Changes In Attitudes

[Dave James]

Article in yesterday's NYT. Not exactly sure of all the ramifications, but if it means paying less for downloading music, I'm all for it.

SAN FRANCISCO — In moves that will help shape the online future of the music business, Apple said Tuesday that it would remove anticopying restrictions on all of the songs in its popular iTunes Store and allow record companies to set a range of prices for them. Beginning this week, three of the four major music labels — Sony Music Entertainment, Universal Music Group and Warner Music Group — will begin selling music through iTunes without digital rights management software, or D.R.M., which controls the copying and use of digital files. The fourth, EMI, was already doing so. In return, Apple, whose dominance in online music sales gives it powerful leverage, agreed to a longstanding demand of the music labels and said it would move away from its insistence on pricing all individual song downloads on iTunes at 99 cents. Instead, the majority of songs will drop to 69 cents beginning in April, while the biggest hits and newest songs will go for $1.29. Others that are moderately popular will remain at 99 cents. The music companies are hoping that their eagerly awaited compromise with Apple will give a lift to digital downloads. They will be able to make more money on their best-selling songs and increase the appeal of older ones. And with the copying restrictions removed, people will be able to freely shift the songs they buy on iTunes among computers, phones and other digital devices.

Technologically sophisticated fans of digital music complain that D.R.M. imposes unfair restrictions on what they can do with the tracks they have bought. For example, the protected files from iTunes do not work on portable players made by companies other than Apple. I think the writing was on the wall, both for Apple and the labels, that basically consumers were not going to put up with D.R.M. anymore,” said Tim Bajarin, an analyst with Creative Strategies, a market research company. Music industry watchers widely applauded the move and said it could help digital music sales, which have shown signs of slowing down just five years after Apple introduced iTunes. In particular, lower prices for some songs could spur consumers “to buy deeper into the catalog, and expand their relationship with digital music,” said Russ Crupnick, an analyst with the NPD Group.

The music industry could use a lift. Sales of CDs fell 20 percent last year from 2007. About 2.4 billion songs were bought on iTunes in the last year, aided by Apple’s expansion into international markets. But that was not nearly enough to make up for losses in traditional retail stores. Industry pundits have long pointed to D.R.M. as one culprit for the music companies’ woes, saying it alienated some customers while doing little to slow piracy on file-sharing networks. Apple has been campaigning against D.R.M. at least since February 2007, when the chief executive, Steven Jobs, wrote an open letter criticizing the software. Apple reached a deal with EMI that year to offer music without the copying restrictions. But it could never reach the same agreement with EMI’s larger rivals. Sony, Warner and Universal allowed other online music services, like Amazon’s MP3 Store, to sell unprotected music, but they withheld it from Apple. Their goal, industry analysts say, was to try to strengthen online rivals to iTunes, which they viewed as having a dangerous level of control over their business. “Apple definitely wanted to remove D.R.M. from music, but the record labels would not allow them to renegotiate their licensing agreements, because they wanted to help competitors succeed against Apple in the market,” said Bill Rosenblatt, president of GiantSteps Media Technology Strategies, a consulting firm.

Apple, for its part, appeared to resist variable pricing, fearing it would amount to a price increase for the most popular tracks on iTunes, which constitute the bulk of sales on the service. It has also said the consistent 99-cent price made things simpler for buyers. It is not clear what broke the impasse, but the deteriorating economy may have put pressure on music companies. “For the major labels, it was clearly time for them to accelerate becoming digital music companies in a macroeconomic environment that is downright frightening,” said Greg Scholl, chief executive of The Orchard, a digital distributor of music from independent labels. The compromise gives the recording industry new leverage over their online music sales, Mr. Scholl added. They can start to sell new tracks at the higher price, then gradually drop prices to keep sales moving. Labels could also experiment with bundled packages of songs and even special editions at higher prices.

Harry Wang, director of mobile product research at the consulting company Parks Associates, said, “They aren’t going to get a huge amount of money from this new arrangement, but in an ailing music industry, anything that can provide more money will be better than the status quo.”

Apple said customers would be able to pay a one-time fee to strip copying restrictions from music they have already bought on iTunes, at 30 cents a song or 30 percent of the album price. ITunes customers can achieve the same effect by burning all of their music to a CD and then reimporting the music into the iTunes software, although this reduces sound quality somewhat. The company also said that its popular iPhone would be able to download songs from iTunes over wireless data networks like AT&T’s. Previously, iPhone owners had to either attach the phone to a computer or connect to a local Wi-Fi network.

Up over and out.

Edited January 7, 2009 by Dave James

[Jim Alfredson]

I can only assume iTunes was starting to lose ground to Rhapsody and other download sites. I know that I usually download material from Amazon just because the bitrate is usually higher and there's no DRM. The price is comparable.

I don't think $.99 is out of line for a single tune. I do like it when the entire album is priced less than the cost of individually downloading the tracks.

[captainwrong]

All I know is iTunes wants to charge me $186 to "upgrade" my library when there's only a few albums out of that that I still listen to and haven't been replaced by real CDs already. Since they want to make it an all or nothing proposition, I'm choosing nothing. They pulled this same garbage last time around with the EMI stuff but lucky for me, all that I wanted to upgrade. I don't know if it's Apple or the labels who are making this 30 cents/track fee and you can't pick and choose what you want to upgrade, but it's completely stupid and greedy. Given the eventual price drop to 69 cents for the vast majority of this stuff, if I was to "upgrade," I'll have paid nearly double the eventual going rate for this stuff.

[The Magnificent Goldberg]

I don't think $.99 is out of line for a single tune. I do like it when the entire album is priced less than the cost of individually downloading the tracks.

Well, back in the forties, when a dollar was worth a lot more than it is now, a 78 (two songs) on Bluebird or Decca's Sepia series cost 35c - 3 for a dollar. Normal priced 78s, Victor or Decca, were 79c. Many idies were faced with much higher costs by independent pressing plants and a lot of their records were priced at $1.05, while shellac was rationed. Then they came down to 79c.

Records have fallen in price, in absolute terms as well as relative to other goods, since then. It's easy to see this looking at the King records discography, because their catalogue numbers incorporated the price. So here's the page for the 10" LPs.

http://www.bsnpubs.com/king/01king10.html

If you look at the Earl Bostic LPs, they were normally $2-95 with 8 tracks; 37c per track. When 12" LPs came along, they were typically $3-95 for twelve tracks; 33c per track. I just checked on Amazon.com what you'd have to pay for "Dance to (the best of) Earl Bostic" which was the same tracks as one of his 12" LPs and it was $3.13. That was from an Amazon seller. (Sure, you can pay an awful lot more for an OOP Blue Note.) But the essence of this download system is that it hasn't YET created a proper market, in which rival firms are trying to compete, and offering their downloads for prices that they think will secure the level of sales they want. And the consequence is that prices are too high (particularly in view of the absence of manufacturing costs).

My 2c.

MG

[John L]

I can only assume iTunes was starting to lose ground to Rhapsody and other download sites. I know that I usually download material from Amazon just because the bitrate is usually higher and there's no DRM. The price is comparable.

I don't think $.99 is out of line for a single tune. I do like it when the entire album is priced less than the cost of individually downloading the tracks.

I think that Amazon may be the reason for this. As you say, they now have an MP3 catalog comparable to iTunes, charge roughly the same prices, have no DRM and a higher bitrate. How can iTunes compete without adjusting?

[The Magnificent Goldberg]

I can only assume iTunes was starting to lose ground to Rhapsody and other download sites. I know that I usually download material from Amazon just because the bitrate is usually higher and there's no DRM. The price is comparable.

I don't think $.99 is out of line for a single tune. I do like it when the entire album is priced less than the cost of individually downloading the tracks.

I think that Amazon may be the reason for this. As you say, they now have an MP3 catalog comparable to iTunes, charge roughly the same prices, have no DRM and a higher bitrate. How can iTunes compete without adjusting?

Well, they COULD have thrown their system open to other vendors, as Amazon does for CDs, and just taken a commission or whatever off them.

I look forward to the day when downloads will be available from alternative vendors, as CDs are now. But watch out for claims that Caiman have a downloadable copy of the Train wreck

MG

[Jim Alfredson]

But the essence of this download system is that it hasn't YET created a proper market, in which rival firms are trying to compete, and offering their downloads for prices that they think will secure the level of sales they want. And the consequence is that prices are too high (particularly in view of the absence of manufacturing costs).

My 2c.

MG

Manufacturing makes up the smallest percentage of the actual cost of making an album. The big chunk comes from paying the musicians, paying the studio, paying the producer (if there is one), paying the licensing fees for covers, paying the artist for the artwork and layout, paying for radio and print promo, etc.

You can print up 1000 CDs for about $1000. But good luck selling them if the material is recorded badly, has no promotion, etc.

[The Magnificent Goldberg]

But the essence of this download system is that it hasn't YET created a proper market, in which rival firms are trying to compete, and offering their downloads for prices that they think will secure the level of sales they want. And the consequence is that prices are too high (particularly in view of the absence of manufacturing costs).

My 2c.

MG

Manufacturing makes up the smallest percentage of the actual cost of making an album. The big chunk comes from paying the musicians, paying the studio, paying the producer (if there is one), paying the licensing fees for covers, paying the artist for the artwork and layout, paying for radio and print promo, etc.

You can print up 1000 CDs for about $1000. But good luck selling them if the material is recorded badly, has no promotion, etc.

You're right, I know, because you've been there, done that, and at least broken even. But that's for a small, specialist, operation. To me, the general level of download pricing seems too high. (And it's even higher in Britain, as itunes charges £0.99 per track.) Pricing in the record industry usually reflects the relative difficulty of obtaining the material. That's why, for example, I'm prepared to pay more for a CD that has to be imported from Ghana than one that EMI manufactures in Britain. But with downloads, there is no relative difficulty in obtaining the material. The inherent difficulty is, as you say, in the investment/R&D costs of producing the recording, plus associated costs. So it seems reasonable to charge more for new recordings (and new digitisations - is that a word?) than for old ones. But old ones are most of what every record company has got. So the price for almost everything should be cheapo.

MG

[seeline]

Emusic.com

No, the majors aren't there, but just about everyone else is. Subscription fees, not per-track fees, and actual ownership of files.

[The Magnificent Goldberg]

Emusic.com

No, the majors aren't there, but just about everyone else is. Subscription fees, not per-track fees, and actual ownership of files.

Mm, can't say I'm greatly in favour of subscription fees. It makes e-music like the old record clubs. But if you don't want anything this month, because you've already got too much recent stuff to listen to, well tough, still pay.

I absolutely can't absorb more than about 200 albums a year - preferably fewer; 170 last year and that was slightly too many as I only listened to 85% of the albums I've had for longer than two years.

MG

[seeline]

Emusic.com

No, the majors aren't there, but just about everyone else is. Subscription fees, not per-track fees, and actual ownership of files.

Mm, can't say I'm greatly in favour of subscription fees. It makes e-music like the old record clubs. But if you don't want anything this month, because you've already got too much recent stuff to listen to, well tough, still pay.

I absolutely can't absorb more than about 200 albums a year - preferably fewer; 170 last year and that was slightly too many as I only listened to 85% of the albums I've had for longer than two years.

MG

MG, I think it's a lot different than those record club boondoggles, because there is so much there. Have you looked recently? (I do find myself doing a lot of single-track downloads there, BTW.) There's absolutely no comparison between typical "record club" stock and sites like Emusic. I think you have to look at it as a completely different business model.

Edited to add: Forgot to mention how much I dislike iTunes (store and software).

FWIW, there's also a lot of good material available on CDBaby - MP3 and/or disc. A lot of people who sell through CDBaby also have their albums available on Emusic.com, though without artwork and inserts. (Which are included if you buy directly from CDBaby.)

Last thought: a lot of rare, o.p. material is available on Emusic.com. I've been able to get hold of things that I simply can't afford as used LPs/discs, which is a godsend. Their setup is also very helpful for anyone needing to hear material in a hurry (for research, review, etc.).

(I've dug into the Document Records catalog there - just an amazing resource!)

Edited January 7, 2009 by seeline

[medjuck]

IIRC a few years ago Rhapsody did a special sale of songs at 49 cents. They sold way more than twice as many as usual-- presumably with no added costs. (I may have all these numbers wrong, but you get the point.) I think iTunes is going to sell a lot of songs at 69 cents, not so many at $1.29. The record labels pressured Apple for so long because the only answer they ever have to their problems is to raise prices.