Apple vs Music Industry on Song Pricing

[PretendPCuser]

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 Apple will once again be sued by what's left of the Beatles (whom they've had a long history with), going back to when Apple tried to include a microphone with their computers.

Or was this actually finally resolved? Anyone know? Paul? Ringo? Yoko?

 

[shamino]

And Apple will once again be sued by what's left of the Beatles (whom they've had a long history with), going back to when Apple tried to include a microphone with their computers.

Or was this actually finally resolved? Anyone know? Paul? Ringo? Yoko?

Definitely not resolved. Every time Apple comes out with another music-related product, they get sued again, and pay more money and sign yet another consent agreement.

I'm wondering how much longer it will be before Apple Computer just decides to buy Apple Records altogether, and turn it into an active record label for signing artists to iTMS. That would solve the entire problem.

 

[geeyesgee]

I'm not buying the argument for variable pricing for individual songs. This is not an issue of supply and demand because there is an "infinte" supply of downloads.

Better songs get bought more and bad songs get downloaded less. Period. How simple could that be?

Variable pricing means someone has to figure out why some songs should cost more and others less, and when a song's price should be raised or lowered because of popularity. Sounds like bureaucracy and regulation, stuff that unneccessarily costs money and someone's time.

 

[dernhelm]

Definitely not resolved. Every time Apple comes out with another music-related product, they get sued again, and pay more money and sign yet another consent agreement.

I'm wondering how much longer it will be before Apple Computer just decides to buy Apple Records altogether, and turn it into an active record label for signing artists to iTMS. That would solve the entire problem.

And it would put the entire Beetles catalogue on iTMS. But I doubt Apple records would sell out for anything less than a fortune. There are egos involved here bigger than all of us put together...

 

[szark]

And it would put the entire Beetles catalogue on iTMS. But I doubt Apple records would sell out for anything less than a fortune. There are egos involved here bigger than all of us put together...

I agree -- I think it's very unlikely that Apple would be able to buy them. But it would be an awesome combination if they did!

 

[Yvan256]

I'm wondering how much longer it will be before Apple Computer just decides to buy Apple Records altogether, and turn it into an active record label for signing artists to iTMS. That would solve the entire problem.

Would also be nice because it'd still be "Apple Records".

Though if you ask me, "records" as so yesterday.

 

[jrhone]

I agree completely. I don't work in music, but I play a few instrumments and try to keep myself informed about the tech, since it interests me.

For quite a while, I subscribed to Sweetwater Sound's InSync newsletter. (For those who don't know, Sweetwater is an equipment store, Mac dealer, and independent studio. I don't work for them, but I did buy some stuff from them several years ago.)

Anyway, their newsletter is full of all kinds of technical information about studio recordings, live performances, and all of the various audio and computer equipment that's involved. Although I don't pretend to completely understand it, I learned enough to realize that there are a lot of things that are not obvious, and that good equipment doesn't come cheap (and great equipment can cost more than some nations' entire budget.)

But I also learned that there is a lot of new tech that can be "good enough" for people on a budget. For instance, digital microphone processors that can take a less expensive (hundreds of dollars) mic and make it sound like a vintage (thousands of dollars) mic, with a pretty high degree of accuracy. It is possible to find great sounding equipment from unexpected places at much lower costs than more traditional sources, but this requires you to do a lot of homework, which may not be possible if you're a non-geek musician trying to hold down a day job at the same time.

But despite all the savings you can find, it will still end up costing tens of thousands of dollars to rig an entire studio. (Don't forget the building contractor - you can't just put equipment into a living room and expect the sound to be acceptable.) Today, I guesstimate it would cost about $50K to build a small studio. Which is better than the hundreds-of-thousands it used to cost, but it's still a heck of a lot more than what a small band can afford.

And of course, once you've got all this equipment, somebody's got to operate it while the band is playing. A geek-friend with a good ear might be able to do the job, but that's going to be a crap-shoot. A professional engineer won't come cheap.

That was my point exactly....BUT....10 years ago, you just couldnt do it. Now, its possible, but takes experience, and the proper equipment.

 

[840quadra]

I'm not buying the argument for variable pricing for individual songs. This is not an issue of supply and demand because there is an "infinte" supply of downloads.

Better songs get bought more and bad songs get downloaded less. Period. How simple could that be?

Variable pricing means someone has to figure out why some songs should cost more and others less, and when a song's price should be raised or lowered because of popularity. Sounds like bureaucracy and regulation, stuff that unneccessarily costs money and someone's time.

Great way of putting it! And I fully agree with that point!

 

[MikeAtari]

More Price Elasticity info...

I'm no Economist but:

From QuickMba.com:

Factors Affecting the Price Elasticity of Demand...

- Availability of Substitutes: the More POSSIBLE substitutes the greater the elasticity.
( This was why Steve was gently trying to point out that higher prices will bring back more illegal file sharing. There are substitutes: CD's, CD swapping, P2P networks and Sneaker net. )

- Degree of necessity or luxury: luxury products tend to have a greater elasticity. ( Music is the ultimate luxury purchase. It doesn't put food on the table, it doesn't help pay the bills, it doesn't expand your edu-m-cation in any way. if it's between the phone bill or an album purchase on ITunes, the Phone bill has to win. )

- Proportion of purchaser's budget consumed: products that take a large portion of the budget have greater elasticity.
( Here, you need to know the demographic:
13-21 year olds will drop out of the market quicker with higher prices because they ( mostly ) don't have an independent income and of that income music purchases will be a high percentage. )
( Older music lovers will have an lower elasticity because( assuming employment ) a song or album purchase will be a small percentage of their income. )
( The problem here is, the Record industry only seems to care about the 13-21 demographic. Higher prices hurt this demographic the worst, and any band that sells into this group should be DEEPLY concerned about the price structure. )

- Time period considered: Elasticity seems to be greater over the long run... ( In other words, a price increase now, may not affect sales immediately, ( long enough for the labels to claim victory ) but, will continue to drop over the course of years. )

- Psychology of price points: 99cents vs. 1.01.
( If there were an increase it probably should go up to 1.24 US. A JUST UNDER a price point looks better that AT a PRICE Point or Higher. )


Of all the points, I personally think, that the second explains the US sales problem the best. When you get NO INCREASE in minimum wage over an extended period of time, on top of 3 years of recession, you're bound to see slow sales.

Also, the MBA site doesn't take into account the general poor quality of most issued music. What the labels need to do is stress some of the basics, even start a tutorial series...

- Singers should actually learn to sing
- Writers should "get good" at the english language, the poetry of music
- Bands should actually learn to play
- Songs should have Dynamics, an interesting story or message, harmony, a solid beat, and an interesting sound.

That's just my 99 cents.

 

[MikeAtari]

Another interesting link...

I'm no Economist but:

http://www.tutor2u.net/economics/content/topics/elasticity/elastic.htm

- point 4: Habit forming goods: Goods such as cigs and drugs tend to have in-elastic demand.

So, here's where you can see where they're coming from. The "Evil Record Labels" do seem to think we are music drug addicts and will pay anything for a band's music. There are some fans that fall into that catagory, and those exec that believe that ALL FANS fall into this catagory are BOUND TO MAKE ILL-INFORMED pricing decisions. But, their sales won't fall to ZERO. So, they may start a un-stoppable train of disaster, with continuous price increases in an attempt to make up for the falling number of fans buying their product. Hopefully, it's not your band with management of this kind...

 

[Sdashiki]

I didnt meant to imply not paying for music is the only way to go.

IMO dl songs you want, pay for music you want.

So yes spending $1 on ITMS is a good thing if its band you love. And most likely youll go out, like me, and buy the album because it feels good to "own" a physical CD and case and liner notes than an mp3 or two on your hard drive.

Though I dont think its such an immoral thing to DL a classic rock song I cant get out of my head. Listen to it, make a few mix CDs including it. Toss the MP3 forever, and then eventually throw away the mix CD in favor of a newer one.

ONLY downloading music is a pretty messed up thing to do, just read some of the posts here, eventually the music industry would "collapse" and all the music you got for free would go away and be no more. That sucks.

While I dont like the bully RIAA etc, I understand the musicians need for recognition in the form of record sales.

 

[Super Dave]

Translation

Steve Jobs said:
If the price goes up, they (consumers) will go back to piracy and everybody loses.

Steve Jobs means:
If the price goes up, the (consumers) should go back to piracy, and you the music industry will continue to lose, while we at Apple will continue to sell iPods by the boatload. It would be convenient if we here at Apple could enlist your help in locking people into the (buy an) iPod->(load it with music from) iTunes Music Store-> (have no choice for your purchased music but to buy another) iPod loop. But, quite frankly before our current customers find a way out of that loop, you'll be crying back to us for regular pricing and finding a way to patch up your messed up relation with the consumers once again. Oh, and did I mention that I sell 6% of your music for you, and that percentage is growing quickly? How are your artists going to feel about you screwing over their sales? Oh wait. I win. End of discussion.

David

 

[Loge]

And it would put the entire Beetles catalogue on iTMS. But I doubt Apple records would sell out for anything less than a fortune. There are egos involved here bigger than all of us put together...

Why would they pay over the odds to put the catalogue on iTMS when anyone who want it can just buy the CDs?

 

[whiteg]

Thinking Backwards

oooo

 

[shamino]

Instead of thinking like victims (I can't afford this music so I'll steal it if they increase the price), why not think like leaders: if there were higher price points for music, more people would be inclined to spend more time making music, and spend more time making better music.

Except that the industry doesn't work that way.

If you doubled or even tripled the price of music, the musicians would not see a penny more than they're getting now (which is virtually nothing.)

100% of money earned from music sales goes to the label. The musicians theoretically get a few cents for each CD sold (and much less for downloads), but they don't even see that, because it all goes to pay back the hundreds of thousands of dollars they owe the record label for producing and promoting the music.

Maybe if there was a decent price point musicians that had no interest in touring would consider putting out records.

Not if they contract with a label. You can charge $5 per song or $100 per CD, and the musician will still get nothng more than 5-10 cents per song, and it will all go to pay off the loan sharks that produced the music.

Don't ever think, even for an instant, that the record companies will ever play fair. They have a history of cheating everybody (both musicians and customers) that goes all the way back to the dawn of their industry.

 

[shamino]

Of all the points, I personally think, that the second explains the US sales problem the best. When you get NO INCREASE in minimum wage over an extended period of time, on top of 3 years of recession, you're bound to see slow sales.

You made great sense up until now.

The fact that the minimum wage laws have not changed in three years does not mean people's incomes have not gone up.

Even people working in fast food restaurants are making more now than they were three years ago. And (at least where I am, near a major city), they were always paying a lot more than the minimum wage.

Yes, recessions hurt music sales (and the record companies refuse to believe that this is possible), and people with lower incomes can't afford to buy luxury items, but you are wrong when you claim that low-income people never get raises except when the government increases the minimum wage.

 

[whiteg]

Premium Content Pricing

pllll

 

[Uragon]

The one more thing....

Jobs:"yes, Apple agreed with Warner Music to increase the prices for top songs at ITMS."

 

[shamino]

This attitude is exactly what I'm talking about, my friend. The record companies aren't in charge the artists are (though the labels desparately don't want you to know this). Every artist with a major label has negotiated their contract and agreed to it--even Billie Holiday.

You're incredibly naive if you seriously believe this.

Arists are forced/conned into signing those deals because, until very recently, there was no alternative. If you don't sign, your record doesn't get made, period.

Even today, when you can produce an album on your own, it's an expensive process. Renting studio time, hiring a producer and engineer, duplication and distribution are all expensive. If you're a small band that doesn't own anything more than your guitars, good luck financing the recording without a deal from a label.

Your logic selectively applies the principles of economics. Record labels compete for talent just like any other industry.

Only when the talent is well-established. But no musician is well established when they're just getting started - when they have no reputation, no money, no clout, and no alternative but to sign a suicide pact with a label.

Just look at the salaries of atheletes as the sports revenues have increased.

Oh? Athletes, like musicians, do not make a lot of money. Only those very few that manage to rise to the level of celebrities manage to get rich. All the rest are chewed up, spit out, and forgotten.

The contracts go those who can attract fans and sell tickets. This is not direcly related to talent or skill.

Plus, more and more artists now have their own labels: Shady Records, Aftermath, etc. Some aren't even tied to major labels.

Go read the fine print on some of your CDs. These private labels are almost all owned and operated by the majors.

Yes, there are a lot of independent labels. But they don't have anything like the kind of distributon network that the majors have. Bands that sign with them take a big hit in exchange for what is hopefully (but not always) a better contract.

And with the proliferation of internet distribution and the ability to make professional sounding recordings on a computer, the very reasoning of the traditional record company is being questioned.

Go back and read other messages in this thread. A guy with a computer and some software is not going to make a professional sounding recording. A good studio still costs a lot, even if it is a lot less than it was ten years ago.

The focus is coming back to content, and a tiered pricing system supports both excellence and differentiation.

You're still basing these ideas on a dreamworld where artists are free to negotiate reasonable contracts, and where higher prices will actually translate to higher royalties.

What you describe would be nice, but it has nothing to do with reality.

 

[MikeAtari]

You made great sense up until now.

The fact that the minimum wage laws have not changed in three years does not mean people's incomes have not gone up.

Even people working in fast food restaurants are making more now than they were three years ago. And (at least where I am, near a major city), they were always paying a lot more than the minimum wage.

Yes, recessions hurt music sales (and the record companies refuse to believe that this is possible), and people with lower incomes can't afford to buy luxury items, but you are wrong when you claim that low-income people never get raises except when the government increases the minimum wage.

Hmmm.
- If you work in Fast Food you should know that you get LESS then minimum wage.
- The minimum wage has been stagnate in PA for 8 years.
- The recession has gone on for 3( the average length of a recession ).
- I've seen, especially in New Jersey, during the Boom years of the Clinton administration business Bitterly Complain they couldn't get people to work for minimum wage, But, they refused to offer those minimum wage jobs at higher salaries.
Look at INTEL and MICROSOFT for example, haven't you noticed that they are also attempting to hold down worker salaries, by shipping jobs to India? And justifiying that as an argument to keep wages low in the U.S.A.?

- Meanwhile CEO salaries have gone from 40 times the average worker's salary to 300.

Anyway, the discussion of minimum wage is only to remind you and the record industry that worker expenses have gone up 8 years straight, and minimum wage has not. Minimum wage affects this demographic.

 

[whiteg]

One More Round (A Sham, I Know)

pppp

 

[MikeAtari]

The one more thing....

Jobs:"yes, Apple agreed with Warner Music to increase the prices for top songs at ITMS."

That would be a nightmare, for us and them.
Some of the CEO's don't seem to "believe" in Economics and that may be a part of their problem.

 

[shamino]

Hmmm.
- If you work in Fast Food you should know that you get LESS then minimum wage.

The local McDonalds here (northern VA) has been paying over $10 plus benefits for years. Back when I was working fast food back in high school, I was getting substantially more than minimum

I've got plenty of friends that have recently worked retail in a variety of local stores. None were making a lot, but all were getting significantly more than minimum (typically $8-10/hr).

Restaurants where serving staff gets tips have a minimum that is lower than for everybody else, but they can only pay it if they can demonstrate that the staff can make up the difference in tips. Although I've never worked in that capacity, I have friends who have - all have said that their effective pay, with tips came to around $15/hr - far higher then minimum.

If you know of a place that's violating the minimum wage laws, why haven't you reported them to law enforcement?

- The minimum wage has been stagnate in PA for 8 years.

As I said, the minimum wage has little to do with what people are actually getting paid. Plenty of people in low-income jobs get raises without federal mandates.

 

[MikeAtari]

The local McDonalds here (northern VA) has been paying over $10 plus benefits for years. Back when I was working fast food back in high school, I was getting substantially more than minimum

I've got plenty of friends that have recently worked retail in a variety of local stores. None were making a lot, but all were getting significantly more than minimum (typically $8-10/hr).

Restaurants where serving staff gets tips have a minimum that is lower than for everybody else, but they can only pay it if they can demonstrate that the staff can make up the difference in tips. Although I've never worked in that capacity, I have friends who have - all have said that their effective pay, with tips came to around $15/hr - far higher then minimum.

If you know of a place that's violating the minimum wage laws, why haven't you reported them to law enforcement?
As I said, the minimum wage has little to do with what people are actually getting paid. Plenty of people in low-income jobs get raises without federal mandates.

- A study on the effectiveness or necessity of minimum wage is not available to me at this time. I may search the Congressional budget office web site later for some relevant statistics. But, antidotal evidence in your area doesn't prove your point. What we need is a statistical study of minimum wage, the number of people on it 10 years ago and today. If that number has increased then there are real problems. If that number has dropped they you would be proved right and a rise in minimum wages would not be necessary.

However:

- The Food Industry has a special minimum wage:
The 1996 amendments increased the minimum wage to $4.75 an hour on October 1, 1996, and to $5.15 an hour on September 1, 1997. The amendments also established a youth sub minimum wage of $4.25 an hour for newly hired employees under age 20 during their first 90 consecutive calendar days after being hired by their employer; revised the tip credit provisions to allow employers to pay qualifying tipped employees no less than $2.13 per hour if they received the remainder of the statutory minimum wage in tips; set the hourly compensation test for qualifying computer related professional employees at $27.63 an hour; and amended the Portal-to-Portal Act to allow employers and employees to agree on the use of employer provided vehicles for commuting to and from work, at the beginning and end of the work day, without counting the commuting time as compensable working time if certain conditions are met.

From: http://www.dol.gov/esa/minwage/coverage.htm

- Even if we take your point that some of your friends are getting $8-10 dollars per hour, that's a yearly income of 16,000 to 20,000. Which is a wage group with not much disposable income. Most people in the 13-21 age group would fall into this income bracket. So, you've got to ask yourself how effective a price increase would be to pull more profits from this group? I'd say very ineffective. So ineffective as to actually turn people off of the idea of downloading music at any price.

- Overall incomes have just kept up with inflation for most wage earners( except the top 1% ).

Here's an interesting article on income distribution you might enjoy.
http://www.nytimes.com/2005/10/05/business/05tax.html

 

[~Shard~]

That's great, but what does it have to do with song pricing?