Monday, August 29, 2005

Holding line on music prices a tough Job

Two big music publishers won't take part in iTunes Japan, a business strategem that can best be summarized as "gimme."

Apple's iTunes defined the legal music download market. At 99 cents per song, Apple CEO Steve Jobs put a system in place that boosted Apple to record profitability while reviving interest in a gasping music market.

Now a New York Times article suggests music publishers like Sony BMG and Warner Music, which will not license their music to iTunes Japan under the current pricing structure, could try that in the US market. This happened despite Apple using different pricing levels in the Japanese market, considered the second largest in the world.

Looks like the uptick in music interest since iTunes arrived in 2002, the proverbial rising tide lifting all boats, has awakened a bit of greed in music publishing circles. With the industry's legal arm, the RIAA, having had some success in conducting litigation against illegal file swapping, perhaps the publishers feel they have cooled interest enough in illicit downloads to demand greater profits on the backs of those switching to legal services.

Sony BMG, which recently had to settle with New York Attorney General Eliot Spitzer's office for its illegal payola practices, and the other three big music publishers may be ready to start dictating terms to Mr. Jobs. That would definitely see price increases imposed on new music; the Times cites the possibility that iTunes would be allowed to offer lower prices on older music. Call it the modern equivalent of the remainder bin.

Apple reportedly pays as much as 70 cents per single to publishers now; that could be higher in the case of the major publishing houses. With Apple having now sold well over 500 million songs on iTunes, the publishers have made hundreds of millions of dollars in a short span of time.

Apple's iPod media player drives the company's profitability and iTunes figures in that strategy. Mr. Jobs can't afford to have users defect to other services or go back to the brisk file-swapping trade. He'll have to convince the publishers that they can't afford that, either.

Write: by LuisB