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Record Industry Pushes Apple to Raise iTunes Prices

By Jennifer LeClaire MacNewsWorld ECT News Network
Apr 3, 2006 12:02 PM PT

The recording industry wants a bigger slice of the digital download pie. Some labels are pushing Apple to change the 99 US cents pricing model it pioneered when it launched iTunes three years ago.

Record Industry Pushes Apple to Raise iTunes Prices

Apple has sold more than 1 billion songs since then, helping labels pad their declining CD sales. More than 350 million digital songs were sold in the U.S. alone last year, according to U.S. SoundScan. That's 1 1/2 times as many as were sold in 2004.

Apple's iTunes has the lion's share of the market -- about 80 percent, according to the company -- with Napster and RealNetworks' Rhapsody among those competing for the remaining share with a subscription-based pricing model.

"I hope that every customer, artist and music company executive takes a moment today to reflect on what we've achieved together during the past three years," said Steve Jobs, Apple's CEO. "Over one billion songs have now been legally purchased and downloaded around the globe, representing a major force against music piracy and the future of music distribution as we move from CDs to the Internet."

Record Labels Reflect

It seems the music companies have done plenty of reflecting. The record labels agreed to Apple's one-price-fits-all model three years ago. However, when Apple's license expires, the labels are expected to push for higher prices, especially for new releases.

Apple was not immediately available for comment on its licensing deals. Recording Industry Association of America (RIAA) spokesperson Amanda Hunter did not return calls seeking comment on the issue.

Record labels, though, have spoken out publicly in the past. Warner Music Group CEO Edgar Bronfman Jr. last fall suggested that Apple should not have a one-price-fits-all strategy. An emboldened Bronfman even suggested that Apple should give the labels a cut of iPod sales. Meanwhile, EMI Group CEO Alain Levy lobbied for higher prices for best-selling bands and discounts for lesser-known artists.

At the Core of the Issue

Record labels make about 70 cents per download, and that's more profit than they make selling CDs, according to Jobs. "So if they want to raise the prices, it just means they're getting a little greedy," Jobs said at the Apple Expo in Paris in September.

The recording industry's response reeks of "greed and ingratitude," agreed Envisioneering Group Director Richard Doherty.

"I would ask any of those labels to show a balance sheet that reveals what the artists have gotten of that money," Doherty told MacNewsWorld. "I would challenge the studios to open their balance sheets and show where they are losing money on this."

A Return to Illegal Downloading?

If there is anything in relation to digital downloads that concerns RIAA more than pricing, it's piracy. The association continues its push anti-piracy efforts around the globe. The question is, would raising download prices spur a movement back to illegal downloads? Or are consumers willing to pay more?

"The general feeling from our consumer interviews is that the market can't tolerate -- or need it have to -- a 100 percent premium, or even a 60 percent premium. The fact is, Apple Computer makes less money on the downloads than any of the labels it is dealing with, and even less than some of the credit card clearing companies," Doherty said. "If digital download costs are going up, the recording industry must be using a different Internet than the rest of us."

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