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.)