this is NOTHING like what Microsoft did.

Microsoft got in trouble because they used their 90%+ share in the OS market to push their failing IE web browser on folks unfairly. They refused to give needed OS information to other companies to develop browsers, threatened to sue them if they did any reverse engineering and made OEM licensees not only put IE on all computers but forbade including any other web browsers.

What Apple is doing here is nothing like that. They are not using any market power to force anything. They have gone to the labels over the issue of the early releases on Amazon etc and merely said that if they choose to participate in the Daily Deal, itunes prime ad space will go to other titles (spreading the wealth if you will). Unless they are willing to give Apple the same date and/or pricing as Amazon. So that the competition is fair.

 

[Darkroom]

So let's see if we can get this timeline straight....

1) Music industry is dying due to piracy.

2) Apple steps forward with iPod/iTMS and makes downloadable music a legitimate business.

3) Record labels are upset that the net result of their screw-ups is the Apple brand being emphasized over their own.

4) Record labels support Amazon as rival over iTunes in order to combat this.

5) Apple gets annoyed at record label's tactics and undercutting of Apple's position; pushes back.

6) Amazon/Labels leak info to press.

7) Tech community jumps up and down about how evil and anti-competitive Apple is, when what Apple is doing is actually the very definition of competition. Complainers also are unable to comprehend they are doing exactly what the record labels want them to do.

Did I leave anything out?

let's rewrite this, shall we?

1. music industry is dying due to piracy.
2. apple sees an amazing business opportunity. sells music on iTunes to drive iPod sales. doesn't even come close to thwarting piracy.
3. record labels still aren't making as much as they use to because of piracy.
4. amazon wants to add music to their book store. record labels want to make money so they agree.
5. Apple, thinking they were a god send to every human being on earth, throws around terms like "traitor" and "betrayal" while doing business, then cries themselves to sleep while sucking their thumb.
6. amazon and labels are all "wtf is that about? bitches in couptown be tripp'n"
7. tech community is all "wtf is that about? bitches in couptown be tripp'n"

 

[marksman]

It's not true competition. The labels are price discriminating against Apple to prop up Amazon MP3.

Yet, they want Apple to promote the same albums and artists on the iTunes Store. You can't blame them for wanting the same deal.

Yeah this is basic business. If a supplier is giving a competitor an advantage of you, then you ask for things to be changed to be either equal or in your favor.

You don't just sit there and say, "Oh well, Amazon got a better deal than us, too bad for us."

That is not how people in successful businesses run them nor is it how they deal with suppliers.

If you were in charge of that for Apple the first question you would have after the first deal of the day showed up, is "Why do they have this product cheaper than us and before us?"

What Apple is doing is what any smart and well-run business would do, and that is to protect their business and go after potential advantages of competitors.

 

[MorphingDragon]

let's rewrite this, shall we?

1. music industry is dying due to piracy.
2. apple sees an amazing business opportunity. sells music on iTunes to drive iPod sales. doesn't even come close to thwarting piracy.
3. record labels still aren't making as much as they use to because of piracy.
4. amazon wants to add music to their book store. record labels want to make money so they agree.
5. Apple, thinking they were a god send to every human being on earth, throws around terms like "traitor" and "betrayal" while doing business, then cries themselves to sleep while sucking their thumb.
6. amazon and labels are all "wtf is that about? bitches in couptown be tripp'n"
7. tech community is all "wtf is that about? bitches in couptown be tripp'n"

I only buy music because I want the Wav quality not 256KBPS MP3/AAC music. I might consider online sales if they made 320KBPS VBR .OGG.