Apple vs Music Industry on Song Pricing

MacRumors

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Businessweek recaps the recent exchanges between Steve Jobs and Edgar Bronfan - chief executive of Warner Music. At the heart of the matter is the debate between fixed $.99 pricing for music downloads vs a tiered model.

"There's no content in the world that has doesn't have some price flexibility," Bronfman pointed out. "Not all songs are created equal. Not all albums are created equal."
Steve Jobs has insisted that the $.99 price point is appropriate and feels that higher pricing will turn consumers back towards piracy.

Businessweek reports that Apple's licensing agreements with the Music Industry runs out in early 2006. Apple may continue to hold the advantage in these licensing negotiations as it cements its hold on the music player market. Meanwhile, Apple's recent entry into the Flash-based MP3 player market with the iPod nano may provide it with an even wider lead.

Apple's lock on large quantities of flash at a substantial discount will make it difficult to other companies to compete, and provide Steve Jobs and Apple the leverage to keep music prices where they are. Apple is rumored to be securing more flash supplies with a deal with Hynix Semiconductor.

The new flash memory from Samsung is a new Multi-Level Cell type which is 30-40% cheaper than the more common SLC type that many competitors use. Samsung defends its established deal with Apple:

It’s true that the company that has the largest market will have the edge. Buying 100 units and buying one can’t be same.
 

revjay

macrumors regular
Nov 25, 2004
160
0
Beautiful Vancouver Island
tiered pricing won't be that bad

Macrumors said:


Businessweek recaps the recent exchanges between Steve Jobs and Edgar Bronfan - chief executive of Warner Music. At the heart of the matter is the debate between fixed $.99 pricing for music downloads vs a tiered model.



Steve Jobs has insisted that the $.99 price point is appropriate and feels that higher pricing will turn consumers back towards piracy...
:
I'm okay with this...

...as long as $.99 is the high end of the pricing scale!
 

rendezvouscp

macrumors 68000
Aug 20, 2003
1,526
0
Long Beach, California
With the contracts running out, what would happen if the record labels decided to not renew because of their disagreement? Would we really see a great loss of music in the iTMS?
-Chase
 

HiRez

macrumors 603
Jan 6, 2004
5,805
1,700
Western US
Tiered pricing, sure. So they think songs are worth more than others, fine. Anyone want to guess how many "bad" songs are priced below 99¢? I'm going to guess zero. Scumbags are just trying to disguise/justify a price increase any way they can.

EDIT: typo...
 

m-dogg

macrumors 65816
Mar 15, 2004
1,339
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Connecticut
Hmmm, those multi-level cell type flash memory sound interesting - I wonder what the roadmap for that looks like...

how high will that flash storage capacity go? and how fast?
 

Will_reed

macrumors 6502
May 27, 2005
291
0
yes this really is Just a case of the music labels being greedy. they didn't care about this when the itms opened did they but now that its the biggest out there they want variable pricing etc. I think that It should stay 99c a song If they moved up the price I doubt people would react well to it.
 

AoWolf

macrumors 6502a
Nov 17, 2003
956
0
Daytona Beach
These guys don't get it. Free vs 99 cents is hard enough to keep up, but free vs a dollar two dollars? If this happens online piracy will take off again.
 

mkjellman

macrumors regular
Oct 14, 2003
158
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Jobs doesn't really have much leverage against them. No matter how popular the iPod is the iTMS isn't the iPod and its still a small blip on the map for the total number of music sales.

Jobs is a very persuasive speaker and we all hope he can because 40% of computer users will have iPods by 2008 I think if the current trend stays true. (Read that somewhere)

I love the fixed price model, and its great for indie bands, because everyone for the first time is equal. Thats great and is putting more people on the map. I know as someone who has bought 1000 songs on iTMS since it opened, it anything is greater than a $1 per song, i will use LimeWire again, and I have gone completely legal.



Its their choice.
 

fayans

macrumors 6502a
Sep 19, 2005
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MacRumors: Forums
HiRez said:
Tiered pricing, sure. So they think songs are worth more than others, fine. Anyone want to guess how many "bad" songs are priced below 99¢? I'm going to guess zero. Scumbags are just trying to disguise/justify a price increase any way they can.
Tiered pricing is OK but how do you discriminate what goes below 99cts and what goes above? Though I wouldn't mind paying more for the works of MJ.

Nevertheless, Apple will focus more on iPod sales than increasing the profitability of record companies. Will Steve Jobs win? I am leaning towards a 'fair compromise'
 

nagromme

macrumors G5
May 2, 2002
12,551
1,186
"There's no content in the world that has doesn't have some price flexibility"

What is he talking about?

Of COURSE some "content" has no price flexibility. Simple pricing is used by numerous businesses--some of them in the "content" business--and is a nice feature to attract customers. Do I pay more for some movies than others on Netflix? No. At Blockbuster (where ALL movies are "New Releases" :rolleyes:)? No. And are music downloads "the same" as other content markets anyway? No.

But Apple DOES have variable pricing. For ALBUMS. That makes sense--and some songs are tied to that by Album Only, which is additional flexibility for the record labels' desires. Nickle and diming you with micromanaged pricing per song is just making the process less appealing.

As for who has the power to "get their way," I don't know. But all Apple really has to do is be seen to be AGAINST this, and on the side of consumers, rather than "part of the problem." If Apple can't stop them (which I hope they can or I'll be spending less on iTMS), then at least they can position themselves on the right side from buyers' view.
 

jads

macrumors newbie
Nov 17, 2004
1
0
I'm in the Uk, where songs cost 79p a track and I think that's just right. If it cost any more, then people would feel inclined to go back to P2P networks. A lot of people came off them simply because iTMS was well priced, and had a simply pricing structure for tracks. If they start messing with this now, it will only lead to confusion and more people going back to P2P. Leave the pricing where it is, the record companies are making enough money as it is!
 

Chundles

macrumors G4
Jul 4, 2005
11,981
364
Money money.......MONEY!!!

OK, tiered pricing, raising the cost of songs, none of this means diddly squat to me cause we don't have the iTMS here.

You know why? Cause our record industry are a bunch of greedy mongrels who don't see the future of it came up and gave them a good kicken'. CD sales here are in the toilet and they want even more money cause it costs a lot to sue.
 

Chundles

macrumors G4
Jul 4, 2005
11,981
364
Oh, and the music rep is right when he says not all albums are created equal, most of the ones now should be about 29c US a song. Good music is very hard to come by now - all this rap and R&B sounds the same to me (boring).
 

MegaSignal

macrumors 6502
Oct 20, 2003
304
0
Here we go again

AoWolf said:
These guys don't get it. Free vs 99 cents is hard enough to keep up, but free vs a dollar two dollars? If this happens online piracy will take off again.
It is unbelievable to me that so soon after Apple came in to alleviate the music piracy problem, here comes someone from the music industry to ruin it all again. A little greed, with regard to profits will always be there, I suppose, for any industry. But COME-ON - this is completely uncalled for!

I'm sure once it's all back to piracy again, Mr. Bronfan will be one of the first to complain and whine in front of Congress for more laws, etc., etc., etc. Just couldn't leave well enough alone!
 

aLbAn

macrumors newbie
Sep 30, 2005
16
0
Netherlands
...hmm if i were to go to the movies or when i rent a video, will the price differ according to the "quality" of the movie? i think not...

would be nice to see who is getting on this committee that will grade all these songs! or if it simply means that big-selling, well-known mainstream artists will be more expensive than, say, more obscure artists, then i won't be bothered anyway :rolleyes:
 

nuckinfutz

macrumors 603
Jul 3, 2002
5,506
312
Middle Earth
The music industry hasn't a clue what to do. Apple assumed the risk of trying to legitimize large scale digital music distribution and now they want to join in with the reward. That's greed no matter how you look at it. iTMS is a great way to search for new artists. If they jack up the price of the music people will be less inclined to check new artists out.
 

onemoof

macrumors member
Jul 23, 2002
75
0
Minneapolis, Minnesota, USA
Simple Solution

The next record company to complain about ITMS pricing will be banned from selling on it for 6 months. The one after that gets banned for one year. The one after that gets banned forever and their artists are encouraged to sign with Apple Computer Music Label and sell their songs directly on ITMS where the musicians will keep 90% of the profits.
 

~Shard~

macrumors P6
Jun 4, 2003
18,388
42
1123.6536.5321
Good for Seve Jobs for sticking to his guns - I think a price increase or teired pricing is a horrible idea and would indeed turn a lot of people back to piracy. Who dtermines what songs are of greater value than others? Music is such a subjective thing, there are an infiinite number of ideas out there of what is "good music" and what is "bad music".
 

technocoy

macrumors 6502a
Sep 4, 2002
765
0
Raleigh, NC
this is BS...

first they brought out CDs spewing about how they were going to be cheaper than cassettes and better sound quality since they are cheaper to produce.

LIE

then iTunes basically ushers in the REAL age of online music for the bastards and we all deal with a lower sound quality for the convenience and fun of having the music at our fingertips, not to mention the feeling that come along with browsing and discovering new music.

if they raise prices, it starts to defeat the purpose, as you will then be paying as much or more than a CD that you can go get and rip at high quality and then send it to all your friends..

I will go back to P2P if these immoral, scheming, lying bastards screw this business model. GOD, i HATE the industry...

right now the quality, price, and ease of use all converge just right, if they screw with it, it's over...

they are only screwing themselves... it's only a matter of time anyway before every musician learns how to do there own production and just does it all online anyway...

goodbye dinosaurs.
 

shamino

macrumors 68040
Jan 7, 2004
3,386
130
Purcellville, VA
HiRez said:
Tiered pricing, sure. So they think songs are worth more than others, fine. Anyone want to guess how many "bad" songs are priced below 99¢? I'm going to guess zero. Scumbags are just trying to disguise/justify a price increase any way they can.
That's exactly it. It's incrementalism. First they say "we want to charge a little more for only the most popular new releases", then all new releases, then everything. And before you know it, all songs are $1.75, with some as high as $5.

It's already happened in other markets.

Those of you old enough to remember records and cassettes should also remember their prices. New releases were typically $10-12, with older material at $5-7.

Then the CD was invented. Even though the manufacturing cost for a CD was comparable to that of a record, and less than that of a cassette, they were selling CDs for $16 each. At first they said it was because they had to make back the cost of buying all new manufacturing equipment. But that was 20 years ago. Today, CDs are even more expensive than that - $18 each, if you pay MSRP.

Today, when you complain, and point out that the manufacturing cost for a CD is less than $1 (just as it was 20 years ago), they'll say that they need to pay their artists and such, but it's all a crock. All you have to do is look at the wholesale prices and you realize that they cost so much because each stage in the distribution channel is charging a 100% markup to the next stage, which they were never able to get away with for cassettes and records.

20 years of history has taught the music industry that they can charge whatever the heck they want, and people will keep on buying because they have no other choice.

And this is why they're so paranoid about file sharing and iTMS. These technologies are giving customers an "other choice". So they need to eliminate the competition (by suing file sharers and demanding that Apple price itself out of business.) This way, they can once again be the only game in town and have total control. (And then they can start charging $25 for CDs as punishment for our disturbing lack of faith.)
 

onemoof

macrumors member
Jul 23, 2002
75
0
Minneapolis, Minnesota, USA
Theoretically music prices are based on supply and demand. On the Internet the supply is infinite so prices should plummet. If songs were 50 cents each I would probably buy more than twice as much as I do now, thereby increasing record company total profits.
 

shamino

macrumors 68040
Jan 7, 2004
3,386
130
Purcellville, VA
onemoof said:
The next record company to complain about ITMS pricing will be banned from selling on it for 6 months. The one after that gets banned for one year. The one after that gets banned forever and their artists are encouraged to sign with Apple Computer Music Label and sell their songs directly on ITMS where the musicians will keep 90% of the profits.
And how will the artists be able to sign without breaking their contracts with their record label?

And how will they record their music without the label? Apple doesn't have a network of studios, recording engineers and producers. Most bands don't produce their own albums and don't have the money to finance production without a record company to provide the services (in exchange for getting screwed in the contract, of course.)

And I can guarantee that Apple Records would sue Jobs for a trillion dollars if they started doing this! And in this case they'd be absolutely right.

Hey, now there's an idea. Maybe Apple Computer should buy out Apple Records and use them as the division that signs bands and produces recordings.
 

shamino

macrumors 68040
Jan 7, 2004
3,386
130
Purcellville, VA
onemoof said:
Theoretically music prices are based on supply and demand. On the Internet the supply is infinite so prices should plummet. If songs were 50 cents each I would probably buy more than twice as much as I do now, thereby increasing record company total profits.
You'd have to buy more than twice as much to keep their profits identical.

Part of the cost of every download includes a fixed amount of overhead (e.g. the bandwidth to transmit the song, accounting, billing, etc.)

Suppose a 99 cent song is 75 cents profit and 24 cents overhead. Now you now reduce the price to 50 cents, you now have 26 cents profit and 24 cents overhead. In order to make the 75 cents profit you made before, you have to sell three songs at the new price, not two.

If they lowered their price by 75% (25 cents per song), they'd be making only one cent profit per song, meaning they'd have to sell 75 songs to make the money of one song at 99 cents, not four, as you might otherwise think.