iTunes and labels reinventing online musicMay 11, 2007
Apple is entering this year’s round of talks with major labels in the US over iTunes distribution rignts.
Talks over the Apple iTunes Store begun just weeks after EMI threw a curveball at the major labels with its decision to make its iTunes’ catalogue available for sale online free of digital rights management (DRM).
While last year’s meetings over the Apple iTunes Store and music labels saw Apple CEO Steve Jobs spurning record company demands for flexible pricing, Apple in the post-EMI-DRM decision may be more willing to negotiate.
Apple wants majors to emulate EMI and abandon DRM, at least in so far as iTunes Store sales for permanent collections. (DRM will continue to have a place in subscription-based and some mobile music services for the foreseeable future).
Jobs isn’t expecting the world to turn upside down. When the EMI decision to release music in high quality format free of DRM was announced, Jobs said he hoped to offer half of all songs sold in iTunes DRM-free by the end of the year.
Jupiter Research analyst Mark Mulligan – an expert in the digital music field – observed: “Jobs suggested at the EMI launch that he expected approximately half of catalogue to be available DRM free by year end. That’s a conservative estimate that essentially covers EMI and the Indies. Jobs is hoping that he’s under-promising with a view to over-delivering – a tactic at which he is adept.”
The analyst believes it may be time to move away from set single price models in iTunes. Variable pricing has served its purpose, he said, adding, “both Apple and the labels would benefit from a more flexible approach to pricing.
Bringing a consumer electronics pricing mentality to selling music only works so far. Not all music is worth the same. Just as Apple wouldn’t want to be forced to sell a generation one iPod for the same price as a video iPod, the music industry doesn’t want to sell 70’s album tracks for the same price as a top 20 single.”
Mulligan believes the new framework in which DRM-free tracks cost 20p more than the previously available versions has “opened the doors to variable pricing”, and has also given Apple a bargaining position for its latest chats with the labels.
Apple has been accused of locking iTunes and iPod customers into iots ecosystem, as songs sold through iTunes can only be played on an iPod. (Or burnt to a CD and ripped back to a computer DRM-free).
The move to abandon DRM for permanent sales through iTunes – or at least offer DRM-free tracks as a higher-priced product – would also free Apple from threats that it will be forced to license its own DRM system, FairPlay.
According to analyst Mulligan, labels also want to be able to offer a wider variety of product bundles through iTunes, such as combined video and music bundles.
“The digital download model doesn’t need to limit itself to trying to replicate the CD in digital form. Just as the 99 cents uniform price point has served its purpose well, so has the digital track. Now the market is more than ready to accommodate product and format experimentation.”