As Rumored, Apple Gives Record Labels Variable iTunes Pricing In Exchange For Ditching DRM
from the it's-something dept
As was rumored last night by Greg Sandoval at News.com, it appears that Apple has worked out a deal with the major record labels (being confirmed as I type) where they will give up DRM (which is the direction they've been moving towards anyway) in exchange for variable pricing of music -- which they've been salivating over for years. This has been a major source of contention between Apple and the record labels. Steve Jobs has stood firmly by the $0.99/song price, while the record labels specifically wanted to be able to price hit songs at higher prices. The dropping of DRM is nice, but hardly that surprising, given that pretty much every other online download store has been going DRM free. This just puts the final nail in the coffin for music DRM. One nice tidbit: you'll apparently be able to upgrade your older DRM'd purchases to make them DRM free. That's a good (and slightly surprising) move.As for the pricing, there's now three tiers: $0.69, $0.99 and $1.29. Hit new songs will go for the higher price while older, less popular songs will have their prices drop. The announcement isn't that surprising, but it is definitely a shift. What will be worth watching is how this impacts sales. It really may depend on how the record industry plays this. If (as seems likely) they put too many songs in that high priced level, it's going to lead to backlash. However, if they really embrace that lower price, it could encourage more folks to download music. I also wonder if it will push competing music download stores, such as Amazon.com to lower its prices even further as well.
While this definitely is a shift from the way iTunes has always worked, in the end, it's really not a huge shift. The industry was moving in this direction anyway, and killing off DRM was long overdue. The variable pricing is the type of thing that the big record labels will likely screw up, but in the long run is probably a good thing. The $0.99 per song fee has always been too high, and accepting variable pricing will eventually lead to those prices decreasing (not increasing, as the industry expects).
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: drm, itunes, variable pricing
Companies: apple
Reader Comments
Subscribe: RSS
View by: Time | Thread
[ link to this | view in chronology ]
Better than free?
Price it reasonably (say the cost of a popular video game subscription) and you have something better than free, a bit-torrent/usenet killer.
[ link to this | view in chronology ]
Re: Better than free?
[ link to this | view in chronology ]
Re: Better than free?
In retrospect, I probably would have been better off BUYING the songs instead of signing up for the unlimited music service. It would be interesting to analyze average customer lifetime, and CLV to see if this whole idea of "unlimited" works. I imagine there to be a large spike of customer churn 6 months out.
I applaud Apple's new pricing! Kudos!
[ link to this | view in chronology ]
Re: Better than free?
[ link to this | view in chronology ]
Re: Better than free?
You would basically have cheap, easy, unfettered access to whatever you want to hear (mostly) without the tons of commercials on FM, and better quality.. I'd liken it to satellite radio w/the need for special equipment.
When something like this is affordable and easy, file-sharing becomes a moot point.
[ link to this | view in chronology ]
Re: Re: Better than free?
Considering Apple has a 160M user advantage, I wish you luck in the new year with changing consumer behavior.
[ link to this | view in chronology ]
Re: Better than free?
What you get is a personalized music catalog delivered to the playback device of choice. Pandora has a great recommendation engine, but their catalog is limited and it's streaming only. What if you could tie the "music genome project" that predicted your own taste with unlimited push-to-your-device downloads?
You can keep the songs, trade them, post them on the web, embed them into video of your toddler taking his/her first steps, whatever.
You keep coming back because your subscription means the thousands of terabytes of music available is distilled into a catalog you actually want to listen to.
We are reaching a point where there is so much media that it's going to become increasingly challenging to sort what we like and what we don't. Having a service the combines a massive database of content with a accurate recommendation engine that lets you keep what you like is worth paying for!
[ link to this | view in chronology ]
Re: Better than free?
Price it reasonably (say the cost of a popular video game subscription) and you have something better than free, a bit-torrent/usenet killer.
fuck the database, just give me a pass that let's me do what i am doing right now, just legally. i call it "the piracy pass". i'd pay 20 bucks a month to not have to mess with private trackers and tunneling thru russia or getting my plug pulled and calling to get it switched back on (6 times and counting).
the industries and everything could keep spying and snooping, and when i get busted i just show them my pass and we move on with our lives. they could even use their snoop data to demand their cut of the piracy pass profits.
the systems are all in place, the technology is here and in widespread use, the people that want to get paid just have to come around to the idea.
[ link to this | view in chronology ]
Then, songs that get popular will be raised from $0.99 to $1.29, in order to discourage people from buying 'the same old thing.'
Leaving the bland middle to remain at $0.99, ensuring that easily 90% of iTunes' profit stream remains untouched.
Sounds like Apple wins this round, too, leaving both customers and the *AA out in the cold.
[ link to this | view in chronology ]
Re:
How much does Apple make from the sale of each song?
[ link to this | view in chronology ]
More likely, they think newer/popular music is worth a premium and that people will pay more for it thus more $$$ for the record companiess.
[ link to this | view in chronology ]
Re:
the popular mainstream stuff is what gets pirated most. check any tracker and the top 100 releases are the top 100 songs.
the gold here is the back catalogue, which let's be real, will never see $0.69 but will stay at $0.99 and be drm free. at that point it might actually be worthwhile to buy a track or two if i need it in a hurry.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
The end result? Hit sales are likely to take a slight decrease, mid range and bottom artists are likely to see a slight increase, and revenue is likely to take a mild but not substantial increase all while giving the consumer what the labels have been fighting against for a decade and making them look as stupid as they really are.
Sorry but until they come down in price, and I'm certain I can play AAC on any music player or device as easily as Mp3s, there is no reason for me to but from iTunes.
[ link to this | view in chronology ]
Re:
If they are keeping AAC and just removing some form of DRM on the AAC format, I still will not purchase songs from them, as my Sandisk player doesn't play AAC format, so in perspective, AAC is still DRM.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re:
BTW-If your Sansa supports Rockbox, then it can play non-DRM AAC. Just Google "rockbox."
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Thanks, Vince
[ link to this | view in chronology ]
re: anoncow #7
[ link to this | view in chronology ]
[ link to this | view in chronology ]
How this relates to a la carte cable pricing
It seems to me that the same thing could be said for a la carte cable pricing. If the cable companies were forced to provide a la carte pricing, they'd screw it up in the form of overcharging for popular channels, but in the long run it would be a good thing for consumers overall.
TechDirt's argument against a la carte cable pricing is that because cable content is an infinite good delivered over a medium that has a fixed cost, you aren't really being forced to buy content you don't want, you're getting the other content as a "freebie". But isn't the new iTunes pricing model letting the market work in a more natural way (and therefore giving consumer's more choice) in the same way that an a la carte cable pricing model would? In other words, if TechDirt is saying that a more natural market will be better for iTunes and its customers, why wouldn't it be better for the cable companies and their customers?
(Admitadly, cable's bundling pricing model is different than iTunes' fixed .99 price per unit, but in my mind they are the same in that they are both corruptions of the free market system. In fact, bundling is more of a curruption, so if anything would have a greater chance of letting the free market work better and benefit consumers -- two things that are one in the same -- it'd be offering a la carte cable pricing.)
[ link to this | view in chronology ]
Re: How this relates to a la carte cable pricing
It's interesting how there are people claiming both that cable should offer a la carte pricing like music services do, and that music services should offer subscription pricing like cable companies do, despite the fact that neither has ever been proven a big success (AFAIK).
[ link to this | view in chronology ]
Charge to upgrade to DRM-less tracks.
--
Now, you can choose from millions of iTunes Plus songs from all four major music labels and thousands of independents. With iTunes Plus, you get high-quality, 256-Kbps AAC encoding. All free of burn limits and digital rights management (DRM). So iTunes Plus music will play on iPod, Apple TV, all Mac and Windows computers, and many other digital music players. It’s also easy to upgrade your iTunes library to iTunes Plus. You don’t have to buy the song or album again. Just pay the 30¢ per song upgrade price. (Music video upgrades are 60¢ and entire albums can be upgraded for 30 percent of the album price.)
--
http://www.apple.com/itunes/whatsnew/
So roughly, there is a 30% tax to remove the DRM (slightly cheaper/ more expensive depending on how they land in the new price scheme).
[ link to this | view in chronology ]
Great for consumers, bad for Apple?
[ link to this | view in chronology ]
Re: Great for consumers, bad for Apple?
[ link to this | view in chronology ]
Re: Great for consumers, bad for Apple?
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
I think individual prices for digital tracks are a fine model, and is a model that will work fine without DRM. The price point is the issue. The good needs to be worth the price being asked, and generally speaking CDs are not worth the price being asked for them. I buy lots of music at $0.99 per song, and will buy more when part of the albums are cheaper yet. Only people who listen to nothing but the latest pop culture hits are going to be worse off with this new DRM-free deal. I like to share some tracks with friends that are into a certain genre of music too, and having the DRM free to let me do that will increase sales of those albums to those friends. Apple has been doing very well at introducing people to new music with their free downloads, which almost always result in short term increase in album sales for the track that was free.
[ link to this | view in chronology ]
Re: Likes of Apple?
[ link to this | view in chronology ]
Re: Re: Likes of Apple?
FYI, Mike thinks music should be free but is strangely silent on how Apple makes tons of money selling what is essentially an infinite good, thereby taking his theory out into the back alley and shooting it in the head.
[ link to this | view in chronology ]
Re: Re: Re: Likes of Apple?
How is Mike silent about selling music? Amazon's Best Selling MP3 Album For 2008 Was Available Legally For Free
That just proves Mike's point, be nice to your fans and they will pay no matter what. And by setting the music free you are getting more fans and being nice to them.
[ link to this | view in chronology ]
Re: Re: Re: Likes of Apple?
Oh, hang on, you were talking rubbish, weren't you? Darn!
[ link to this | view in chronology ]
to #28
[ link to this | view in chronology ]
@ techdirtReader
But unless your some sort of a music director on a major production and need to "cast" music to some sort of content, there really is no "thrill of the hunt" in an all-you-can-eat strategy. If I was to venture a guess, most customers first fill their new PMP with music that they like, are familiar with, and probably want to become acquainted with an artist's full repertoire. They probably use all-you-can-eat services to listen to music they've already purchased in the past. Should they then "rent" music they already purchased?
The end result of All-You-Can-Eat is similar to that of eating at a Chinese Buffet: the customer becomes inundated with lots of stuff. Some of it is good, some bad, all served with a lot of MSG (DRM), but nothing stands out because it lacks an connection to their personal reality.
At the end of the day, an astute customer will end up going back to that one tasty restaurant that may cost more, but they are specialized in the area and push the art form forward. El Gaucho comes to mind.
Put simply, Nordstrom Service can't compete with WalMart Prices. Trying to compare the two can be the issue of many debates. But those that shop at Nordstrom don't go there for the price but for the overall experience. "Yes" I want to buy this. But overall, considering that Apple has a 160M user advantage, I wish you luck in the new year with changing consumer behavior.
The song which I was listening to while writing this can be acquired here.
[ link to this | view in chronology ]
As for an all-you-can-eat style service, I agree that it sounds good in theory, but isn't really practical in most cases. Like someone else said, eMusic used to work this way, and they eventually had to change to a pay as you go to stay in business. There is absolutely nothing wrong with this model. I was, until recently (had to drop my subscription for financial reasons) a member on one of the "grandfather" plans. For about $200 a year I got 90 tracks a month. That's 1080 tracks a year. If you figure that on average an album is about 12 tracks, that would come out to 90 albums a year. 90 albums a year for $200 sounds like a reasonable deal to me.
[ link to this | view in chronology ]
Perhaps you are also new here. Go back in time on Techdirt and all you'll see is thread after thread of how music should be free, making money off infinite goods is not a good model, etc, etc, ad nauseaum.
Mike's always been talking about making music available free and focusing on making money off scarce goods. His theory is that if it costs next to nothing to copy a song, its price would be driven to zero (basic economics, which he's very fond of teaching). So all artists should GIVE AWAY infinite goods and SELL scarce goods to stay in business.
But now he's suddenly singing a different tune. Actually when it comes to iTunes, all he has had to say was in the long term it wouldn't last - because there's precious little he can say about his theory vis-a-vis Apple, when Apple is busy destroying it by SELLING infinite goods (music) AND scarce goods (the iPod).
[ link to this | view in chronology ]
Re:
No, I'm not.
Mike's always been talking about making music available free and focusing on making money off scarce goods.
Yes, Mike does say that music should be free and money should be made from scarce goods. But I have never heard him say that you couldn't/shouldn't sell the music as well. The business model just shouldn't be based on selling these infinite goods.
But now he's suddenly singing a different tune. Actually when it comes to iTunes, all he has had to say was in the long term it wouldn't last - because there's precious little he can say about his theory vis-a-vis Apple, when Apple is busy destroying it by SELLING infinite goods (music) AND scarce goods (the iPod).
Music is not yet free, at least if you want it legally. So of course Apple are selling it. But when the economic realities force the artists to set the music free, then things are different for Apple.
[ link to this | view in chronology ]
Apple scores -200 on this move.
If anything, this move definitely pushed me further away from a company I didn't like to begin with. To know they're in bed with the recording/music industry adds insult to injury.
Even at $0.69/song, it's STILL TOO MUCH for a near $0 distributable valued good. While many (morons) out there feel a song is worth $0.99, it stuns me to believe they actually think this goes back to the artist.
It doesn't. It never has. It never will.
All this news did was to enforce the business model of Apple: Screw over the consumer by overcharging for technology that's been around for years.
But, you can't convince sheeple of this, as they continue swooning over the latest ad/news by this company.
[ link to this | view in chronology ]
No, I'm not.
Sorry, my bad. You did sound like someone new here to me.
"Yes, Mike does say that music should be free and money should be made from scarce goods. But I have never heard him say that you couldn't/shouldn't sell the music as well."
What? I thought Mike's position on this was clear: Keep the infinite good, which is the music, free, which in other words means don't try to make money from sales of the infinite good. He wants everything that is infinite to be free, be it music, literature, movies, newspapers.
"The business model just shouldn't be based on selling these infinite goods."
But Apple just destroyed that theory: they are making good money from selling an infinite good. Of course they sell scarce goods too; actually everything from Apple is at a price. And they seem to be a success. I'd like to know how does that fit in with Mike's Grand Unified Theory of Free.
"Music is not yet free, at least if you want it legally. So of course Apple are selling it."
Even the music that IS free is being sold in infinite form (eg: Reznor). A lot of people are selling it. And a whole lot of people seem to be buying it. And they seem to have no problems paying for musivc, unlike Mike and his fanboys.
"But when the economic realities force the artists to set the music free, then things are different for Apple."
Reznor's own example disproves that statement. The economic reality has already forced him to gove away his music, but that has not changed anything for, in this case, Amazon, which seems to have raked in the money from sales of those very MP3s he gave away for free.
[ link to this | view in chronology ]
Re:
He has never said that make money only from scarce goods. Some of us are willing to pay for the infinite goods as well. But if you let the infinite to be free you will increase the market for the scarce good.
But Apple just destroyed that theory....I'd like to know how does that fit in with Mike's Grand Unified Theory of Free.
The theory you mentioned is about how content creators should set free their content. Apple is not content creator and it doesn't sell its own content. So Apple hasn't destroyed any theory.
And they seem to have no problems paying for musivc, unlike Mike and his fanboys.
Show me where Mike has said that nobody should pay for music? Or that is somehow wrong to pay for it?
Reznor's own example disproves that statement. The economic reality has already forced him to gove away his music, but that has not changed anything for, in this case, Amazon, which seems to have raked in the money from sales of those very MP3s he gave away for free.
You take Reznor as an example that Mike is wrong? :D Dude, Reznor is proving Mike's point.
[ link to this | view in chronology ]
"He has never said that make money only from scarce goods. Some of us are willing to pay for the infinite goods as well. But if you let the infinite to be free you will increase the market for the scarce good."
Mike's has always been urging people to make money only from scarce goods, it's at the heart of his theory. The fact that a sizeable number of people are actually willing to buy what essentially costs zero to produce flies in the face of his theory.
"The theory you mentioned is about how content creators should set free their content. Apple is not content creator and it doesn't sell its own content. So Apple hasn't destroyed any theory. "
I think you misread me. Mike says infinite goods cost zero to reproduce, therefore the model relying on sales of infinite goods will fail (which is why he wants content creators to set content free and make money from "t-shirts"). Apple has clearly demonstrated that this model can work if applied correctly. Ergo, it destroys Mike's theory.
"Show me where Mike has said that nobody should pay for music? Or that is somehow wrong to pay for it?"
Mike has always said music in its infinite form should be free and no one should be expected to pay for it. He wants musicians to make more money, but not from the sale of the music in its infinite form. You can see it all around Techdirt. It's central to his philosophy.
"You take Reznor as an example that Mike is wrong? :D Dude, Reznor is proving Mike's point."
Dude, I think you are misreading me agan. I was just disproving your statement. You said things will be different for Apple once economic reality forces artists to free their content. I say, that reality has already forced Reznor to free up his content. But Amazon has only benefited from it.
So, even if all artists free up their music, the likes of Apple and Amazon will likely continue to benefit, as people will keep purchasing music in its infinite form. And that drills a hole in Mike's precious theory.
[ link to this | view in chronology ]
Re:
No, this is 100% wrong. I have urged people to base their business models on making money from the scarce goods. If you *can* make money from the infinite goods, more power to you. But the point is that if you are *relying* on selling the infinite goods to make your revenue, you're going to be disappointed, because the economic reality is that selling infinite goods is simply a bad long term business strategy.
Mike has always said music in its infinite form should be free and no one should be expected to pay for it.
No, no, and no again. Cram, you really ought not put words in my mouth. I have never said it "should" be free. I have said that the economic reality is that eventually it *will* be free.
He wants musicians to make more money, but not from the sale of the music in its infinite form. You can see it all around Techdirt. It's central to his philosophy.
Again, you get it wrong. I guess I haven't been clear at all. Sorry about that.
[ link to this | view in chronology ]
Re:
To me Mike's theory is for content creators. So I have been talking about them. And you have been talking about the distributors, like Apple.
I do agree with you that Apple and Amazon will keep making money from these infinite goods in the future as well. But only if they provide convenience for their customers.
[ link to this | view in chronology ]
Thanks for the response.
"No, this is 100% wrong. I have urged people to base their business models on making money from the scarce goods. If you *can* make money from the infinite goods, more power to you."
That's exactly what I wanted to know from you. Thanks for clarifying.
"But the point is that if you are *relying* on selling the infinite goods to make your revenue, you're going to be disappointed, because the economic reality is that selling infinite goods is simply a bad long term business strategy."
I guess we'll have to wait and watch. Bceause at the moment, it does seem to be paying off, especially with digital music sales on the rise. And the guys who are making money are companies like Apple, which sell music only in the infinite form.
"No, no, and no again. Cram, you really ought not put words in my mouth. I have never said it "should" be free. I have said that the economic reality is that eventually it *will* be free."
No Mike, I'm not trying to put words in your mouth. That's just my understanding of your ideas. Maybe I was mistaken. And as Reznor's MP3 sales indicate, even if the music is eventually free, people will still line up to buy the infinite good.
"He wants musicians to make more money, but not from the sale of the music in its infinite form. You can see it all around Techdirt. It's central to his philosophy.
Again, you get it wrong. I guess I haven't been clear at all. Sorry about that."
I think you are more concerned about musicians breaking free from the shackles of labels, than how they make their money.
Cheers
Cram
[ link to this | view in chronology ]
Call a Waaambulance...
Yes, yes. What a rebel. Bashing Apple is such a rad move. It's not like people haven't been doing it for 25 years. That sound? That's my eyes rolling.
But let's move past your insipid false bravado and see if you have something substantive to say...
If anything, this move definitely pushed me further away from a company I didn't like to begin with.
Nope. Nothing here but whining.
To know they're in bed with the recording/music industry adds insult to injury.
What injury, Whiner? The injury done to consumers by a company that provides seamless integration of audio and video purchases, downloads, transfer, viewing and listening across a varied product line?
Oh, The Humanity!
Even at $0.69/song, it's STILL TOO MUCH for a near $0 distributable valued good.
Good Gravy you are one of Those People.
Servers, network storage and access, software development, licensing agreements, advertising ...
Guess what? All that stuff costs money.
And what is all this carping about Apple anyway? Guess what, Putz? The prices and agreements and whether there is DRM or not are SET BY THE LABELS!
While many (morons) out there feel a song is worth $0.99, it stuns me to believe they actually think this goes back to the artist.
Don't be such a putz. The artists signed agreements, the Labels enforce them. Everyone gets their cut. It's not Apple's fault that the Labels are predatory and artists are easily manipulated.
Apple made digital downloads easy and affordable and got the customer base large enough to make it worth the industries time to participate. From Day One they did not want DRM. It was forced on Apple by the labels to get content online. That's it, that's all. All your gosh-i'm-such-a-rebel Apple bashing is not only pathetic, but misplaced.
[ link to this | view in chronology ]
lala.com
[ link to this | view in chronology ]