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November 18, 2005

Who's your daddy, Steve? Who's your daddy? SAY IT!!!

In the end, the recording industry's muscle may prove too much for even Steve Jobs. With their contracts with Apple up for renegotiation, a number of record labels have become increasingly more vocal over the issue of pricing at the iTunes Music Store, demanding that Apple replace the digital music storefront's buck-a-song scheme with a tiered pricing system based on artist and track popularity. To date, Apple and CEO Jobs have been intransigent on the pricing issue, holding fast to the flat-fee plan upon which iTunes has built its success and talking smack about those who criticize it (see "Record labels greedy? What tipped you off?" and "Greedy? Greedy!? I'll show you greedy.").

But now, faced with some cold market realities and the tough negotiating tactics of an industry hardened by years of CD price fixing and peer-to-peer lawsuits, Apple may be softening its stance a bit. At least according to EMI Music CEO Alain Levy, who, speaking after his company's earnings report earlier this week, said Apple may soon move iTunes to the tiered pricing model the industry has been clamoring for. "We are having discussions which make us believe it will happen in the next 12 months," Levy said at a press conference, according to the Wall Street Journal. "There is a common understanding that we will have to come to a variable pricing structure. The issue is when. There is a case for superstars to have a higher price. We are having discussions which make us believe it will happen in the next 12 months." Now, this could simply be more artifice and posturing from the recording industry, but somehow I doubt it. Ultimately the labels set the wholesale price of digital music and if they move to tiered pricing when their contracts with Apple expire in 2006, Apple may have no recourse but to follow suit.

Posted by John Paczkowski on 05:29 AM
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Ideally, Jobs will be able to pull off this kind of structure:
$.50 for the low quality crud, $.75 for the average crud, $1.00 for the superstar quality crud.

Posted by: Troy Jennings | Nov 18, 2005 11:50:53 AM

Who's going to stop the record companies from price fixing and forcing the issue? Certainly not the current administration's so-called Justice Department. The New York/Florida price fixing case that lead to the paying over $67 million in fines took how long to actually cost them a dime?

Posted by: Eric | Nov 18, 2005 12:22:48 PM

Isn't it about time for Apple
just to buy EMI, SonyBMG or
whatever and start issuing
their CDs via iTunes only...

Posted by: Jos | Nov 18, 2005 2:59:13 PM

Apple could write contracts with the artists, give them a higher cut than the one offered by the LA and NY dinosaurs, and sell the content in all types of media. BestBuy and their competitors sell CDs as loss leaders, what if Apple could minimize that loss?

Posted by: JKN | Nov 18, 2005 4:45:41 PM

Why doesn't Apple get into the recording business and begin competing with traditional labels? All their artists output would be available only via I-tunes forcing consumers that wanted a particular cut to I-tunes with no option of buying a commercial CD containing that same song. If the music was good enough and enough talent entered the fold, many major recording companies would be in trouble and Apple could sell its music for any price they chose that the market could bear.

Posted by: charles | Nov 18, 2005 7:55:03 PM

In tandem with U2 and whomever else they choose to recruit, Jobs and Apple possess the tools to revolutionize the industry. He should tell the labels to take a walk and let them generate their own next-generation distrubution system. Then he *would* be able to buy EMI, Sony and the lot pennies on the dollar. No one needs them anymore and no one knows it better than them.

Posted by: don | Nov 18, 2005 11:15:37 PM

Question: Why should "Superstars" albums cost more? I mean, it is my understanding that according to the contracts they sign, they are getting a fixed price for their work therefore the only people who stand to (increase) profits from this are...well .. golly..the record companies - not the artists, not the songwriters, not the musicians - in short none of the creative (artistic) talent - as opposed to the creative (legal/accounting talent)

Posted by: Glenn | Nov 21, 2005 4:10:14 AM

iTunes opens a real gateway for small time artists with small followings to self publish and grow their fan/sales base.

How about Apple agrees to set high prices for the big-label stuff, but keep the simplified pricing structure for off-label or small-label artists.

I think this will give artists a great incentive to build their careers through iTunes without having to deal with the record companies at all.

Also it will create a better environment for them with consumers if their prices aren't being hiked up. Young people with limited cash may start to find cool, quirky off-label artists who fit their budget and sense of style better.

Those artists will build up viral fan bases, and lo and behold - record companies become obsolete.

Whichever way you look at it, they are building in their own obsolesence.

Posted by: den | Nov 22, 2005 12:26:59 PM

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