Record Labels May Give in To Apple on Variable Pricing of Music
By: Spacelab Research Staff
Apple may just have the strength to fight off calls from the music industry to raise the prices of songs sold through iTunes. Universal, Warner Music, SonyBMG and EMI are all negotiating new contracts with Apple to sell their music through Apple's online music store. The labels have all been calling for a raise in song prices, to what they call variable pricing, i.e. the ability to charge more for new music or highly popular artists. Steven Jobs and Apple have been absolutely firm on the price, saying that 99 cents a song is the right price and won't raise prices. This has led to the labels calling the price unfair to artists, which led Steve Jobs to call the labels greedy, and then the whole thing started to spin out of control.
But a recent report in the New York Post says the labels may be close to either giving in to Apple, or at least sitting on the negotiating process for a while, leaving them the option of pulling music from iTunes whenever they want. That leaves the 99 cents a song as the price, and the labels with a negotiating tactic (albeit a small one), rather than giving in completely.
The labels now seem destined to make a choice between giving in to the 99 cents per song model, or pulling their music from iTunes altogether. Thinking about making the second of those two decisions makes sense for one, maybe two seconds... until you realize that doing that will lower the visibility of their music considerably. Selling songs on iTunes just makes sense for accesibility and visibility alone, let alone the vast audience it has.
Which brings the whole discussion back to the topic of what Steven Jobs and Apple do so well... innovation. Given the fact that no one had actually been able to combine the notion of an online store, a music catalogue, a media player, and an easy to use service until iTunes, it's no surprise that Apple may win this battle. Steven Jobs has set the tone of the debate, and he has the labels following his lead (more innovation). The labels have no real traction on a service of their own, so they can opt out of iTunes, or just make their artists more visible and accept the iTunes model.