Higher iTunes Prices? How Much Goes To The Artists?

from the well,-how-about-that dept

Mon, Dec 21st 2009 3:32pm — Mike Masnick

Earlier this year, Apple finally agreed to strong pressure from the major record labels to introduce variable pricing on iTunes -- which officially would make some popular songs $1.29 and (in theory) also offer older, back catalog songs for $0.69. In reality, it's pretty difficult to find any of those $0.69 songs. However, as a musician, which would you prefer? Well, as Shocklee alerts us, most musicians might not see any of that additional fee (that report is a little misleading, though, in that it suggests -- incorrectly -- that all songs were driven up to $1.29). I have to admit that I'm a bit surprised by this, and wonder if it's really accurate. The telling quote in the article is this one:

"Artists receive fixed residuals for music sales based on individual contracts via their respective record companies," says Max Clingerman, a music executive for MixJam Records who explains "the staggering price increases are not for the artist interest, rather intended for executive pockets."

While I'm sure the intention was very much for exec pockets, I was under the impression that most major label contracts included royalty rates based on retail price. And while most signed musicians never recoup their advance, and thus never see any royalties whatsoever (no matter what the price), I do wonder if it's really true that musicians don't get a larger cut of higher priced digital sales (at least in the fictional accounting systems the labels use).

Of course, the larger point made by the article is almost certainly true. In increasing the price to $1.29, the demand for such songs has been driven down significantly, leading people to look for alternative sources for the same music.

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: itunes, musicians

41 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

zellamayzao, 21 Dec 2009 @ 3:43pm

Its true....
Eventhough its only 30 cents it really makes a difference in the minds eye (or wallets eye) 99 cents seems easier to look at and make a decision to purchase a song where as 1.29$ may turn a lot of buyers off just because they see its priced over a dollar, it might not be worth the extra 30 cents. I know it has stopped me from buying a lot more than I have from Itunes.
[ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2009 @ 4:37pm
  
  Re: Its true....
  Only 30 cents!!! That's a 30% increase. Ouch. How would you feel if eveything you bought went up 30%?
  [ link to this | view in chronology ]
- bigpicture, 21 Dec 2009 @ 6:53pm
  
  Re: Its true....
  Rip them off on the internet, rip them off in court. What's the difference? The game is rigged and the government is in their pocket. Is piracy an option at around $100K per song? Say the average CD has 10 songs, then at $1.29 that is $12.90, except now you don't get the CD. Consumer Rip, Rip, Rip your CDs, recording industry rip them off, when is greed going to stop?
  [ link to this | view in chronology ]
Anonymous Coward, 21 Dec 2009 @ 3:57pm

Poor Executives
Please, won't somebody think of the executives' children?
[ link to this | view in chronology ]
- Hephaestus (profile), 22 Dec 2009 @ 10:27am
  
  Re: Poor Executives
  You just had to bring up the children didnt you? ;)
  [ link to this | view in chronology ]
- Anonymous Coward, 27 Dec 2009 @ 1:26pm
  
  Re: Poor Executives
  theyre already yuppies
  [ link to this | view in chronology ]
PRMan, 21 Dec 2009 @ 4:33pm

Amazon has some great deals...
...And all songs are less than $1.00.

I don't work for them, just a happy customer.
[ link to this | view in chronology ]
- Hiro Nogano (profile), 21 Dec 2009 @ 5:05pm
  
  Re: Amazon has some great deals...
  And that's without any DRM either!
  [ link to this | view in chronology ]
- B, 31 Jan 2012 @ 6:41pm
  
  Re: Amazon has some great deals...
  Yeah, before Amazon bumped up the prices...
  [ link to this | view in chronology ]
lavi d (profile), 21 Dec 2009 @ 4:50pm

Another Day Another Outrage
To my everlasting glee, the internet has caused confusion, anger and terror for anal-retentive, small-minded officials, bureaucrats and businesspeople everywhere.

Their public flailing and thrashing about is truly enjoyable and I find myself checking TechDirt every ten minutes or so anticipating the next amusingly intemperate outburst.

I am mostly annoyed by people who feel they must maintain absolute control of every particle of their little fiefdoms, and so their frequent tantrums and lamentations are a joy to my heart.

Merry Christmas, Happy New Year and Keep 'em comin', Mike!
[ link to this | view in chronology ]
- lavi d (profile), 21 Dec 2009 @ 4:51pm
  
  Re: Another Day Another Outrage
  Crap - Meant for the Alabama Artist's post.
  
  Feh...
  [ link to this | view in chronology ]
  - ChurchHatesTucker (profile), 21 Dec 2009 @ 5:27pm
    
    Re: Re: Another Day Another Outrage
    It works just as well here. Actually, it'd probably work in most TD posts.
    [ link to this | view in chronology ]
Anonymous Coward, 21 Dec 2009 @ 4:56pm

Seriously, $1.29 to download a song? Even at .99 a song, it's a rip-off.

If they were instead aiming to sell volume, at say $.10 a song, there's your piracy problem solved, and they're back making money. I just don't see why they don't do it -- anyone care to enlighten?
[ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2009 @ 5:41pm
  
  Re:
  Why pay for something that is $.10? That seems like a lot of work that you can download for free.
  [ link to this | view in chronology ]
- nasch (profile), 22 Dec 2009 @ 7:23am
  
  Re:
  The only semi-legitimate reason I can think of is that once you do that, it's really hard to raise the price back up if it doesn't work out well. Since they don't understand the market very well anymore, they're not sure if they would sell more at 10 cents, or if their evil nasty customers would decide that a 10 cent price basically means the label doesn't think the song is worth anything and they might as well pirate it anyway.
  
  They know they're selling at 99 cents, so they stick with that for the most part. The move to $1.29 is pretty inexplicable though.
  
  Wow, it's kind of weird trying to think like a music executive.
  [ link to this | view in chronology ]
  - Hephaestus (profile), 22 Dec 2009 @ 10:32am
    
    Re: Re:
    "The only semi-legitimate reason I can think of is that once you do that, it's really hard to raise the price back up if it doesn't work out well. "
    
    Check out how amie street works. start sales at a penny and work your way up ...
    [ link to this | view in chronology ]
    - Rasmus, 22 Dec 2009 @ 4:14pm
      
      Re: Re: Re:
      Absolutely brilliant!!! I didn't know about amie street before but checked it out and their pricing model is the first time I've seen a pricing model for digital goods that gets how marketing of content works.
      [ link to this | view in chronology ]
Mojo, 21 Dec 2009 @ 5:13pm

And I would say to YOU, seriously, you think throwing a dime at someone for a song is fair?

Considering all the time, effort and people it takes to write, rehrearse and record a song - not to mention publicize it - a dollar is a pretty reasonable price. It's also the cheapest anyone's ever been able to buy a song in decades (CD singles cost a minimum of $5 and 45 RPM singles before those were about $3).

So complaining that the lowest price for music in fifty years is STILL too much means you're selfish just want everything for free.

Just because you WANT 100 songs and you don't want to spend $100 doesn't mean it should cost less - it just means you have to spend more or you buy less. Like I did when I was shopping at record stores and had a stack of $15 CDs I wanted.

If you want 5 cheeseburgers instead of 2, do you think they should lower the price of cheeseburgers to accomadate your gluttony?

Give me a break. Anything less than a dollar a song begins to border on insulting.
[ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2009 @ 5:28pm
  
  Re:
  In fact a dime for some songs is too much and I should be receiving compensation for listening to them .... any ideas on who I can sue for pain and suffering ??? :>
  [ link to this | view in chronology ]
- Non-cowardly Anonymous, 21 Dec 2009 @ 5:31pm
  
  Re:
  One word. Scarcity.
  
  Music copies are unlimited and have no cost after the initial development. Each cheeseburger has a production cost, and profit must still be made.
  
  A consumer spending $100 on 77 songs is supporting the artists AND the music industry execs only as much as a consumer spending $100 on 1000 songs, except the consumer with 1000 songs is going to be significantly happier, and most likely return in the future.
  
  Also, CDs and 45 rpm singles have production and distribution costs, online digital copies don't.
  [ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2009 @ 5:32pm
  
  Re:
  Most of the music I listen to is free. Which is way less than a dollar. How is that insulting?
  [ link to this | view in chronology ]
- Anonymous Cow #7, 21 Dec 2009 @ 5:50pm
  
  Re:
  I don't have anywhere to store a stack of CDs or LPs, and that's why I don't buy them any more. I also don't pirate stuff, though I would definitely not pay $1 for a song because that is just insulting.
  
  A song is just a few MB of data these days. All they have to do is record it once and sell it to me over the internet for a reasonable price. If the record industry can't do that because they're a stunned dinosaur just waiting to die, then at the end of the day the artists are in trouble and I get no music.
  
  So, I think the public is making a statement, loud and clear. Some don't care to listen to music any more, many go as far as to risk getting it illegally. The ball is in the artists' court, and they should just bite their lip and dump the record industry once and for all! We need lower prices, because (with all due respect) copies of songs from the internet are not really worth *anything*, no matter what they cost to make.
  [ link to this | view in chronology ]
  - Trent Anderson, 2 May 2016 @ 12:30pm
    
    Re: Re: Won't pay one dollar for a snog?
    Dude, think about this really, you won't pay a dollar for one song? yet you have a stack of CD"s? How many songs are on a CD usually? About what? twelve to sixteen even? Let's do the math on this real quick. You're paying about twenty dollars or more on a CD for twelves songs? That's more than a dollar per, i got news for you buddy. I know this post is way later than you have posted this comment. But i really hope you have rethought the topic. A freaking dollar per song is definitely worth it. All you people don't think about this real hard do you? But whatever, everybody is different i know this. But come on people use your #!@$ heads fro once. Humans can't be this dumb!!!
    [ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2009 @ 9:08pm
  
  Re:
  "Anything less than a dollar a song begins to border on insulting."
  
  The only thing that is "insulting" is thinking the high-and-mighty artist can charge more than the consumer is willing to pay because it might "insult" them to be paid less.
  [ link to this | view in chronology ]
- nasch (profile), 22 Dec 2009 @ 7:26am
  
  Re:
  So complaining that the lowest price for music in fifty years is STILL too much means you're selfish just want everything for free.
  
  You should read his post again. He didn't say he wants to pay less for his music. He said that, in his opinion, the labels would make more money charging less per track. He's probably right.
  [ link to this | view in chronology ]
Pks, 21 Dec 2009 @ 5:34pm

TunesPro?
I wholeheartedly agree that $1.29 is absurd. Now, without in any way disputing that, the original article seems highly suspect. MusicIndustryReport.org goes as far as to say that it's a press release, but it doesn't say from whom. If you Google the first sentence, you'll find it shows up in several places. The only logical explanation seems to be that it's a plug for TunesPro.com.
20c sounds way too reasonable for songs, though, since the evil hand of the recording industry would simply not license its music for so little. Heck, I almost broke down and bought a couple of albums right there (I dislike paying for music downloads, so all the music I buy is in good ol' plastic discs which actually cost money to make). Of course, when something seems too good to be true... Some quick googling seems to imply that there's no official backing to the site (for instance: http://routenote.com/blog/tunes-pro-new-download-store-that-wants-to-be-the-next-allofmp3-com/). An easy giveaway is their The Beatles portfolio.
So, however little the labels pay their artists, these guys would be the height of hypocrisy in decrying that and then selling music for which no artist will receive any money at all. I sincerely doubt they are the Robin Hood of the modern age, sending unsuspecting artists checks for their troubles while skipping over the record labels. More likely, their business model is "Take the Money and Run"�. So if the claims they make about artists not getting their due are true, it would only be a happy accident within their PR game.
Let me know if I'm terribly off the mark here, and this is actually somebody who's figured out something closer to what people want.
[ link to this | view in chronology ]
Auditrix (profile), 21 Dec 2009 @ 5:45pm

Typical artist royalty rates for permanent downloads + dynamic pricing
Mike is correct that most recording agreements provide for artist royalties for permanent downloads to be based on a sales price in the USA - either the wholesale, consumer or suggested retail price, depending on the contract (i.e., the "royalty base price"). Therefore, increased prices should translate into both greater unit royalty rates for artists and greater revenue for the record companies.

However, lower prices may impact more than the royalty base price, since most artist agreements provide for a reduced percentage royalty rate on midprice and budget records. So, if your normal rate is 20% of wholesale and your download becomes a "budget" release, you may receive only 15% of the low "budget" royalty base price. (I won't get into discounts because that is too complicated.)

What may not change regardless of price are mechanical royalties for permanent audio downloads which are payable to song publishers. For example, the statutory mechanical royalty reportable for many songs is currently $0.091 per permanent download, regardless of the price. This is why many record companies do not license music to eMusic or other "all you can eat" services (because the liability to publishers could theoretically exceed the record company's revenue).

But I digress...

While I can see why it is in the best interest of many artists to make their music to be available at the lowest possible consumer price, one size does not fit all. Dynamic pricing for permanent audio downloads is an opportunity to increase profits for all parties, except maybe publishers and songwriters.

Other products are dynamically priced, so why not music?
[ link to this | view in chronology ]
- reboog711 (profile), 21 Dec 2009 @ 5:51pm
  
  Re: Typical artist royalty rates for permanent downloads + dynamic pricing
  If a contract calculates the artist percentage based on wholesale price, I would have thought that the changing of iTunes retail pricing would have no affect on what the artist gets; as it does not necessarily mean a change in wholesale pricing.
  
  [of course it all depends on contract specifics between iTunes and the labels]
  [ link to this | view in chronology ]
  - Auditrix (profile), 21 Dec 2009 @ 6:00pm
    
    Re: Re: Typical artist royalty rates for permanent downloads + dynamic pricing
    Reboog711 -
    
    Record companies get about 70% of the iTunes retail price.
    [ link to this | view in chronology ]
Anonymous Coward, 21 Dec 2009 @ 5:50pm

I'm a die-hard Itunes customer who has been completely won over by Amazon's MP3 service. The .99 cent price point does make a difference.

I wonder if Jeff Bezos ever dreamed where Amazon.com would end up. In the last month, I've bought water filters, air purifier filters, an SDHC memory card, and dozens of other items directly from Amazon, on top of any book and music purchases.
[ link to this | view in chronology ]
- Stephen, 22 Dec 2009 @ 9:28pm
  
  Bezos's dreams
  Actually that's exactly where Bezos dreamed Amazon would be: your one-stop shop for everything. And that's the only place I get mp3s. iTunes sucks.
  [ link to this | view in chronology ]
transmaster (profile), 21 Dec 2009 @ 7:51pm

I don't use or need iTunes
I presently have 4 T Bytes of music and video's. This represents several decades of collecting. iTunes is irrelevant to me. I am a musician so I understand the business from the performers side. I do not and will not purchase any music from artists that are in what amounts to bonded servitude to a recording company. Instead I look for musicians that market their own stuff on the net. By doing this I know the money I am spending is going directly the artists. It is a revelation, and very refreshing the diversity and quality of these independent acts. More and more people are recognizing this. As the music consumer learns about this whole other universe they are lost to the main stream. These large recording companies who grew into the mastodons they presently are during the CD boom are going to presently learn they are no longer in control. iTune's was the camel's nose into the tent, and the other music services followed them in. Soon it will be these services that will start telling the minions of the RIAA the whichness of Why.
[ link to this | view in chronology ]
Archer0911, 21 Dec 2009 @ 10:23pm

Quality
MP3 downloads are generally considered to be of less quality than CDs themselves. very few services offer lossless quality downloads. yet the riaa still wants to charge for these inferior mp3 at the same rate as a normal cd. something doesn't seem right there. granted, many out there can't tell the difference between a mp3 and a lossless format, but ask any audiophile, that difference exists, and the right hardware can more than demonstrate that. so $1 per song to me does seem a little high. $.49 - $.69 per mp3 would seem more reasonable considering the loss of quality of the downloaded track.
[ link to this | view in chronology ]
Barak Yedidia, 21 Dec 2009 @ 11:43pm

Quality redux
This has been a bizarre discussion to read. Maybe I'm weird, but I don't see $1.29 as a lot to pay for a popular track. I do occasionally pay that and I don't feel insulted or ripped off. Granted, I don't usually pay $1.29 for a song on iTunes, because the popular stuff is not the stuff I buy. I can listen to pop on the radio whenever I want. On iTunes I go looking for music that is somewhat off the radar. Regardless, a buck per song plus or minus 30% is a bargain in my mind. How many times have you given a buck to a busker on the street or in the subway? And you don't even get to keep the music! The article that Mike references indicating that $.69 songs are hard to find has since recanted and indicates that $.69 songs are quite plentiful in classic and R&B categories among others. I have bought many Elvis and Smokey Robinson songs at $.69 per. The whole concept of people being insulted one way or another is baffling to me. As a photographer, I'm used to stock photos selling for pennies or fractions thereof. There is no point in being insulted. And as for the Anonymous Coward who thinks it's insulting for musicians to ask for more than some are willing to pay, I hope you're joking. I price my work at what I think the market will bear. If you're insulted, that's not MY problem. You don't have to buy it. As for the quality concerns, since iTunes changed their pricing structure, they also removed DRM and doubled the AAC bitrate to 256kbps. CD music is about 150kbps. I'm not sure how much of the AAC bitrate is overhead, but I doubt the music on your CD is better than what you're downloading on iTunes.
[ link to this | view in chronology ]
- Anonymous Coward, 22 Dec 2009 @ 11:03am
  
  Re: Quality redux
  "And as for the Anonymous Coward who thinks it's insulting for musicians to ask for more than some are willing to pay, I hope you're joking. I price my work at what I think the market will bear. If you're insulted, that's not MY problem."
  
  Uhh, yeah, the point was that the person I was responding to was claiming that artists should get to ignore what the market will bear because...they're artists and might be insulted if the market wants to pay them less.
  [ link to this | view in chronology ]
Tele2002, 22 Dec 2009 @ 1:13am

Do the math
Well, this one has sparked some thought from it's readers, and most of what I am going to add has been covered somewhere in the comments above, but lets first take a quick look at history....
When the CD when into the mainstream consumer purchase frenzy the record labels got rich... and I mean mega rich while the artists also benefited from a sudden rebirth of their income (take any artist who republishes albums based on their hits...Rod Stewart anyone) but while the record labels where getting mega rich and having lavish drug fuelled parties they took their eye off the ball.... Suddenly the CD burner was becoming popular in the dorms of universities and music piracy became a mainstream business opportunity for any budding student (and I'm sure some of those pirates where setup for life on those dishonest earnings) Also their was the corrupt world of radio airtime that then closed down....
And then come the digital age.... and the labels ignored it.... and ignored it.... and are still trying to ignore it.... Why? Well for the past 50 years they have dealt with tangible product, something that needs to be manufactured, packaged and distributed, now artists can self publish and self promote taking 100% of the income.... Look at what Radiohead did and I'm sure others followed.
The artists today, much like movie stars should be signing contracts that allow for them ti take pride in their work and gain the royalties for their efforts, not take an advance in a hope that they may get rich if they do well...
If you took a major artist, lets say U2, yes they could take a huge advance because their label knows they have millions of fans who would buy the music, but what if they themselves said, you know what I want people to be happy with their purchase and pay for what it's worth....

So as to the $1.29 debate, I actually thought that .99$ was too much as when you do the math on it, if an album has on average 12 tracks you would be paying 12 bucks for it, yet go onto Amazon and buy the CD, packaging and all for less that it costs digitally, and you know what, when your computer crashes that CD is still on your shelf, and you know what, want to put that CD into as many devices as you like and you can.... DRM, Digital and high costs really do fuel the piracy game.

I closing thought for the labels is to get in touch with your mass market consumers and listen to what they expect because until you meet their needs piracy will keep holding you hold.
(oh and the poster who said .10$ is a little unrealistic but I get where your coming from, if 10 million happily buy the song for .10$ then that is 10million who would probably go back for seconds, if 1 million buy at $1.29 then you may only have 300k go back for seconds...
[ link to this | view in chronology ]
- Hephaestus (profile), 22 Dec 2009 @ 11:22am
  
  Re: Do the math
  Find a video or go to a music industry gathering where someone like mike is speaking. What happens is you have people booing, shouting insults, and all around being ass holes to the guest speaker. They have no real interest in hearing the other sides opinion. You see the other sides opinion doesnt exist. Its the most extreme cult like form of denial I have ever seen. Its actually really fun to watch.
  
  "I closing thought for the labels is to get in touch with your mass market consumers and listen to what they expect because until you meet their needs piracy will keep holding you hold."
  
  The labels getting in touch with the consumers isnt going to happen. Go to any musicians blog that has an open policy (ie doesnt delete every anti RIAA and anti label comment) and read some of the comments you will see why. The majority of the comments are far off to the Die RIAA Die, Label side, of the picture. The labels are off to the other side where they circle their wagons amd have surrounded themselves with people who tell them we can fix this, everything is going to be all right. The problem with listening to the people who only tell you its all going to be fine is, the ship actually isnt unsinkable....
  [ link to this | view in chronology ]
Rosedale (profile), 22 Dec 2009 @ 9:36am

I stay with Amazon
So normally I get my music from eMuisc. It works great and they have the artists I love, but I wanted the New Moon sound track because of all the great Indie artists. Of course it was almost $15 through iTunes...I figured if I am going to pay that much I need something more than just some digital files, but if you wanted the "bonus" tracks you had to buy from iTunes. I went to Amazon and the price was $9.00. I sampled the bonus tracks from iTunes and didn't find it all that compelling to spend so much more money...so I bought it from Amazon.

If the price across the board had been $15 for DIGITAL download than it just wouldn't have happened to be honest.
[ link to this | view in chronology ]
GeoS, 22 Dec 2009 @ 11:00am

Barak Yedidia, you left out one zero for the CD bit rate ... unfortunate oversight.
The difference between the CD rate and the compressed isn't the most critical thing to sound enjoyment. How it's mastered is more important. There is still a big problem of sound loss when converting from analog to digital. It generally kills half the sound.
I suggest HDCD is a good solution.
[ link to this | view in chronology ]
Thomas (profile), 22 Dec 2009 @ 11:55am

when was the money..
ever intended for artists? The money is solely for the labels and the executives. They have to live high and need money for trips, cars, drugs, and hookers.
[ link to this | view in chronology ]
Anonymous Coward, 22 Dec 2009 @ 2:21pm

99 cents was the magic number hen they got greedy and decided to fuck it all up..... AGAIN.
[ link to this | view in chronology ]