Apple’s iPod/iTunes Music Store Sets The Standard

| News

White wires danglini, iTunes tunes jammini; Appleis iPod and iTunes/iTunes Music Store (iTMS) is the music scene today. So many people have purchased the little-white-digital-music-player-that-could, that some industry analysts believe that it is Apple, a computer company, not some music company, that is defining the direction the music business is heading into. A report from the Financial Times emphasizes just what a good position Apple has found itself. From the article:

Alarm bells rang in November when Mr Jobs told analysts that iTunes was "not a money-maker". Apple stresses that iTunes is out to make a long-term profit but is a volume business. Yet if Apple cannot make money on 50m sales, what hope is there for smaller web retailers?

At the heart of the debate is the price consumers are charged for legal downloads and the subsequent share-out of revenues among record labels, rights owners and retailers. Apple does not discuss the share-out of iTunes revenue. But the consensus among music executives, who asked not to be named, is that on every 99-cent download bought from iTunes, Apple takes about 10 cents, after it has paid 65 cents in record company royalties and 25 cents in credit card fees and distribution costs.

Mark Mulligan, senior analyst at Jupiter Research, suggests Mr Jobsi words should not necessarily be taken at face value. "It discredits his competitorsi chances of making money and strengthens his position in negotiating with the labels," he says.

[...]

"Everybody in the software industry knows what Bill Gates did, which was to seize a key strategic choke point and milk it," says John Beezer, founder of the legitimate, Seattle-based file-swapping service Weedshare. "It looks like Jobs is making a strong bid to do that to the music business."

The article also points out that independent label Beggars Group says that iTMS downloads will account for 10% of its US sales in 2004. Thereis more information in the full article at the Financial Times.

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