this topic needs a LOT more discussion and debate. The labels doth protest way too much.

You make a good point about why Apple (may have) *originally* created the iTunes store. However, it would be naive to think that they haven't changed their thinking now that iTunes has become dominant. Half-a-billion nickels is nothing to sneeze at, although obviously more money comes in through iPod sales.

You can't blame Apple for not wanting to raise prices--they'll sell more iPods that way. (No, they're not fighting for the consumer or any music-listening idealism--forget that BS.) You also can't blame the labels for wanting to avoid "another MTV"--an industry outsider that suddenly holds a lot of power over who sells and who doesn't. This is as much a power-play as an issue of price.

Do you get your iTunes email each Tuesday? See all the pictures of new CDs being released? That's very good PR for singers/groups that want to get their new work in front of the public and make a few sales. At the minimum it lets potential customers listen to 30 seconds of each song.

So while the record companies are bashing Apple in public they are quietly pleading for their next hot release to get a good spot on next weeks email.

While record companies will always want more money they also need to be very careful of pissing Apple off to the point where they loose their place on the email and other promotional areas related to TMS.

if the labels wanted the power, they could've done it al themselves. I don't feel sorry for 'em. Nothing entitles the labels to corner music, or maintain their profit when they've essentially done nothing. They can say they own the act, but y'know what? i can happily listen to acts they don't own. screw 'em.

apple didn't do anything magical with ITMS. ITMS wound up catching on, iPods wound up being incredibly popular, and before you know it, there's a new model.

why should i care if it's a good thing for record labels or not? it's good for me. probably good for a lot of musicians. especially the musicians who weren't signed by these greedy labels.

former industry bigshots who missed the boat are just going to have to come up with their own iTunes or hope they invested their former incredibly high incomes wisely. or play ball. their choice.

Realistically though, aren't all services ment to market other more tangible items? The ones that don't market a device surely take sides with another company that does. All other music services are no different. Off-hand I know that Napster supports Samsung- it's no different. Apple's methodology is just so much more attractive than any other company's. Napster isn't taken seriously because anyone who had anything to do with it while it was a true p2p service find the idea of renting music laughable, therefore most name recognition with the service is lost. The remaining people know of it only as something that could possibly get them in trouble (ask a few older computer illiterates and you'll know what I mean.) Thats no way to draw a crowd. This is just one example.

To make a long story short, most services exist for the sole purpose of selling a tangible item. The difference here is that Apple did it with an all-in-one package. If Apple wasn't there first, someone else would have been there to start the riot. Think about the Microsoft X-Box and it's implications... They don't make any real money on it, it just ups the value of the Microsoft name. X-Box live is an example of a proprietary service ment to sell units- using other peoples' creative property (video games.)

I know there are different sides to the arguement, but this strategy isn't original. The theory has existed as long as capitalism itself: Try to get people to give you as much money as you can.

That's true. The music store is not the only example. Apple does .Mac and the iApps pretty much to sell Mac hardware.

It shows up to the left on my screen, right below the Apple ad. Ironic as hell. Also worthless as heck, why advertise that on a Mac site when there is no way to use it on an Apple iPod?

Anyway you can get the advertising dollar I guess.
: )

Must be a random thingy!

Personally I hope the record industry withers and dies. Artists will then make a bit of money by selling more - or - less directly to consumers via iTunes or similar service, but will be compelled to perform their stuff to make real money. In all the cities I have visited it seems as if there is a dearth of live, real music. It's all pre - recorded. Where's the fun? In live performance, that's where.
Roll on, roll over and roll off, record industry.

...while better Powerbooks and Mac Minis are tactical decisions, the iTMS is a strategic decision that blunts several problems at the same time.
First, the iTMS creates lock-in. If you've got an iPod you're more likely to buy songs from iTMS. When your iPod breaks, or becomes hopelessly obsolete, you may shop around for another company's Mp3 player, but since you already liked your iPod and your $100 of AAC w/ Fairplay music won't work on anything but the iPod you're more likely to stick with the iPod.
Second, the iTMS gives the iPod cred with the labels. For all their bitching and moaning, the iTMS legitimizes the iPod, it shows that users are just using the darknet or their friends' CDs, they are in the labels eyes paying customers and not some criminal subset. Popularity, of course, helps too.
Third, the iTMS gives Apple some money and if it continues could become a revenue-stream that far-and-away exceeds the revenue from the iPod. As the iPod falls to the iPhone (or some other device) Apple can still have a hand in the game. If all things go right, they may be THE game.
Fourth, this blunts WMA. iPod buyers have a music store to themselves and so there is no reason to open the iPod up to WMA and therefore no way for WMA to become the 'de facto' standard. Popularity helps here too. A lot.
Fifth, Jobs gets to define some of the standards of digital music, including the DRM. At best he has some cards on the table to negotiate with, and this gives him some very useful control, including which DRM-scheme gets used.
Sixth, Apple can use the iTMS to gain traction with newer artists, and if Jobs wants, become its own label or create a business that does something similar.

Point is, iTMS is a nickel-operation now, but in the future it could become a huge business. And one that kept Microsoft out of the digital music game.

Record companies will never die. There will always be artists who can't handle or don't want to handle all the business side of things. And for that, the companies should be compensated. The trick is that artists not sign crappy contracts in the first place; unfortunately that happens a lot since many new artists are young and few have much contract law experience if they are even bothering to think of any of that while writing, performing, etc.

And even with self-promotion , if you get big enough the business side of things could quickly overwhelm a performer or a group.

Nope, there will always be a place for the record companies. And some will be "evil" and some won't. Some of those being accused of being "evil" now are just wanting more money so they can pass on more to themselves and their artists. Nothing evil about wanting to live well. I don't know many rock stars that took a vow of poverty.

However, having said all of that, the 99 cent price point is key. They will shoot themselves in the foot demanding more. What they REALLY should do is start thinking about how they can market extras like printable booklets, official lyric sheets (those online lyric sites have so many errors it's pitiful; hell, even some printed booklets have errors above and beyond the usual artist singing "oh yeah" instead of "mmm yeah"), special videos never shown anywhere at all, etc.

Think about it. If the business of ringtones is so phenomenally big as reported, that means people are buying snippets of songs for the price or more of the full song. So, surely these extras and others can pull in enough jokers...er...fans to supplement record company and artist income easy.

Record execs just gotta think outside the jewel box.

Hi,

My take is that Steve Jobs knew he needed to grow demand for digital music in order to propel sales of the iPod. The iPod would not have flourished if it was only useful for those consumers comfortable with the process of "ripping" songs from CDs (or obtaining them via P2P services) - despite the sheer numbers of people said to access P2P services etc., it represents only a small % of the total consumer space. Without a user-friendly, non-technical source of quality digital content, iPod would have become a niche play.

Now, Jobs has clearly learnt a few things from Microsoft. In releasing the iPods + iTunes + a proprietary music format, Apple has effectively created a "closed loop" food chain - only Apple can sell music content direct to iPod owners.

[Of course, iPod owners have the option of securing music in an open format - like MP3 - and manually copying it into their iTunes software or directly to their iPod...but we know most consumers will take the path of least resistance etc.]

I don't believe it was part of Apple's broader strategy to profit significantly from iTunes. It was merely a tactic to feed demand for their hardware/software combinations. Certainly, I don't think iTunes is a "loss leader" - they will want it to break even etc. - but the success of the overarching strategy isn't to make a windfall profit on iTunes.

Regards,

Mark

When some people are stupid enough to spend $2 or more for ringtones, this makes the RIAA, and Warner Music in particular, pee in their pants about all the money they "lost" on each tune downloaded from the iTunes Music Store …
What they don't realize is that all consumers aren't dumb enough to buy overpriced junk. The iTMS and iPod are proof that quality and reasonable price can go together and appeal to the widest audience.
I wouldn't be surprised, though, if the same people that buy ringtones were the ones that get their music library from Kazaa …
Here is the subject of a potentially very interesting market study. IDC to the rescue !

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hulugu wrote:
Point is, iTMS is a nickel-operation now, but in the future it could become a huge business. And one that kept Microsoft out of the digital music game.

something else for the record execs to remember-- ringtones are different than itunes... when i got my new cell phone i bought about 3-5 different ringtones to last me through the life of the phone, mainly cause the ones that came on it were terrible... however, i've purchased well over 300 songs from itunes... even if ringtones were .99 a piece, there's still no need to have more than 3-5... i mean, it's the signal that somebody is calling your phone for goodness sakes... it's not like i sit there with my motorola and listen to the piss-poor quality 30-second clips of green day for entertainment... no, instead i'll listen to high(er) quality full-length songs on my ipod... now, if the record execs wanna make a few more benjamins, leave the 128kbps AAC files at .99, but give us an option of downloading lossless for 1.50... i would be happy to do that for songs that i really care about, but for others i'll just take the cheaper...

something else... the average 12-13 track cd costs 15 bucks... that includes a physical disc, jewel case, rear insert, and booklet... if they raise the itunes price to 1.50 per song, they are asking $19 for an album's worth of music with no physical media at a much lower sound quality...

Thanks to iTunes, Apple has gained a MUCH stronger and more efficient method of getting their QuickTime media player out there on most computers. They made tremendous strides to get xServes out to the cellco's so that they can use QuickTime broadcaster to stream content to their customers. They have created quite an infrastructure for QuickTime this way. As the MacMini feature-set continues to evolve, it will probably become the must have accessory for HiDef video viewing. Perhaps making a hybrid Airport card that would also add over-the-air HDTV receiver capabilities. The iLife apps continue to improve to provide a ubiquitous solution for streamed, downloaded and perhaps in the future, bit-torrented content. Strangely enough, streaming content still seems to be mainly the domain of Real and Windows Media, but a quiet shift is occurring thanks to PodCasting, and video casting. I don't see a real challenge for Apple to create a frontend to QuickTime Broadcaster so that the HiDef connected MacMini can act as the Bonjour/uPNP device for streaming all media content available on a local family network or even VPN'd networks. Then we can finally see how all of the pieces fit together. That's when MythTV and Media Center will have real competition coming from the Apple front. Lastly, let's not forget .Mac and the Gig of space made available for publicly available home-brewed media content. I always wondered why Apple hasn't created a real community structure for Publicly shared .Mac content. As Spotlight capabilities get fine tuned, perhaps it will be extended to support searching .Mac content with search criteria like Most Viewed, Highest Rated, etc., for publicly available Media on .Mac. I just hope .Mac matures to be something like a modern aJax (Web 2.0) enhanced eWorld type service.

Agree with burrito.

This is an opportunity for Apple and record labels to increase the equity of iTunes. Add better quality (lossless) files for a premium. It doesn't "cost" anybody any more to produce, and eveybody wins, including the consumer.
Steve has to assuage the labels (at least for now), iTunes is still a baby. He needs to be more flexible with his negotiations. It doesn't have to be defined as greed (bad word), as long as they keep the .99Ñž option people will be happy and iTunes will thrive.

Everyone remember you can send feedback about iTunes and the iTunes Music Store via http://www.apple.com/feedback/itunes.html . So if you think you have an good idea, send it to them! The worst they can do is ignore it. The idea of providing higher bitrates at a premium cost to maybe placate the big companies is a good one.

If many people suggest the same thing, it might show up in the next version. Who knows? Maybe Apple has already thought of it, but using the form will support the idea further.

I believe that most of the strategy for iTMS is to promote QuickTime. I don't know the strengths and weakness of QT versus Windows Media or Real. But think that QuickTime has and will continue to be a crowning piece of software for Apple. Which helps drive hardware sales - iPods, Macs, xServes. etc.

That's not to say that iTMS won't end up being a major player in the world of music. I believe they already are and will continue to be the next "MTV" icon and having a major role in future music.

i love apple, but i have to disagree with that last post... quicktime player is crap. the quicktime framework is phenomenal, and it makes final cut and motion a dream to work with, but the consumer shell is a bare-bones means to viewing content, and frankly, it's a piece of $#!%. there are no library features, audio playback is horribly limited, it has an archaic interface and it doesn't play a vast range of files without external plugins... no, i think quicktime player will eventually die, and give birth to a new universal itunes/quicktime player that combines all the features of both... you can see it happening already, as the itunes install package includes quicktime, and the itunes software itself imports quicktime files...

iTMS might be the long tail of the iPod boom - especially as competition drives down the price / margins on the players - it gives them a transfer from the hardware model to the service model.

.Mac is a better example, as is Xbox Live for MS -
companies want recurring revenue, not unpredictable sales where you're only as good as your last product.

As for musicians being forced to go out and play live : since Revolver a good deal of popular music has relied on the studio and these days a large quantity of good music isn't performed on real/live instruments at all.

Oh, and you're right about lockin - my iPod is knackered after 18 months. Without the lock-in (as much to do with having hundreds of CDs in my easily managed itunes library as iTMS stuff) I'd consider replacing it with an alternative.

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Anonymous wrote:

Oh, and you're right about lockin - my iPod is knackered after 18 months. Without the lock-in (as much to do with having hundreds of CDs in my easily managed itunes library as iTMS stuff) I'd consider replacing it with an alternative.

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kenaustus wrote:
So while the record companies are bashing Apple in public they are quietly pleading for their next hot release to get a good spot on next weeks email.

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Anonymous wrote:
Oh there is no pleading involved in placement....record companies pay BIG BUCKS for placment in iTunes and in each week's email (another little know Apple iTunes revenue source!)

In response to GrahamExton's comments, wishing that the record industry "withers and dies" is extremely short-sighted. Are labels sometimes big greedy monsters? Absolutely! But, without them, how do you think artists would reach their fans? If you say "the Internet!", you're hopelessly naive.

Labels serve a very valuable purpose (in theory, at least). They nurture artists and, more importantly, provide the money that allows them record their albums. How will these artists record without the labels? Do you think the bank is going to loan them the money? And where will they find a good producer (often the difference between a mediocre album and an amazing one)? Who will pay him or her?

And after the album is recorded, who will promote it? Who will pay for radio servicing and who will buy ads in pricey music magazines?

It's utterly naive to think that artists will one day simply put their music on the iTunes Music Store (or anywhere else online) and new fans will download it by the millions. A record needs to be marketed to the public. A buzz must be created. Virtually no one buys a new CD (or download) the first time they hear a song unless they are already a fan of the artist's work. Joe Public has to hear the single a few times and maybe even read about the band before he parts with his hard-earned cash. And it's the label's job to make this happen.

Labels advance millions of dollars to new artists each year. This money allows them to record their albums and promote themselves. Do they wind up owing the label a lot of money in the end? Yes. But why shouldn't they? The label took the chance on them and should recoup its investment. Are their predatory contracts? Of course. But wishing the death of the music industry as we know it will not bring about more money for artists. In fact, the opposite will happen. Whereas today many artists are able to build a decent fanbase with a strong label behind them, most of these same artists, in a world without the music industry, would have to scrape together a few thousand dollars to record a CD that sells a few hundred copies if they're lucky.

I agree that the labels shouldn't "die," but they are going to need major changes. Yes, they're essential for getting the word out, but all they seem to promote is crap.
Maybe it's cause all hip-hop sounds the same to this white boy, maybe I'm just plain sick of the last 50 female pop singers that sound like Norah Jones, maybe I think Top 40 Charts should reflect what IS popular, not what labels TELL US is popular. But creative and unique music seems to be a deep underground genre lately.

When I look at the labels, I don't just see more greed than oil companies, as they continue to charge $17+ for CDs that take 17 cents to produce, or the last gasps of trying to retain their archaic business model. I see a continuing desire to control what is and is not popular, regardless of the music's quality.

Lots of people say Britney's hot. How many can say she sings well?

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Guest wrote:
Labels serve a very valuable purpose (in theory, at least). They nurture artists

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Guest wrote:

Lots of people say Britney's hot. How many can say she sings well?

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Guest wrote:
Labels serve a very valuable purpose (in theory, at least). They nurture artists and, more importantly, provide the money that allows them record their albums. How will these artists record without the labels? Do you think the bank is going to loan them the money? And where will they find a good producer (often the difference between a mediocre album and an amazing one)? Who will pay him or her?

And after the album is recorded, who will promote it? Who will pay for radio servicing and who will buy ads in pricey music magazines?

It's utterly naive to think that artists will one day simply put their music on the iTunes Music Store (or anywhere else online) and new fans will download it by the millions. A record needs to be marketed to the public. A buzz must be created. Virtually no one buys a new CD (or download) the first time they hear a song unless they are already a fan of the artist's work. Joe Public has to hear the single a few times and maybe even read about the band before he parts with his hard-earned cash. And it's the label's job to make this happen.

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Guest wrote:
...as they continue to charge $17+ for CDs that take 17 cents to produce...

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hulugu wrote:
I think you need to look around again, I buy stuff all the time from iTunes from artists I've never heard of before because of Listeners Also Bought tags, iMixes, and because of websites like BetterPropaganda.

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Steve W wrote:

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Anonymous wrote:
Oh there is no pleading involved in placement....record companies pay BIG BUCKS for placment in iTunes and in each week's email (another little know Apple iTunes revenue source!)

Really? Proof, please...