Apple iTunes to End Flat Fee Pricing?

MdntToker writes "According the Forbes, EMI has an understanding with Apple that flat fee pricing will end within the next 12 months, and more popular songs will be priced higher than 99c, while lesser known acts will be priced lower than 99c." From the article: "Label executives have made multiple arguments for flexible pricing. They argue, for instance, that almost all retail businesses have different price points for different products. But they are particularly interested in boosting their revenue from digital music sales, which aided by the sale of mobile phone ringtones, are increasing but not quickly enough to replace the continuing drops in compact disc sales. EMI said today that digital sales, made up 4.9% of the company's sales in the last six months, up from 2.1% a year ago." We've previously reported on this story.

The "Flexible" Elevator - Going Up?

[erick99]

I take it that this will translate into the vast majority of what is downloaded being above ninety-nine cents; otherwise, I don't see why they would bother with "flexible pricing." I know this is cynical - but I suspect that this is intended to be flexible mostly in an upward direction . . .

Re:The "Flexible" Elevator - Going Up?

[interiot]

Not necessarily; profit is one of those microeconomics things that is a curve. If you're on the top half of the curve for a specific product, lowering the price of a product will increase profits because volume goes up faster than unit-profit goes down.

Re:The "Flexible" Elevator - Going Up?

[AdmiralWeirdbeard]

except that we already have heard from the RIAA robber-barons that they want to be charging more for new releases.

if they really understood, well, anything, let alone economics, they would not be giving their customers the middle finger on a daily basis.

what I want to know is, what the hell happened to Jobs calling them greedy and standing firm on the flat pricing scheme?

Re:The "Flexible" Elevator - Going Up?

[marshac]

It is not. What you speak of is the Laffer Curve, the backbone of Republican 'Voodoo Economics'

Lower prices doesn't always increase demand...

[shmlco]

Your assumption is that, by lowering prices, more people will buy. However, the number of people in a given market is finite, and as such that rule doesn't always hold. If only N number of people are interested in band B's music at any price, then lowering the price will not increase N.

You may be in the middle of a curve where decreasing prices will increase volume, but due to the finite nature of N, there may not be sufficient demand to recoup the difference.

In other words, you gave money away.

Re:Too bad the music companies don't think so

[interiot]

Right... there are different products, and so there are different profit curves for each different product. 99 cents may be too low for some, and too high for others. I was trying to say that just because Adam Smith's invisible hand is based on greed, that doesn't mean that consumers will always get screwed. But it looks like quite a number of people disagree with me, particularly in the case of the RIAA. :)

Re:The "Flexible" Elevator - Going Up?

[Genevish]

The basic problem with that theory is that human greed knows no bound. If the record companies can get away with charging say $2 a song, do you really think they would settle for $1.50?

Case in point: CD prices. I think it's safe to assume the COST of pressed CDs in the volume record companies deal in is around 50 cents. Given the prevalence of CD in this day and age, by your logic CDs should cost no more than... say, $5. The very fact that to this day consumers are still charged $15 a CD would disprove your theory...

There is no problem with the theory. The theory applies in this case like this: If the record companies lowered the price of CD's to the $5 you propose, sales would increase. But they wouldn't increase enough to offset the loss of profit from the lower price.

By the same token, if they make more profit from adding draconian DRM to their CD's, then they will do so. Why is Sony removing the DRM from some of their CD's? Because it's negatively impacting their profit.

Why do CD's cost so much when they cost so little to produce? because people buy them. If you don't like a particular companies prices, or business practices, or ecological ideals, or whatever, don't buy their products. And it won't matter in the least. If, however, enough customers stop buying their products, the company will make whatever changes necessary to increase their profits (changing the price, changing the business practice, moving their factories to cheaper offshore companies, etc). I'd suggest two things: Take a basic microeconomics class, and watch the documentary, "The Corporation".

You're only proving his point

[MattW]

That only helps prove his point. The smaller the cost of goods is, the smaller the reduction is net profit per unit with a price reduction.

Basic econ

[abb3w]

They believe demand will be constant no matter what price is or quality of the product.

...that is, that they have a product with a high degree of price inelasticity of demand [wikipedia.org] (although record execs don't hvae the sophisticated vocabulary). The problem is they don't realize the cross elasticity [wikipedia.org] of substitute products.

OK, so assume that RIAA member company Three Initial Recording (TIR) have a lock-in recording contract with the hottest band around, the Hong Kong Cavaliers [imdb.com]. TIR makes a fistful of buckaroos from every one of HKC CDs they sell. But music from iTunes is a really close substitute, if not a superior replacement; changes in prices of one will affect the sales of the other pretty easily. Raising prices so as not to undercut sales makes sense to TIR.

The problem is, there are other substitutable choices besides CD and iTunes. TIR considers DRM-Rootkitted music disks: consumers don't like those much, but most are easily confused sheep, so the substitutibility is fairly good until ingenious [eastoftheweb.com] folk at Sysinternals [sysinternals.com] notice. Maybe they try it, maybe not.

There's live concert performances... but that's not a good substitute for most working stiffs who want to listen to the band at any given time of day, and the HKC can only do so many concerts; TIR can live with that.

There's music from other bands; although some folk feel there is no alternative to the HKC's unique sound, others are just as happy listening to Electric Mayhem, who are signed with another RIAA member. Well, it's within the cartel. But the band Disaster Area tends to have a wide overlap in the fan base, and they've not only working with an independent studio, they took pot shots with a sniper rifle at the last TIR contract rep who tried to persuade them to join up. Hmm...

And really, any form of entertainment might be a substitute; cheap, safe, designer hallucinogens might leave everyone just sitting around giggling at their fingers, but the War on Drugs makes most people stay away. Movies are another alternative, but the MPAA has enough overlap and common interest that they're not likely to be a deliberate threat. Books... well, nobody reads those any more. Video games are a growing problem, but they look to be gelling into a cartel pretty soon.

But that leaves the big one: there's pirate copies of the music, in all of their many forms. Recorded live in concert while in the audience. Sketchy dealers on NY sidewalks selling counterfeit CDs. Music ripped to MP3/Ogg/FOO format and traveling over the internet by FTP, HTTP, NNTP, KaZaa, BitTorrent, and the six surviving Gopher sites. Yes, it's illegal... but cheaper, all the way down to free. The extra costs are only to the pirate's self respect (which there's less to lose of each time they give in) and if they get caught. And almost EVERYBODY is doing it.

Some flexibility in pricing might help both Apple and the RIAA, especially if they put more of the long tail [slashdot.org] up on iTunes (which would probably be the best way to grow revenue), with opportunities for having sales, and making a litte more on the megahits. (Yeah, bands with gold albums probably ought to be going for $1.25 IMHO). But my back-of-the-hand guess is that if the average price (weighted by number of sales) of iTunes song starts rising, there will be more "sales" really lost to piracy, as opposed to the RIAA claimed losses. And with those short-term real losses come longer term erosion to the foundation social mores (EG: piracy=theft=bad) that the music industry is reliant on. And that is something TIR and the other RIAA members aren't factoring in on their economics.

Re:The "Flexible" Elevator - Going Up?

[dots and loops]

If Apple were actually able to leverage lower pricing on lesser-known artists, it might benefit many users. Most of what I download is not consdered "popular music."

Going down

[SuperKendall]

I like ITMS - a lot. But if songs start rising in price I will simply use AllOfMP3.com any time I consider a price to be unreasonable, possibly dropping ITMS altogether if variable pricing gets too crazy.

What I see happening is the EMI song sales on ITMS start dropping substantially.

What I would do if I were Apple is tell EMI they would be happy to drop thier music altogether. Apple can only do that to a certain extent of course as ITMS wouldn't hold up well with no major label support (or, perhaps it will would with indie stuff? Hard to say) but record companies are getting a fair amount of money out of ITMS and I think being cut out cold might have a few exec heads rolling at the loss of many milllions in recurring revenue, and probably some arsists chafing to drop the label. Record labels can only afford so much heat and if new acts wont sign with you because you're not on ITMS then it could affect the bottom line substantially.

Here's the thinking

[SuperKendall]

I am totally with you on the problem of the artist getting nothing from AllOfMP3.com. I find that distasteful myself.

So then AllofMP3.com is basically outright piracy (which is why I do not use it now). However it is a form of piracy that:

1) Cannot get you the size of fines that use of P2P gets you (making for a relativley risk-free form of civil disobedence), and more importantly
2) Provides a monetary and numerical record of demand for cheap online music. The discrepancy between AllOfMP3 sales and sales

The "Possible" Elevator - Going Nowhere?

[danaris]

Yeah, but is anything really going to happen?

From what TFA says, this is based on what one music industry exec thinks Steve Jobs might do. Now, if it was something the exec had heard that Jobs was going to do, that might be something.

This looks to me like nothing more than wishful thinking. And Slashdot jumps in with a sensationalist headline proclaiming certitude, never one to let a little thing like reality (or sanity) get in the way of a nice flamewar...

Dan Aris

Re:Mod the fuck up.

[jav1231]

Yeah, this could be a "Let's put the word out that we think Jobs is going to cave because the arguments all make sense then he'll be relatively compelled to save face." Jobs could as easily say, "Dude! We had this discussion. Remember when I said, 'Go pound sand up your ass?' we were talking about this!"

Re:The "Flexible" Elevator - Going Up?

[mattkinabrewmindspri]

It won't be a nickel a song. The "new hits" will probably be ~$2.00, while the old songs and songs from lesser known artists will drop to about $.98. And, of course, it will have DRM.

Never Mind

[Golias]

It's a non-story anyway. From TFA:

"Today EMI Group boss Alain Levy said at press conference today that he believed Jobs would introduce multiple price points for iTunes music within the next year."

So one guy says with no control over the situation tells Forbes magazine that he thinks Jobs will make this happen, and it gets reported on Slashdot as fact.

For fuck's sake, not even the various Mac rumor sites have run with this one yet. When did MacSlash become MacWildGossip?

Re:Never Mind

[SeattleGameboy]

Umm... sorry to break it to you. Apple may control RETAIL pricing for digital music, but the labels set the WHOLESALE pricing for digital music.

The labels can pretty much dictate WHATEVER pricing they want, and Apple will not have any say over it (unless they want to lose revenue). It would be one thing if they had a marketshare of say, Walmart. But digital sale is still pretty small percentage of the overall revenue for the labels.

The labels have been offering their goods at "introductory" pricing to see how quickly they can get legit digital distribution to grow.

Well, thanks to iTunes, they are growing fine, and now the labels want to make (more) money off of it. Which is a lot easier if they can apply flexible pricing model.

When the exec says he believe iTunes will offer multiple price points is because the labels have already announced to the digital music wholesalers that in 2006, they will be introducing mulitple wholesale price points.

Unless Jobs wants to lose even more money than he is losing now on iTunes (yes, they make money on iPod but iTunes is still not operating even yet), he WILL offer multiple pricing points on retail as well.

Re:Never Mind

[kollivier]

The labels can pretty much dictate WHATEVER pricing they want, and Apple will not have any say over it (unless they want to lose revenue). It would be one thing if they had a marketshare of say, Walmart. But digital sale is still pretty small percentage of the overall revenue for the labels.

First of all, I don't think wholesale prices have anything to do with it here, because IIRC Apple has a contract with the music companies (which no doubt offers guarantees against price changes). Apple can say no to th

Re:Never Mind

[adpowers]

Well, they could not renew the contract. If Steve has the balls he might just remove all of that labels' songs from the store and see how they like losing all the potential earnings. iTunes has a huge market share and I don't think people are going to just up and switch that quick to another store (especially when so many people have iPods). Steve has lots of bargaining power here and one of the big things about the music store when it was released was the simple pricing (although, the album pricing is more flexible than it used to be, so you can no longer predict how much an album will cost, unfortunately). I will not buy a single song for more than a dollar, so if they do raise prices, I just won't be those songs. Also, who knows, it might give a big push to the smaller labels like CD Baby when all their music is much cheaper.

Also, in reply to like the great-grandparent, I do believe iTMS is profitable these days. I think they are making a nice little profit, actually (nothing compared to the iPod sales, but nothing to sneeze at either).

Andrew

Re:Never Mind

[mj_1903]

The iTunes Music Store has made a profit, albeit small, in the last two quarters.

Re:The "Flexible" Elevator - Going Up?

[Philip K Dickhead]

Never bought 'em. Never will.

Got a nano as a gift. It's full of my own MP3's. iTunes doesn't even have my Ornette Coleman or Rasahn Roland Kirk stuff. There's a bunch of old releases by the Move and Traffic I can't get here either.

Guess I'm just not a sizeable market. Cry me a river!

Re:The "Flexible" Elevator - Going Up?

[JoshRazz]

If you've updated to the latest version (6.0.1) you can disable the music store under Parental Controls (in Preferences).

Re:The "Flexible" Elevator - Going Up?

[Imsdal]

What sort of prinicple is that? The same principle that explains why cell phone calls have dropped dramatically? I would suggest that economic principle says that the functioning of the market decides to what extent prices are set at marginal costs (i.e. the optimal price in a perfect market). In this particular instance, I assume that competition is less than perfect for any number of reasons, but "sticky downward" really has nothing to do with it.

Re:The "Flexible" Elevator - Going Up?

[SatanicPuppy]

Supply and Demand trumps your "Sticky Pricey" theory, and when music became all digital, supply effectively went to infinity, because there is no limit to the number of copies of a single song that can be sold.

That being said, I think prices will drop because artists will find that it is more lucrative to sell songs for .25 without giving the RIAA a cut. Then there is the model piloted by webcomics, where the content is free, and supported by targeted advertising and the sale of branded merchandise.

Re:The "Flexible" Elevator - Going Up?

[Golias]

The new digital model the GP was referring to is the band creating a website, hosting it, and charging $0.25 a song download (or even givign it away for free and make money selling merchandise or concert tickets). Therefore, the music store is obsolete (or can be used just for selling branded merchandise).

Name three rock bands who were never signed by labels and make a living that way sufficient to quit their day jobs.

Imagine if the music version of slashdot existed (it may already, I don't know). Bands could post links to their new releases, users can comment on the songs / bands, and the best bands will gain the largest following.

Dozens of such sites exist. Hardly anybody goes to them. A few hard-core people do so they can pat themselves on the back for supporting indie bands, but most people fall in love with some fractin of the crap they hear on the radio. Even psuedo-indie acts like Death Cab for Cutie are in the position they are in only because a record label pimped them like crazy.

If you will pardon me for briefly playing the Devil's Advocate...

One could easilly make the case that the work done by a record label is more important to the financial success of a music act than the work done by the band itself. When you look at it in that light (and realize that the labels take the brunt of most of the financial risk), it really isn't so eeeevil that they take a bigger slice of the pie.

I mean, David Gibbon just sat in front of a microphone and crooned for a few hours. Behind every album his band has made, there was an army of promotors, engineers, event planners, office staff, and several layers of management, all putting in 40-hour work weeks to make sure that you and as many of your friends as possible buy the album. They all worked just as hard as he did, and for considerably less money. Yet people consider it this horrible injustice when this ONE EMPLOYEE of the record company, who happened to have the most fun job of anybody involved, doesn't get to hog a majority of the profit for themselves.

So yea, if you are a singer and think that's unfair, go out and try to do the work of all those people by yourself. You will probably end up with a much larger slice of a vastly smaller pie, unless you are just as good at music promotion as you are at being a musician.

Re:The "Flexible" Elevator - Going Up?

[mdarksbane]

"sufficient to quit their days jobs"

I call BS. There are a huge number of small performers who are unknown beyond their local state but still make a perfectly livable wage, including my dad. He quit his job as a producer ten years ago to do what he loved, playing music and performing. He initially signed up with a temp agency to fill the gaps in his schedule.

In ten years, he only went in once.

Now, almost no one outside of Ohio has probably ever heard of Bob Ford the guitar player, but he definitely made eno

Name three? Easy...

[MacDork]

Name three rock bands who were never signed by labels and make a living that way sufficient to quit their day jobs.

Easy:

• Celldweller [celldweller.com] (Featured in several films, movie trailers, TV spot, and video games)
• More Machine Than Man [mmtm.net] (Currently touring America)
• HeavensDust [heavensdust.com] (Currently touring Japan)

Your turn... give me three examples of RIAA members who have stopped taking their customers to court.

Dozens of such sites exist. Hardly anybody goes to them. A few hard-core people do so they can pat themselves

Re:The "Flexible" Elevator - Going Up?

[Golias]

Master P owns a record label which he set up with a $100,000 inheritence.

He didn't sign with a label because he bought one.

Furthermore, most of his fortune came after His label fell under the umbrella of Priority Records, and Priority Records cut a distribution deal with EMI.

Sorry to ruin your ghetto fantasy, but Master P is, and always was, Part Of The Machine.

Re:The "Flexible" Elevator - Going Up?

[Golias]

Oh, and MC Hammer is another good example.

On his own label (not without a label... he got backers and started one): "Feel My Power" sold 60,000 copies. This is considered a "jackpot" in the indie music scene, even though it's not enough to sustain a comfortable lifestyle. Think about it... after taking out expenses to pay off the handful of employees involved in promoting the record, and taking out an even bigger chunk to pay off those who backed it, he still had to split the remaining money two ways with

End Result?

[Shads]

... I go back to snail mailing money to the artists and downloading the mp3. Shrug.

Re:

[account_deleted]

Comment removed based on user account deletion

Great idea!

[sseaman]

And do I make that check out to "50 Cent" or "Fiddy Cent"?

As the Ferengi say

[Anonymous Coward]

Greed is eternal

Re:As the Ferengi say

[ScentCone]

Greed is eternal

The funny thing is that the usual arguers on both sides of this issue will think you're talking about the other side. People who produce and distribute the product are eternally interested in remaining profitable as the do so, and the people who want popular music seem to eternally want their entertainment for free. At the intersection is (supposed to be) a market economy. But a lot of people on the consuming end seem to have lost touch with the general notion of "the person selling it is asking more than I want to pay, so I'll buy something cheaper, instead" and have shifted to "so I'll rip it off, instead" without any sense whatsover of causality (when it comes to the consequences).

Re:As the Ferengi say

[krbvroc1]

But a lot of people on the consuming end seem to have lost touch with the general notion of "the person selling it is asking more than I want to pay, so I'll buy something cheaper, instead" and have shifted to "so I'll rip it off, instead" without any sense whatsover of causality (when it comes to the consequences).

You contradict yourself. If the consumer feels 'the person selling it is asking more than I want to pay', they are likely not to purchase the item anyhow (if it is a luxury item). The industry l

So the model becomes ever more like...

[w.p.richardson]

allofmp3.com [allofmp3.com]?

Only way more expensive...

And encumbered with DRM...

No thanks!

Re:So the model becomes ever more like...

[pilgrim23]

Everyone KNOWS that the only reason Apple has done so well selling iPods is because of the beneficence of the music companies allowing iTMS to sell stuff for only 99 cents. Without them, the iPod would be history and the other players with pay per month models would be king.

"Sum ergo Cogito" -getting Descartes before de horse...

Re:So the model becomes ever more like...

[Reverend528]

Yes, many people who purchase iPods do so because they know that it will only cost them $9900 to fill that ipod with 10,000 songs. If the price goes up even 20 cents a song, ipod owners will suddenly be out an extra $2000!

Re:So the model becomes ever more like...

[Jeff DeMaagd]

Forget the arguments of legality, is anyone really convinced that the artist gets any of the money from the sales of music from that site?

Re:yeah, like that only legal in th eUS

[nine-times]

It's fraught with legal vagaries, yes, but I'm not sure it's blatant. IANAL, of course, but there's been some talk, and some people (including lawyers) have said that it isn't really addressed by law. For one thing, when you purchase something online, where does the purchase take place? If the purchase is in Russia, then it's a legal purchase. If you purchase a CD in Russia, and the purchase is legal, then I would assume you can transport it back to the US.

Of course, the real issue isn't really legality-- it's whether the record company will sue. If it's illegal and they sue, you're screwed, and if it's legal and they don't sue, you're fine. However, if it's legal and they sue, you're still screwed, and if it's illegal and they don't sue, you're still fine.

To date, I have no knowledge of anyone being sued for copyright infringement for simply having mp3s on their computers. It's always the sharing that gets you, partially because it's easier to find you if you're sharing, but also because it's easier to demonstrate you did something illegal-- copyrights were intended to deal with unauthorized distribution, not unauthorized viewing/reading/listening.

Ok, all that to say, it's not that clear. You pay your money, you take your chances.

Their merchandise, their prices

[MyTwoCentsWorth]

Why complain ? It is their stuff, and they can price it at any level they want. You can always buy from somewhere else or refuse to buy it altogether if YOU think it is too expensive, but I'll bet you that lots of people will keep buying at the new, higher prices. Why leave money in their pockets if they are willing to give them to the record companies ?
Happy Posting.

Re:Their merchandise, their prices

[A beautiful mind]

Why complain ?

Why not? It is certainly their right to price it higher, but it doesn't make it moral/ethical. Of course we can complain!

Feedback is beneficial for all.

[CyricZ]

It's important to complain, as that provides them with feedback on their decision. Everyone is better off if there is dialogue between the two parties.

If enough people voice their opposition, then perhaps Apple will realize that it is not in their best interests to switch to such a scheme. Thus everyone is potentially better off if Apple listens and responds accordingly. Customers can then continue to purchase the songs they want, rather than to boycott. Apple can continue to receive revenue from such customers, rather than having the customers go elsewhere.

Notice that the same thing happened recently with regards to Novell/SuSE and their switch from KDE to GNOME. They announced the switch, and many customers complained. The customers let them know that KDE was still wanted. And what did Novell do? They agreed to keep offering KDE.

It's better to work out such problems before involving money.

Re:Feedback is beneficial for all.

[dwandy]

then perhaps Apple will realize that it is not in their best interests to switch to such a scheme.

I could be wrong, but the way i've been reading this, it's not Apple that's pushing this change... it's the copyright holder, and since they own the rights to what Apple is selling, they don't have much choice in the matter.
Just like the consumer has the choice to pay more, or not buy, Apple has the choice to pay more or not sell...

Re:Their merchandise, their prices

[MilenCent]

Why complain ? It is their stuff, and they can price it at any level they want.

Um, maybe because we installed iTunes based on a promise that it wouldn't work this way, because we've already bought music that only iTunes can play, and because it S-U-C-K-S.

If we didn't complain, they'd probably blame something else for their sudden lack of revenue. Like, oh, piracy or something.

Re:Their merchandise, their prices

[WormholeFiend]

Ha! Ha!

The joke is on them, since I make MY OWN MUSIC!!!1!

For my own personal enjoyment, too!

Re:Their merchandise, their prices

[dwandy]

Why complain ?

...'cause without complaints, /. is a pretty quiet place.

Re:

[account_deleted]

Comment removed based on user account deletion

Re:Their merchandise, their prices

[nine-times]

Why does anyone complain about anything? Why are you complaining about other people complaining?

Good news

[generic-man]

According to Slashdot, popular music sucks. As a result, non-sucky music will cost less than it does today. This is good.

Re:Good news

[AKAImBatman]

Don't worry about that. The music companies will soon be implementing a new system to assist you in getting the lowest price! Here's how it works:

Every song in the system will be ordered by the number of downloads it had last month. The rank will then be sorted in reverse. The position of the music on that list will be its price. Therefore, Britney Spears will cost only a penny, while Simon and Garfunkel will cost $300! See? Now you can get Britney Spears for cheaper! Aren't you HAPPY!

And so it begins..

[Anonymous Coward]

I wonder if 'flexible pricing' will allow them to adjust prices 'on the fly' - let's say 10,000 users download Song A priced 99c and software automatically then adjusts the price to say 1$ 29c or similar price.

Then again, there is no end to corporate greed so I'm expecting to see this in action.

Is this really a bad thing?

[Ossifer]

Shouldn't B-sides actually be cheaper than the hits? New material more expensive than oldies? People have been justifiably complaining for years of having to buy whole albums just to get one or two songs they want, and now they don't have to.

Re:Is this really a bad thing?

[mobiux]

this is why the music companies have a problem with itunes.
People don't have to buy the entire album to get a single or two, so the instead of spending $16+ for two songs, they are spending $1.98.

They are used to screwing people over with crap, so they can't see why people are fighting this.

Re:Is this really a bad thing?

[droleary]

I really don't see how you got modded up, since you seem to working with a world view that is fuzzy and warm and has absolutely no connection with how the labels work.

Shouldn't B-sides actually be cheaper than the hits?

Maybe. Since supply is effectively infinite, it may also be that the hits should be cheaper. And who is to decide what is a B-side these days? You think a record exec is really going to walk away from money should something initially considered B hits big?

New material more exp

Guys, this is a strange story

[daviddennis]

"Believes"?

It's a story if you have someone say that he "knows" Mr Jobs will do something, or - better yet - if Mr Jobs actually says he's doing something.

But if a record company executive says it, and he has a vested interest in having it happen, and perhaps almost a desperate need for it to happen, well, I don't think his word or judgement is necessarily good.

Record company executives have, from what I've noticed, little reputation for integrity. Until I hear this from Mr Jobs' mouth, or a slick press release and video from Apple about its inevitability, I'm not going to believe it.

D

Re:Guys, this is a strange story

[BushCheney08]

Exactly. The story title should be "Apple iTunes to End Flat Fee Pricing?" Question, not a declaration.

Apple employees say no

[fishmasta]

I was talking with a guy that works at the iTMS today and he said that there are no plans for that, and Steve's still strongly opposed.

"According to EMI"

[ErikTheRed]

Yeah, and I'm sure their opinion is 100% pure and unbisased. This could very well be a ploy to pressure Apple into complying. Also, even if it is true, Steve Jobs will send them packing for pre-announcing it.

Take your time

[Mr. Sketch]

It seems that they will end their flat fee sometime within the next 12 months . This gives them plenty of time to decide on pricing and get public opinion on the issue.

If there were a major backlash, I wouldn't be surprised if they back off the decision.

conjecture?

[vena]

What a label boss "believes" doesn't translate to "Jobs will do it" for me. I'll wait for word from Apple before calling Jobs out on his previous spine.

Just to make sure...

[Spytap]

...So the most easily pirated material (the popular stuff) is going to be more expensive, while the harder to find stuff (the less popular songs) will be cheaper? Either they're changing their business model more drastically than ever before in their history to expand the appeal of smaller artists...or they're just in it for the short run to prove that digital downloads don't work...

Good.

[Senes]

Let the prices change. If someone wants to price their music competitively, let them price their music cheaper. If someone thinks that the latest Britney Spears/Eminem/Metallica album is worth more for a digital file than a CD, then let them get ripped off to their heart's content.

Apple often seems to be on the side of the RIAA over our side, but that's because our side is OUR side and that makes any compromise be less than what we want. I really would welcome price changes in both directions; independant artists being more competitive, and big fat companies ripping off diehard fans more than usual. Go Apple.

The RIAA Strikes Back

[KodeJockey]

As part of the deal, Sony has agreed to include malicious code that will open gaping security holes on your devices with the higher-priced downloads.

Crap

[psykocrime]

Buying music online should be less expensive than buying the equivelant CD, since you're not getting as much value when you buy online (see: DRM), and the manufacturers aren't paying for packaging and shipping. If they push the prices up to where all the tracks on a given CD cost more than just buying the CD, you'd have to be an idiot to download from an online store.

Within that framework though, I don't see any reason not to have flexible pricing. Most of the music I listen to is older, less popular stuff anyway, so I'd probably benefit (if I actually used iTunes in the first place). I hope Krokus, Vixen, White Sister, Rough Cutt, Faster Pussycat, etc. songs go down to about a quarter each... I might actually start buying online then.

Paying more for popular songs

[raider_red]

Since I think that most popular music sucks, I don't think this will affect me too much. I'll just keep downloading songs from obscure groups, and paying my $.99.

Sensible capitalism

[jfengel]

The reason people complained before is that the record company exec was insisting that Apple raise prices but not lower any prices, which is just foolish. You can let the market help you set pricing to maximize profit, but you can't have it both ways. If you just raise prices that's not letting the market decide, and you'll lose money from people who would pay $.49 for a less popular song but not $.99.

It makes sense to me that the one good song on an album would go for more than the rest. The record companies are ticked that they're losing revenue that they used to get; it used to be you had to buy an entire $12-$16 album to get the one non-sucky song. Perhaps $.99 is too low for that song, if people are willing to pay more, as evidenced by the fact that they used to spend MUCH more.

There will be the inevitable replies to this about how you can get it all for free on P2P, but Apple has demonstrated that people will pay for music if it's convenient. Now they get to fine-tune the pricing model.

Personally, I look forward to it. If the latest top 40 goes up, and the older and obscure stuff that I want goes down, I win, at the expense of the rubes paying $2.49 for whatever is hot today.

Dynamic prices = higher costs

[zakezuke]

No matter which way you cut it, the moment you introduce a variable into the equation it's going to raise the costs. Assuming even the copyright holders were not bastards, which they are... you gotta employ people to keep track of the market value of tracks and makes bookkeeping more tedius. 99c each would actually encourage artists to actually produce songs worth paying for as opposed to the system of one or two singles and a bunch of filler crap which no one would pay for, but switching to variable pric

Infinite supply = $0.00 price!

[Suzumushi]

If they are going to use demand for a product to determine pricing, they should also be required to factor in supply. The supply is infinite, so then the price should be practically nothing!

I like it.

[no_such_user]

This works well for me: If the most popular songs, and generally suckiest, are the most expensive, a quick sort from lowest price to highest will yield the best songs. What's not to like?

Misleading

[nine-times]

Some record exec says he *thinks* Apple will introduce variable pricing, and suddenly all the news sites report that Apple will do it. The record companies have been after Apple to introduce variable pricing for some time. Is it any surprise that they think they'll get their way?

Labels can't see past their own greed.

[Steve Cowan]

Apple provides a viable way for record labels to transition from media-based distribution to an on-line model, and the labels in turn slap Apple in the face and say they're not making enough money.

Jobs was absolutely right to publicly go on record saying this behaviour is "greedy". The arrogant fat cats who run the music industry will, in the end, price themselves into extinction.

There is value in a unified pricing model that consumers find attractive. I believe the increased volume would make up for the

just another way of saying 'we are raising price'

[lashi]

I think the record company is just trying to raise price of downloaded songs overall. First they will say flexible pricing and raise price on most of the popular songs, while lower price on a small number of unpopular ones. Then a few months later, all the cheap ones will go back to 99 cents with most songs sell for higher.

Read between the lines.

Somebody CAN'T read!!!

[Warlock7]

From the article:
"Today EMI Group boss Alain Levy said at press conference today that he believed Jobs would introduce multiple price points for iTunes music within the next year."

This does not say that "...EMI has an understanding with Apple that flat fee pricing will end within the next 12 months..." as the story claims.

Why was this story allowed to be posted this way? /. seems to be slipping...

The actual Forbes story is talking about how the labels want to take advantage of the consumers while Steve Jobs does not want to change the pricing structure. He's fought against it from the beginning and there has been nothing reported to support that the labels have won the fight yet.

If teh Steeve had teh Ballz....

[otis wildflower]

... he'd say "You want variable pricing? You got it! You can charge anything you want, but the cap is still 99 cents!"

Meh.

Who cares?

[sulli]

I never buy from iTMS anyway. I refuse to buy DRM'd tracks. Let them charge $99, it doesn't matter.

ATTN:RIAA

[eno2001]

I have the solution for you and it consists of a few simple steps:

1. Stop producing crap artists with guaranteed star power and invest long-term in less popular but more qualified artists that you are currently rejecting
2. Divorce yourself from the ClearChannel monopoly in the United States. It's not helping matters since they aren't exactly a hotbed of diversity in programming
3. Continue to offer your music on CD as well as non-DRMed cross-platform media files and watch your profits soar higher than you e

Sounds good to me

[mapmaker]

The world's 14 year olds can pay $2 for the latest 50 Cent "song", and I'll pay 50 cents for real music.

some bad, some presumed good

[MORTAR_COMBAT!]

the bad:

now I have to check the price of every song before I buy it to make sure it's not been deemed "worth" $2.99 or whatever.

the presumed good:

much of the music I'm interested in will drop to $0.79 because it is far from "popular".

yeah right.

This will not increase revenue.

[krinsh]

The audience for digital music buys it because they get the songs for 99 cents and can buy one or two at a time; not because it is digital. I don't see the more popular songs making the labels any more money. CD sales will continue to drop because the majority of purchasers are looking for bargains; not hits. Those that look for 'hits' are going to continue to watch VH1 and BET and trade copies either analog or digital. I know that in my 30s I'm not really the market for what they're doing; but everyone

That makes sense

[overshoot]

... after all, the labels charge a lot less for stuff from the 60s and 70s that they don't have to amortize, market any more, etc.

Oh, wait ...

Simple solution

[dcavanaugh]

Everyone sets their own "do not exceed" price limit. 99 cents would be a logical point for most people. When they can't sell anything above 99 cents, the market has effectively limited the price. Meanwhile, the prices have dropped for some of the older stuff, so once again, the music industry shoots itself in the foot. They will have no problem getting people to accept a decrease.

If nobody has the self-discipline to set a limit, then the music companies truly deserves more money because people are willi

Um.. ATI anyone?

[enderwig]

Wait, this record company exec released information about iTunes Music Store and Apple wasn't available for comment? I don't think Jobs like being put on the spot like that. If a deal has been struck and EMI jumped the gun, will they be punished like ATI for "leaking"?

officials were unavailable for comment

[digitaldc]

They were all stuck in an arduous meeting trying to determine the pricing of every song for each of these albums:

Sgt. Pepper's Lonely Hearts Club Band (Soundtrack) - Bee Gees and other Various Artists
The Endless Dream - Yanni & John Tesh
Osmond Family Christmas Album - The Osmonds
Lord of the Dance - Ronan Hardiman & Michael Flatley
All or Nothing - Milli Vanilli
Middle of Nowhere - Hanson

see: http://listsofbests.com/list/64/ [listsofbests.com]

i had no problem buying from itunes before

[hsmith]

for me, $.99 isn't bad, it is easier than searching for songs for 1/2 hour. now, they can go screw themselves. i will not pay over that, it should be 1/2 that price.

The truth of the matter...

[PortHaven]

Apple makes what, $0.29 out of $0.99, the artist gets maybe $0.10. That means that the record labels get $0.60 for doing jack-crap. In truth, I support variable pricing. The record labels should forego some of their pennies and let the oldies retail for $0.50.

Another thing to bare in mind...

[axonal]

Users will be more willing to use digital downloads now, since the whole debacle over "malicious code" infected CDs from Sony. So, the industry might have to come to terms with their pricing just to keep consumers.

Who decides what is popular?

[Dekortage]

From the article: "Label executives have made multiple arguments for flexible pricing. They argue, for instance, that almost all retail businesses have different price points for different products." Who decides the price points, however? Who decides which albums/songs are popular vs. less popular? Would Apple decide, or the music companies? Is it "according to traffic on iTunes" -- e.g. when more people buy it, the price goes up, like a stock -- or "measured by radio play or CD sales or Billboard ranking", or "what the record companies are declaring as popular"? What's the reference???

Why the heck doesn't Apple:

[PortHaven]

1) Start signing bands on a 50/49 cent split. (OMG...can you imagine it, artists getting more money than the label for a change)

2) File a lawsuit on behalf of the artists...that said artists only negotiated "analog" recording distribution rights. That none of the old contracts covered digital distribution. And that all of the artists retain the rights to their digital distribution, including the right to negotiate a digital distribution contract.

(Think about it, a) the common people would support it as I would buy a lot more music at $0.99/song if I knew the artists actually benefited. b) think of how many artists would support such a move? big names too like "Paul McCartney"... As many artists were screwed over big time. Even big name artists saw very small percentages of their songs. This would allow Paul McCartney to regain ownership of his music (for digital distribution only). RIAA would still retain the analog rights (but we all know that's a dying medium). And with RIAA pushing so much legislation distinguishing the difference between Analog and Digital (DMCA) there may in deed be enough cause for a court to decide in Apple's favor especially if 90% of the artists and consumers are in favor of it as well.

RIAA would find themselves the owner of an extinct business model. Left with a rotting carcass...

- The Saj

Re:Why the heck doesn't Apple:

[Morgalyn]

Unfortunately, Steve has commented multiple times (here's one [rollingstone.com], an interview with the Rolling Stone) that they are not in the business of signing artists. He recognizes that music companies have an expertise in signing artists, in choosing the ones they think will do well versus the ones that will flop. Apple does not have that expertise. Granted, I think it they really wanted to, they would do it, but that might cause the wrath of Apple Corp (see other comments if you need background). Then again, he also used to dispute the coming of the video iPod....
From the linked article:

When is Apple going to start signing musicians - in effect, become a record label?

Well, it would be very easy for us to sign up a musician. It would be very hard for us to sign up a young musician that was successful. Because that's what the record companies do. Their value is in picking that 1 out of 5,000. We don't do that.

We think there's a lot of structural changes that are probably gonna happen in the record industry, though. We've talked to a large number of artists that really don't like their record company, and I was curious about that. And the general reason they don't like the record company is because they think they've been really successful, but they've only earned a little bit of money.

They feel they've been ripped off.

They feel. But then, again, the music companies aren't making a lot of money right now ... so where's the money going? Is it inefficiency? Is somebody going to Argentina with suitcases full of hundred-dollar bills? What's going on?

And it turns out, after talking to a lot of people, this is my conclusion. A young artist gets signed, and they get a big advance -- a million dollars, or more. And the theory is that the record company will earn back that advance as the artist is successful.

Except that even though they're really good at picking, still, only one or two out of the ten that they pick is successful. And so, for most of the artists, they never earn back that advance -- so they're out that money. Well, who pays for the ones that are the losers?

More popular = more expensive?

[ortholattice]

The law of supply and demand in action, I guess... It would be a shame for them to run out of the more popular songs, so they price them higher to keep the demand lower, right?

Not Apple's stance

[amichalo]

Steve Jobs is quoted [businessweek.com] as saying the opposite and further than music companies are "greedy" for wanting this price flexibility.

I for one welcome flexible pricing because I think there is some music I would buy for less than $0.99 that I have not bought because of its current price. Pay more an a dollar for a single? That would have to be some great music, I doubt I would do it. Everyone has their price. mine feels like a dollar.

Why must they always kill the goose...

[phillymjs]

...that lays the golden eggs? What a bunch of morons!

The iTMS achieved its status as the most popular online music store by being easy to understand: You get the same rights for every song, and every song is the same price. That's called being customer-friendly. Contrast that with the stores where songs are all different prices, and some can't be burned to CD, etc.-- they're all also-rans, killing each other for the small sliver of the market not controlled by the iTMS.

When the prices go up from 0.99 and that psychological barrier is broken by a nonzero digit left of the decimal point, sales will go down as people balk at song prices and go back to p2p for their music. And does anyone think the record companies will really lower the prices on anything people would actually buy? Haven't they demonstrated that they have no stomach for charging x when they could be charging x+1?

When will these jackals learn? <shaking head in disgust>

~Philly

Behind the curtain, the conversation, the deal.

[haplo21112]

I am sure the conversations between Apple and Music EXECs where something along these lines:

Execs: You need to allow a flexible pricing model where more popular stuff costs more so we can all make more money

Apple: No we don't .99 is working just fine, its an excellent price point sure the less popular stuff we are probably way over charging for, but its made up for by the fact we undercharge for the more popular stuff so money gets made on volume...you can look at it the other way too and the model looks just as good.

Execs: We don't care about the less popular stuff from the bands with actual talent, never did, those acts could drop off the face of the earth for all we care, charge whatever you want for that stuff, here is a list of the artists we care about and have the payola going to promote them even though we all know they suck, oh wait crap *sleep* When I snap my fingers you will akwake and not remember I ever mentioned anything about payola *snap*

Apple: huh, wa...oh yeah, no we are sticking with .99 its an effective sweet spot price point, we will stick with that, besides we control 85% of the online distorbution model we must be doing something right.

Execs: We'll stop selling our stuff through iTunes, then where will you be?

Apple: Eh, whatever you'll be back...we control 85% of the market and sell the most popular player.

Execs: Oh yeah we wanted to talk to you about that we want a cut of the iPod hardware sales too, its only fair.

Apple: Na, You don't seem to understand you need us as I've pointed out we basically own this market yes you make the widget we are the only effective way of getting the widget to the customer

Execs: We'll take our toys and go home, without the music you have no store....

Apple: Without our STORE you have NO STORE

Execs: so there see we need each other so lets talk about that pricing

Apple: no really you don't seem to understand .99 is what the consumer will pay, they are tired of $18 for a CD with two good songs on it, they would rather pay $1.98 to get those two good songs, or $18 to get 18 good songs. Your trying to achive price parity we see it you want the same cash for that CD without selling the end user the physical media. Nice cost savings for you, no raw materials cost, no shipping, no brick and mortar, You must really think those users are idiots.

Execs: (TO self) Oh shit they are on to us.

Apple: No really I think we are going to stick with .99

Execs: I think you don't understand, we really are going to take our ball and go home, ALL of us where will your store be if none of us provide the music to sell in it. NONE. Other stores will work with us on it, sure the players they support are not as good, the store isn't the best model, but hell they will charge whatever we tell them to charge just to get their hands on the product...

Apple: Well you don't have to go that far, maybe we can work "something" out.

Execs: Well thats more reasonable, perhaps we can work "Something" out.

Apple: (TO Self) umm humm you just keep thinking that, sure we'll agree to your "Flexible" pricing...BUT just wait until you see the terms, and when the sales slump on the first couple of releases under this plan, because TRUST me they will, we will make sure of it...

Execs: So we have a deal

Apple: Sure Sure we'll phase it in like the next year

Execs: Excellent!

Apple: (To Self) Umm humm more like 2-3, never, perhaps a token release here or there for a higher price, actually you have played right into our hands, yeah we'll rasie the prices on a few things, but wait until you see the price drops on the back catalog...Volume, its all about Volume, and didn't you notice that clause in the agreement that says we always get the same wholesale cost and keep the same amount of the profits per purchase no matter what, when the price goes down to .79 on that Metallica song from 1990, that .20 is coming out of your share not ours.

Steve won't like this

[aduzik]

If there's anything we genuinely know about Steve Jobs, it's that he loves simplicity. You can see it in the design of everything that Apple produces from its hardware to the iTunes Music Store. That's why Apple sells only two configurations of each of its iPods. And the prices even mesh well: the low end full-size iPod is more expensive than the high end iPod nano. Offering every song for the same price eliminates all the guesswork. If you're standing in a store looking at a CD, you know exactly what it would cost at the iTunes Music Store. That makes your decision largely a matter of "are the liner notes and actual CD worth an extra $5-6 to me or not?"

But what's most important to notice is this: a variable pricing scheme as described in TFA could seriously hurt Apple's sales. While I have no data to support this claim, I'm sure that Apple makes most of its money from popular songs. However, remember that when an album is new and popular, the retail price is usually lower to boost first-week sales. I doubt that this same policy would apply to the iTunes Music Store. Thus, if the price is higher at the iTunes Music Store, a full album could very well end up being more expensive than the retail CD.

We live in an impatient world, and this has at least two implications: people won't wait for the price to come down and will buy the CD at retail, or people will pay more for the instant gratification of the iTunes Music Store. I think the former is more likely, because in reality you would be getting more (a real CD) for less. People love a bargain.

So if you're the kind of person who buys popular music when it first comes out, which many if not most of the iTunes Music Store's customers are, chances are good that you will never have cause to buy an album from the iTunes Music Store again. Plus, suppose that when an album is no longer "new and hot" that Apple is permitted to lower the price. By that time, people have lost interest that Apple could lower the price substantially and they still wouldn't sell many copies -- everyone who wants it already has it.

There's also a psychology at work here. $.99 seems a lot smaller than $1.00, even though for all intents and purposes there's no real difference. That's why you rarely buy anything in a store that is an even dollar amount because $39.99 looks a lot smaller than $40.00. Suppose Apple starts selling at $1.19 for a popular track. That's only $.20 more and 20% higher than $.99, but gosh, $1.19 looks huge compared to $.99. That $1 mark makes a big difference in terms of the perceived cost of a song.

In the long run, I don't see how this can be anything but bad for Apple. And, the more the record labels try to screw people over with high prices, the more people are perfectly content to screw over the record label by downloading illegally. So it may even end up being worse for them. What it boils down to is this: one way or another, people will download music. Whether it happens legally or not is entirely in the hands of the record companies.

Bye Bye Itunes

[nurb432]

This will only serve to increase market share of those services where for a flat monthly fee, you get to download what ever you want.

Bad move Apple. Steve Jobs must be calling the shots again.

Re:So How Much is that 80's Hair Band Music Worth

[psykocrime]

Do you think you'll have to pay more or less than $0.99 for your favorite throwback band.

Heh, I'm hoping less. I could rack up on "hair band" music if the price drops to about $0.25 per track. Lots of it would be a steal even at $0.50 / track...

Personally, I relish the though of all the kids that must have the latest/greatest junk out of the studios paying buku dollars in order to subsidize me buying up older stuff I used to love in College

I hadn't really thought of it that way, but good point. Let the g

Re:Good job apple

[Theaetetus]

RTFA.

It says that the CEO of EMI "believes that Apple will end flat fee pricing... Apple could not be reached for comment."
Jobs is on record as saying that he won't raise prices and that the people who want to are just greedy bastards.

But don't let reading the article stand in the way of your joke, of course.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:But that's not how the stores work...

[freeweed]

You have supply and demand working in reverse to the real world. So does the music industry.

Just imagine if all retail worked like this (your suggestion). You'd go to a clothing store, and instead of last year's stuff being marked down, it would actually increase in price.

Note that this is pretty much how DVD sales go. Seems to work for them. Video games too. New, popular stuff expensive, older items that don't sell well become cheaper. Eventually it's pennies on the dollar. Why does this work? Because by that time, the manufacturer/retailer has ALREADY MADE THEIR PROFIT. The rest is gravy.

Music is one of the only things that starts cheap, and gets more expensive as time goes on. It's weird, really. They can get away with it because of two factors:

1. Music is one of the only products that people will continue to buy decades after release.

2. Perpetual copyright.