Recent developments in the market place for digital downloads of music have resulted in iTunes being seen as the black sheep in the family.
Although Apple have made a lot of money for the record companies, (Apple sees iTunes as a break-even arrangement, taking very little from each song sold, making money from sales of hardware instead), the record companies are not happy.
iTunes success, has resulted in Apple having a great deal of power in terms of the prices they are willing to sell music at (regardless of what the record companies want), to-wit – we see prices on iTunes remaining pretty consistent across the range.
This benefits the consumer, (who are Apple’s main focus here), for other online retailers who have allowed the music companies to dictate pricing terms, have not been as successful as Apple, hence their almost complete demise.
This has irked those record companies greatly, for they are used to having almost total control of their industry.
So we have seen a change of direction; they have now started offering competing online music providers, different, and much better terms and arrangements to sell their music, while Apple is left out in the cold.
We’re seeing no DRM, better choice of music and lower prices in competing services.
Most, if not all the media see this as a benefit to the consumer, and a sign that the record companies are finally giving in and embracing the future, and hey, iTunes having competition is a good thing, right?
They’re wrong. Why? let me explain.
Apple have remained steadfast in their demands that pricing on iTunes is consistent. The record companies wanted tiered pricing, and Apple correctly stated that one of the reasons why iTunes was successful, was the ‘across-the-board’ pricing.
The record companies then realised that this was a battle they could not win, unless they sacrificed a couple of things in the short term, to win back something in the future.
These 2 things are DRM, and pricing.
They sacrificed DRM because a) of a change in customer demand and media momentum which they couldn’t control, and b) to give them leverage against Apple, hence the offering of DRM-free music to the linkes of Amazon.
They sacrificed pricing to again, give them leverage against Apple, but only temporarily.
Why do they want leverage against Apple? They want this so they can bring competitors to iTunes dominance.
Is that not a good thing though? NO IT ISN’T.
Why isn’t it? Because 5 years from now, if they are successful and iTunes dominance is eroded to the point where the record companies don’t have to listen to it’s demands, what will be left?
You will have the record companies on one side, and on the other side a number of partners who will not be powerful enough to dictate pricing terms, as Apple has in the past.
What will then happen?
PRICES OF ONLINE MUSIC WILL RISE. GUARANTEED.
They will then be able to do what they like, kill online music stone dead if they want to and return to the more profitable and controllable model of CD’s, or worse.
Do I have any proof of this? No, of course not. But answer me this, if this isn’t true, and the only reason why the record companies are doing this is to bring competition, cheaper prices and no DRM to the industry, then why don’t they let Apple join in now?
By not letting Apple join in now, they seek to erode its dominance, and they want to topple iTunes, so they can get the pricing back under they’re control.
So the next time you buy music online from Amazon, just remember that you giving more power to the record industry with every purchase, and taking power away from Apple.
Apple want to keep music prices cheap and consistent, the record companies want you to pay more. Just remember that.