Music Exec Fires Back At Apple CEO

geniusj writes "Warner Music Group CEO, Edgar Bronfman Jr., has fired back at Steve Jobs in response to the Apple CEO's claim that having variable pricing for iTunes music would be 'greedy.' From the article: 'To have only one price point is not fair to our artists, and I dare say not appropriate to consumers. The market should decide, not a single retailer ... Some songs should be $0.99 and some songs should be more. I don't want to give anyone the impression that $0.99 is a thing of the past ... We are selling our songs through iPod, but we don't have a share of iPod's revenue ... We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only.' Perhaps iPods combined with iPods are selling music as well, and it's not just a one-way street?"

Do they get a share of the sale of CD players?

[Nicolas MONNET]

I don't think so. Why should they deserve a share of iPod sales?

Taking this to its logical conclusion

[Alex Reynolds]

Maybe the record companies should get a cut of every CD player and stereo system ever sold?

Notice what he didn't say...

[stoneymonster]

Some songs should be $0.99 and some songs should be more. I don't want to give anyone the impression that $0.99 is a thing of the past ... We are selling our songs through iPod, but we don't have a share of iPod's revenue

So I guess no songs should be LESS than $0.99. Apparantely that is the minimum value for all music clips of any length or quality. Oh, and I like how they want a cut of the "iPod" revenue. Maybe they should go after CD player manufacturers and home stereo's too, by that logic. Classic.

Two thoughts

[Wesley Felter]

I actually think variable pricing would be OK -- if it went the other way. Make some songs 99c and some less. After all, music is part of the computer world now, and in the computer industry prices only go down. :-)

As for wanting a share of the music player revenue stream and needing to "monetize their product", what's wrong with the ~75c per song of pure profit that they're making now? Music labels didn't get a cut of Walkman or Discman sales; why should anything change now?

Re:Wow. A walk down contradictory lane!

[adrianbaugh]

That's the best suggestion I've heard so far. Even if 99 is the lowest the music industry wants to go, what about 99 for stuff older than 5 years, $1.25 for newer stuff and $1.50 for top 100 stuff? It might get people to look a bit more broadly than whatever's on the radio today, and in so doing realise what dross most of the top 100 is, compared to stuff that has stood the test of time. And if not, well at least the record industry's mammoth profits are mostly at the expense of people with poor taste ;-)

Re:Do they get a share of the sale of CD players?

[Precambrian-C]

Aren't they already getting the majority, like, I don't know, maybe 90% of the iTMS sales? Wasn't iTMS at least originally just trying to get to break-even point? Apple may be making some profit off iTMS sales now, but hardly like anything this guy is talking about. Now the music publishers are wanting that for those songs that are selling more, they want to charge and make more, and claiming it is more fair for the artist. Yeah, right, like the artist will see 2 cents of that. Hey, if the work is more popular it will sell more, if not it will sell less. They are only wanting to charge more because they think the market pay it, judging by the apparent demand for the work. Even so, online music sales are at least at preset such a small, small piece of the music sales pie, how much more would they really expect to get. The more I think about it, the more they do sound like greedy bastards afterall.

Re:Do they get a share of the sale of CD players?

[BandwidthHog]

That was what I thought at first, but by the time I got to the end of the article, I was pretty sure he really did mean to imply that his industry was entitled to a cut of each and every iPod sold. Perhaps I’m wrong, but Bronfman isn’t known for being the brightest crayon in the sandwich, if you get my drift.

Re:Do they get a share of the sale of CD players?

[ioErr]

That man simply does not know the word "iTunes" and was substituting "iPod" for "iTunes Music Store."

"We are selling our songs through iPod, but we don't have a share of iPod's revenue," he said.

No, it really sounds like he want a part of the iPod profits. To claim that they don't have a share of the profits from the music store would be more of a lie than I'd expect even from a representative of the music industry.

Re:Taking this to its logical conclusion

[Precambrian-C]

hey, while we are at it, my higher range hearing has been adversely affected by, um, maybe age, (ahem), and I know for sure one certain Ted Nugent concert, (WAY to close to the speakers), gunfire, etc., so if my ability to hear and enjoy the music is not the same as the average person, shouldn't I pay less?? Hell, it should be on a graduated scale where my cost is directly proportional to the amount of the music that is in the range of my hearing. Cheap grozny bastards.

One little piggy went to market

[mmarlett]

Let the market decide the price? Well, Napster will let you have access to 1,000,000 for $10 per month. Now, it's not really far to say that $10/1,000,000 is the price, because you can't listen to that many songs in a month. An average month has roughly 44,000 minutes in it. Figure an average person will sleep through a third of that (eight of 24 hours), and (let's through the industry a bone and say that I'm a shallow teenager with no attention span) a poop -- sorry, pop -- song is 2.5 minutes long, that's about 5,849 songs that I can listen to for $10. That means each song is worth $0.0017 -- a tenth of one cent.

The free market rocks!

Wait... wait a second. He didn't say anything about being cheaper than 99 cents, did he? Crap.

Re:Price Fixing

[bananasfalklands]

His concern for the 'artists' is funny. I mean unless your like u2 you still need a job at mcdonalds because of the fees the record companies charge.

Celine Dion declared herself bankrupt and she apperently sold millions of records/songs, there is also that Courney Love speech and thats been covered here before.

If he wants to make 'artists' rich perhaps he should get out the entertainment business so the artists make more profit.

When will someone PLEASE drop the other shoe?

[Chuqmystr]

There is obviously a transition, albeit slow, at hand. I read and hear more and more often of known musicians doing their own recording and there's a growing number of indie artists doing everything from soup to nuts - meaning recording, producing and marketing their own content. I wish things would speed up. What does it take for this trend to gain momentum? How come I don't see these artist who are involved in producing and marketing their own content banding together and creating their own marketing campaigns to promote purchasing music online? A campaign in direct challenge to these goddamned douche-bag record companies crap anti-piracy/it's not fair to our artists three ring circus?

Here's what things I see needing to happen before everyone can fully give the labels the collective finger

• Like I said above, artists need to band together and have a common voice that is well heard. They need to educate the public of the benefits for everyone of buying music online. I also don't see a reason why record stores cannot buy and resell the same music. There's some other possibilities in that idea alone I'll get to later.
• Artists, producers, recording engineers and marketeers need to tell the labels to go shove things up their big fat collective ass and set out on their own. Ok, we don't need the marketing guys either, my bad. The way I see it artists can hire producers and engineers as need be. Producers and engineers can also go about setting up their own studios and labels. These "micro labels" could be more versatile and contract themselves to artists who have their own studios as well as providing the entire package. They could offer multiple sales outlets such as direct sales, making a deal with itunes, or basically giving the artist pressed media and masters to go sell on their own.
• We need more stores like itunes and they all need to agree on some standards, eg DRM (it will never go away so we'd best figure how to make it easy to live with) format of files, licensing and probably a lot of other things I'm overlooking. Hey, Lord Steveness, if you really want to take the world by storm and piss off "da man" then why in the fuck don't you quit dry humping your giant, inflatable luv ipod and stat licensing your music tech to those who want it? You could sell the "build your own itunes store" in a box. You could be selling Garage Band and some well polished editing/recording apps all rolled up in a studio packaged G5, and, OMG, it one-click [uh, better make that 3 clicks or Bezos will sick a lawyer on you] publishes to "iTunes in a box". Oh, and thee other digital music player manufacturers have well proven that they just can't make something as cool as the ipod so you might as well license your DRM to them as well. Hell, look at Motorola, you gave them the entire thing, interface, DRM and the name association and they still managed to fuck it up. My point is your precious ipod is safe. You need to take full advantage of what it has built for you. Geeze Steve, you could pwnz0r the music industry. I could go on this tirade for a *very* long time.
• Music stores could play a big role in all this. Why shouldn't the artists and micro-labels sell to them or sell from the shops on consignment? People are still going to want to buy CDs for a very long time to come and probably some other medium beyond that. I also envision kiosks in these stores where folks can purchase music electronically and burn CD's or even upload playlists they've just compiled to their players. Um, retail version of itunes there Steve-o?

In short. revolt, tear it all down and then all of you people out there in the industry who have an honest and useful talent step up and rebuild it. There's no reason you shouldn't continue making a living and there's every reason to rethink your business and end up making much happier customers and in turn making yourself a really nice living. To hell with fighting the existing recording industry. To hell with them, go around them. What law exists that sa

Sources of Music

[djwhornplayer]

This guy seems to imply that the music industry can kill the iPod by refusing to sell through the iTunes music store. This would only be possible if the vast majority of iPods was not filled with songs from P2P serivces and ripped CDs.

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A "Free Market" Observation

[Zen Curmudgeon]

"We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only" OK, then, start releasing music with more than "promotional value". To quote Col. Bruce Hampton, "The best thing about popular music is that it isn't popular for long." Take Care - ZC

Re:Do they get a share of the sale of CD players?

[Jeffrey Baker]

With games there is at least a small cost for the goods. They come on a disc or a cartridge and in a case, with a manual, and so forth. At iTunes the cost of goods sold is *zero*. The record company's gross margin on an iTunes sale is 100%. It's an enviable business, to be sure, but not enough for these greedy fucks.

Re:Do they get a share of the sale of CD players?

[Blondie-Wan]

It's not a billion songs yet. Also, some of those songs sold have been as part of albums, and a lot of the album prices work out to less than 99 cents (or whatever other currency is used) per song. The music labels have therefore gotten well under $700 million so far.

That said, however, your point still stands. It's clear the labels have made a heck of a lot of money by now on music they don't even have to physically replicate, distribute, etc., and they're making more all the time.

Re:Do they get a share of the sale of CD players?

[nEoN nOoDlE]

I think that movie thing is a brilliant idea. If they'd charge 3 bucks to see a million dollar movie and 15 - 20 to see a 200 million dollar movie, people would just go to see the cheap movies. More cheap movies would be made, usually by indie filmmakers and the big budget crap blockbusters would die out. That sounds great!

Re:Warner Music Group CEO, Edgar Bronfman Jr...

[sabat]

aware that Apple might start dealing directly with the artists? Of course, they would have to come to a deal with the other Apple, but I'm sure that wouldn't be a huge problem.

...

If not for most artists already having a strangling deal with a major record company which prohibits them from doing so.

The artists need to get themselves released from their contracts, or merely let them expire.

Then, Apple promotes them. They go from making .45 (you read that right, 45 cents) per CD to something closer to 100%.

Proves the point

[glebd]

We are selling our songs through iPod, but we don't have a share of iPod's revenue

Doesn't this prove Steve's point that the records industry is getting greedy?

Re:Do they get a share of the sale of CD players?

[bsgk]

This is a over-simplification of their business though. Sure, the COGS for one song on iTunes is $0.00 to the music label. They still have all the overhead in finding / developing / producing / marketing artists. Now, you may believe they do this inefficiently, but that doesn't mean they don't have those costs.

My question is, why is it so hard / bad to vary prices on iTunes? It's basically considered a success, and if price tiers prove to lower overall revenue (volumn sold vs. price), they can revert to $1 / song. This is just a market approach to pricing songs. If Green Day's label can make more revenue on iTunes by selling their hits for $1.50, why not? It's their call. If they can also increase revenue by lowering new artist prices to increase overall demand (units sold), so be it.

Why do people defend the $1 price so much? It was just an initial, simple price to test the market. The market has been proven and is very strong. Pricing strategies are usually executed at this point, Apple is just being controlling. IMHO, I think labels will succeed in implementing a new online pricing strategy, as well as forcing hardware and software vendors to introduce compatibility between players.

Feedback loop

[Have Blue]

He's also forgetting that once there's a disincentive to downloading popular songs, they're going to get downloaded less, and since the music charts themselves are based on the quantities purchased, the top songs will fall down the charts and into a lower price bracket, thus simultaneously making the charts meaningless and ensuring that the music industry won't actually realize the extra profit this move was supposed to give them. Brilliant.

Well, that's easy to solve, then

[mcc]

"and I dare say not appropriate to consumers" ????

If this guy thinks that songs should be sold for more than $0.99, then he should go ahead and do so. I mean, really, go ahead and start selling songs for more than that and see how that works out. He is perfectly free to set up his own online music store, and because of the extreme flexibility of the technology involved, this will just involve getting the files on to your portable music player from a URL instead of from the iTunes application.

Once he has done this he can set the songs in his music store to cost $1.99 or $5.00 or $53.00 or absolutely whatever price he likes, and if people choose to buy it then all of that money will go right to him. While of course meanwhile the iTunes Music Store will still be back there offering quality music at $0.99 a song.

Then the market will decide for itself. That's what he says he wants, right?

Re:Do they get a share of the sale of CD players?

[Jeffrey Baker]

I don't think there's anything wrong with varying prices and I don't defend the 99c price point. What I object to is the record companies trying to dictate the retail price. If they aren't careful, Apple will drop the 99% of music that is crap and control the price to their benefit on the remainder. As the retailer Apple ought to be able to dictate the retail price and negotiate with the manufacturer over their cost. But Apple has already given them a sweet deal by allowing them to dictate terms like songs not available, not available individually, albums costing above the $9.99 price, etc. So Apple is already being really nice outside of the traditional retailer/wholesaler relationship.

I think the record companies do not understand the power relationship involved here. They ought not to go poking the eyes of their largest online retail outlet.

Re:Do they get a share of the sale of CD players?

[jkabbe]

The reason you don't charge a different price for a more expensive movie is that the cost per showing is exactly the same regardless of the cost to create it (e.g. cost of wear and tear on the print, cost to the theater for projector maintenance, etc).

That same logic suggests that software should be priced based on the number of CD's it comes on, rather than the amount of effort that went into it or the amount of value it brings.

Yeah, yeah, I know - software and music should be free :)

A drowning man graps even at straw

[inchhigh]

The music industry is largely superfluous at this point, but unfortunately they haven't realized that yet. Unfortunately, they won't go down without a fight, and since they have made such an obscene amount of money over the years, they have the cash reserves to wage quite a war.

Vote with your dollars, go see live music. Go see that local band that has been playing at the corner bar for years. Find someone who seeks out music outside the mainstream and have them make you a mix. There is so much more out there than reaches the top 100. As digital distribution expands we will have more access to what we want, not what we are being force fed. Turn off MTV, it is the industry.

'The words of the prophet are written on studio walls'

What would happen if the Music "Industry" folded?

[ctbarker32]

There seems to be this pervasive attitude of those in the so called "Music Industry" that they are besieged and on the verge of collapse. My question is what's wrong with the Music Industry actually going under and disppearing? I've heard long time "slaves" such as Roger McGuinn (of the Byrds, etc. kiddies) that he gets a fraction of one penny on the sales of his older Columbia recordings. When people like Bronfman talk about the music industry getting squeezed, it's not the artists. The bulk of the artists rarely got much. It's all the middleman in the "Music Industry" that are screaming bloody murder. The industry is top heavy in hanger's on that siphon off the bulk of the profits.

So what if the music industry folds? Does that mean no one will ever sing a song again? Will the world be silenced forever? Will Beethoven, Mozart, et al roll over in their graves because there is no more music industry? I would like for people like Bronfman to explain in very detailed terms what value they bring in the 21st century to the music making process? My guess it is a very marginal addition.

I have over 5,000 cds and a couple thousand Lps. If there was never another CD produced, I still have enough music to last me a lifetime. Additionally, because of advances in computer tech, I can now produce my own music which I do for my own amusement. It may not appeal to anyone else but I get enormous satisfaction from doing it myself. Again, what do I need the music industry for?

I say let the music industry perish. Out of its ashes, a new phoenix will rise that will be a lot more interesting and compelling. Dollars will flow to those that embrace a modern paradigm.

Re:Do they get a share of the sale of CD players?

[MaskedSlacker]

Furthermore, he claims that the "market" should decide the price of music, a la supply and demand (i assume that is his implication). However, with digital media files, the supply is literally infinite, therfore, traditional market dynamics do not apply. There is no reason for more popular songs to cost more, just because they are in higher demand, because supply is inifinite.

Re:Do they get a share of the sale of CD players?

[anagama]

Defintely a jackass. I bought a Mac in January. I just checked my "purchased music" -- 305 songs. Now granted, about 25 of those are freebie downloads, and some albums have more than 10 songs, but I'd bet I've spent easily $225-$250 in the last 9 months.

In the previous five years before I got the mac, I could count on one hand the number of CDs I bought -- four to be exact, 3 of which were European imports and one of which I bought directly from an independant artist. So yeah - this guy's an idiot -- w/o itunes they would have made a grand total of diddly squat off me. Greedy bastards. Need to toss that out too.

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Re:Do they get a share of the sale of CD players?

[Oculus Habent]

Right now, you pay either $0.99 per song or $9.99 per album for most music. Some artists charge "song value" for their albums (14 tracks = $13.86). There are already some exceptions in album pricing, and artists/labels can enforce album prcing by offering certain songs as "Album Only".

they can revert to $1 / song

The odds of the music industry accepting a return to $1/song after they've rejected it, even if it worked better, are low. Why? Because they still don't really understand the benefits of the medium.

Record labels are venture capitalists. They invest in hundreds of artists, hoping that some of them will be big enough to cover the costs of the others. They pour money into marketing to generate interest and then adjust the price point of the album to reap the maximum benefit of their advertising investment.

Online sales are still seen as a form of threat to the "traditional" business model. This is going off a bit, but it does have a point.

The music industry, hasn't come to see the benefits of Lean Enterprise/Just-in-Time Manufacturing. When a new album (movie, book... same problems for each industry) comes out, there is a huge initial push in production. Make a massive number of copies, and get them out there for distribution. With the batch production runs, they spend less per disc with larger quantities.

As online music sales take hold, it threatens to diminish the demand for CDs. As the demand goes down, the production runs decrease, and it costs the record label more per disc. Even though they aren't spending anything extra on the electronic download (bandwidth charges are probably lower than freight) they are "losing" money. I know it's not actually loss, but we've seem countless demonstrations of their math skills.

The benefit of the variable pricing is clear to the label - people will pay higher prices up front for new music. Later, when the excitement has died down, you can lower your prices to move the surplus inventory.

The benefit of fixed pricing is clear to the distribution channel and the customer. If music is $1 per song, you can budget very easily. If you want five songs, it's $5 (plus tax, of course). If you want two albums, it's $20. It's piece of mind . The distributor doesn't have to spend money adjusting prices. A single price point saves money.

I wonder what percentage of COGS for CDs is price stickers? You'll sometimes see four or five on an album after the initial rush is over, and the store steadily decreases it's price to move product and recoup the investment.

f Green Day's label can make more revenue on iTunes by selling their hits for $1.50, why not? It's their call. If they can also increase revenue by lowering new artist prices to increase overall demand (units sold), so be it.

The potential benefit to the consumer is the possibility of a lower price point. New (read: new, big) artists are expensive. The prices will go up, just like they do with CDs. Additionally, with the speed of reporting and without delay for manfacturing, the response time on a product can be quite quick. If people start buying a relatively unknown artist, the labels can know within hours. This could be very beneficial, as they can start advertising on the artist. It also means there's little delay in price increases related to popularity.

Ultimately, there's a delicate balance. If a label were to take their catalog of music away, it would deal a major blow to the music store. However, by doing so they close themselves out of a major market. And, if a label walks away from Apple for being non-cooperative, how thin is the ice on which the other stores are standing?