Someone May Want To Explain To Record Execs How Little Power They Really Have
from the just-saying dept
Warner Music is really backing themselves into quite a corner. Last week CEO Edgar Bronfman started whining about how Apple won't let them charge more for certain songs -- which, as we pointed out, isn't a problem with Apple. Warner is the initial seller. They can set whatever wholesale price they want, but they can't tell Apple how much to price something for retail. If they don't like the wholesale price, they should change it or (as we said) stop selling to Apple altogether. Now they're saying they might do exactly that. Broadband Reports points to a story about a different Warner exec claiming that Warner might just stop letting Apple sell its songs. Where it gets really amusing is that he seems to believe that it's the songs being in iTunes that sells iPods, rather than the other way around. You have to hope that these guys aren't so blind to what's happening that they actually believe they have any kind of leverage against Apple. It seems pretty clear to everyone else that it's the exact opposite. If Warner pulls out of iTunes, then people will simply get their songs for free on file sharing networks or just not listen to Warner songs at all. In either situation, Warner loses... big time. So, you have to assume that they're bluffing on this one, and just doing a really bad job of it. The thing about Steve Jobs, though, is that you get the feeling he isn't afraid (at all) to call the recording industry's bluff. Update: A few people have pointed to this article in TheRegister saying that the quote was misattributed to a Warner exec when it was really said by a music industry lawyer. What's weird, though, is that our original story wasn't from TheReg, so it sounds like multiple news sources got the original story wrong.
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Overstating Importance of Digital Music Sales
I disagree that if Warner pulls out of iTunes that people will get their songs for free on file sharing networks. What's stopping iTunes users from choosing that route right now? Why would they choose to pay for music when a free alternative exists? Will iTunes users boycott Warner? Maybe. But, for the most part, boycotts don't work.
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Re: Overstating Importance of Digital Music Sales
Also add warner to the list of companies who want to dictate the price of their products (this is called price fixing and is illegal) once I purchase your product wholesale I can sell it for whatever I wish or even give it away.
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Re: Overstating Importance of Digital Music Sales
We already know they pay for their music, but if Warner stops offering their music through iTunes, where else will these people download the music?
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Re: Overstating Importance of Digital Music Sales
Examples? Just wondering.
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Re: Overstating Importance of Digital Music Sales
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Those Figures and eDonkey News
Also bear in mind that:
(a) downloads also drive some CD sales, because people use them as a way to try new music, and
(b) production costs are very low for legal downloads, so they should be very profitable.
In other news (Mike please note), eDonkey Folds to RIAA Demands, Cites Legal Costs
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Re: Overstating Importance of Digital Music Sales
That's an easy one. People will pay for convenience and value (real or perceived). iTunes gets people to pay because it's convenient, the quality is high, the search quality is good, the ease of use is there and because they feel the overall experience is better than the free alternatives (less junk, less risk of viruses, less risk of lawsuits... who knows...).
However, if the alternative isn't there at all, then people revert back to free.
Why do people buy bottled water? The tap is free and in many cases actually better quality. But there's perceived value there.
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Re: Overstating Importance of Digital Music Sales
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Re: Overstating Importance of Digital Music Sales
I recently stored away all my CDs away next to my VHS tapes in the basement. Why? I've got all the CDs as MP3s on my hard drive, I own a Nokia 6230 that plays MP3s, my wife owns an iPod mini. Wife & I have tape decks in my car that have tape -> 3.5mm adapters to hook up our MP3 players, and the stereo at home can take a 3.5mm adapter as well.
Call me an early all-digital adopter, but what do you like best about christmas presents, the paper they're wrapped in, or the gift itself?
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Re: Those Figures and eDonkey News
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Re: Overstating Importance of Digital Music Sales
I still disagree with your notion that iTunes users will jump ship to the the "free ship" or that they may abandon ship all together. Some users? Sure. But 'a lot' or 'many'? I don't think so.
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Re: Those Figures and eDonkey News
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Re: Overstating Importance of Digital Music Sales
Simple, it's convenience and reliability. iTunes has everything in one place, easily searchable by title, artist, genre, etc, it has preview clips of most songs, recommends similar artists, and you know the file is good quality and correct/complete. Depending on what p2p service you use all of those things are to some degree less certain. I haven't done p2p for music in a while but I doubt any of them are as consistently reliable in all of the areas I mentioned as iTunes is. Plus there's the added bonus that the RIAA isn't going to possibly sue you for using iTunes. Also, not all (aka average-Joe) users are savvy enough to figure out p2p, what's good to use, how not to get caught by the RIAA, what different encodings mean etc etc. But they know if you install iTunes it Just Works, which is the holy grail of any tech for the masses. Also people have gotten the idea that downloading music for free is wrong (though they may not know for the right reasons) and generally want to be law-abiding people and pay for things.
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Re: Overstating Importance of Digital Music Sales
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Re: Overstating Importance of Digital Music Sales
The fact is that in 2004, digital music accounted for 1.5% of global music sales. And 2004 was the best year in the past five. I have yet to see a major music company seek bankruptcy protection. They are making money - most of it from sales of "physical" media. Now, by no means am I suggesting that digital music will become important - it will. But as we speak, too many people are overstating it's importance on the bottom line of the music industry. Don't even get me going on the negligible impact of p2p on the bottom line of the music industry ;)
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Re: Overstating Importance of Digital Music Sales
I still disagree with your notion that iTunes users will jump ship to the the "free ship" or that they may abandon ship all together. Some users? Sure. But 'a lot' or 'many'? I don't think so.
Good question... but all of those other services use DRM that won't work on the iPod without a fairly convoluted process (buring to a CD and then ripping as an MP3). So, for iPod users, it's easier to just go out and get the damn MP3.
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Re: Those Figures and eDonkey News
Yes but as much as these record execs may have their heads in the sand I think they're still forward-looking enough to realize that pure digital is the future whether they like it or not, and putting the download genie back in the bottle will be impossible now that people have tasted it. I agree currently there is less leverage than some have implied, but the fact of the matter is that iTunes is the most successful online music seller currently and that does mean something if online music is going to be part of your current and future business model. Plus ipods clearly lead the mp3 player market, and every single one comes with itunes software and points you to their online store. While it's possible to use another service, most people use what's convenient and stick with what they were given. I do agree with you though that if Warner leaves then people are more likely to go to other pay services before going directly to free p2p piracy for those songs. But Warner would be doing themselves a disservice in the online music industry by shunning the current global leader in that industry.
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Re: Overstating Importance of Digital Music Sales
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No Subject Given
These are the people who would, if they could, plant DRM inside your skull just to charge you a penny every time you hummed a tune from their catalog.
When thinking about media companies and digital recording, one should always remember that these are the same folks who saw their death and destruction from content piracy in cassette tapes and VCRs. Media moguls should remember that each of these technologies just made them that much richer.
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Re: Overstating Importance of Digital Music Sales
I'm happy to have generated so much discussion on this issue. Much better and much more intelligent than what is posted on digg.
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Re: Overstating Importance of Digital Music Sales
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Itunes
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teaching newbies
I use as an example Command & Conquer. They demand a cd key on install. I bought the game and lost the key. I needed to install the game on my new pc. So, I learned how cracks work to do it. I didn't know how to crack a game and now I do, BECAUSE of their security precautions.
Let's see if we can tie my example to Itunes. I love an imaginary band called, "I-Tuner". They are my favorite! Then, Warner Bros. pulls them from I-tunes. What! No Tuner! That sucks!
So, I learn a simple p2p. I learn it ONLY to get the new I-tuner album.
Wait, that wasn't that hard, do they have "Band X"? They do! And now I'm pirating instead of paying.
My desire for the band's product fed my motivation to learn the file sharing 'trick'.
Warner Bros. helped create the carrot that this donkey followed... yes? Or no?
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Why did file sharing catch on so quickly again?
We found an alternative because we, the consumer, HAVE THE POWER. We always have the power, and file-sharing is our way of expressing this. RIAA/MPAA need to accept.
They want to increase the semi-reasonable prices of i-tunes music? Fine, I say go for it, but if anyone needs me, I'll be boycotting again by finding it somewhere else online for FREE.
I'd much rather download an album for free and sent $1 to the artists fan mail address. That's the same amount of money they get from a CD sale anyways.
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Ooops
Warner Music's Michael Nash - no executioner
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Re: Ooops
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Re: Those Figures and eDonkey News
1. Nobody was linking to the source of their figures, which makes them difficult to check, so I wanted to include a link to the best figures I can find.
2. Although paid-for downloads may be only 4% by volume, their costs are very low, so they should be very profitable. This would make their contribution to total profits much bigger.
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which is selling which
The comment regarding itunes selling ipods in the article is correct as I understand it. Apple was never really looking to make serious money from itunes - it was always just an angle to add value to ipods and foster sales. In fact the statistics of how many ipod owners regularly download from itunes is amazingly low. And when you compare the sales volume * the profit margin on both products, it's clear that the real money is made from the hardware and the store is just a support product to boost sales.
That's why he's not interrested in a flexable pricing model, he's not so much marketing the songs as he is the ipods - his 99 cent "sweet spot" is an easy to get concept that can push the hardware sales.
Since day one the record bosses have pushed for a variable pricing model, charging very little for old music and high for chart toppers. this model would suite the marketing and revenue potential of selling songs, but not for selling ipods - this is where they are butting heads!
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Re: teaching newbies
My parents, older folks, not computer literate at all but they like what they like, learned about cracks exactly the way you describe
(they also learned about viruses and such...but we'll let that go hehe)
They browse the file shares now for tons of stuff..they aren't heavy downloaders, but they've learned that its VERY easy and convenient to look to P2P for digital alternatives to media.
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Re: Why did file sharing catch on so quickly again
In 2004, digital music accounted for a mere 1.5% of global sales (in dollars). The figure for 2005 is expected to be 3 to 4%. Further, 2004 was the best year in the past five for the music industry. If the "masses" were really fed up, I would have expected 2004 to be a bad year and I would have expected online sales (since people only want the 20% of the CD that is not crap) to account for a greater percentage of total sales (in dollars).
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