Apple's Jobs Warns On 'Greedy' Music Pricing

[johnniecarcinogen]

By Astrid Wendlandt and Jeffrey Goldfarb

 

Apple boss Steve Jobs, the man behind the popular iPod digital music player, called the music industry greedy for considering hiking digital download prices, warning such a move would drive users back to piracy.

 

Record companies have begun rethinking how to price songs sold over Apple's online iTunes store -- 99 cents each in the United States and 79 pence in Britain -- before new contract negotiations come up with the California-based company.

 

"If they want to raise the prices, it means that they are getting greedy," said Jobs, chief executive of Apple, at a news conference in Paris on Tuesday.

 

"If the price goes up, they (consumers) will go back to piracy and everybody loses," he added.

 

Hit hard over the past five years by the rapid spread of illegal song copying over the Internet, music companies are struggling to revamp their business models as sales shift to more legal digital downloads from the CD format.

 

Vivendi's Universal Music, Sony BMG Music Entertainment, EMI Group and Warner Music are responsible for three out of every four albums sold around the world.

 

They are divided about the next phase for digital download pricing, with some contemplating a tiered model that could charge more in the first days a popular album is available and for songs recorded exclusively for iTunes. Others prefer to wait before tinkering with the existing system.

 

Jimmy Iovine, chairman of Universal Music's biggest unit, Interscope Records, said last month that not enough consumers are buying music online to warrant raising prices.

 

"I don't think it's time yet," Iovine told The New York Times. "We need to convert a lot more people to the habit of buying music online. I don't think a way to convert more people is to raise prices."

 

On the other hand, Sony BMG CEO Andrew Lack said at a Reuters gathering earlier this year that Apple is benefiting from two revenue streams, sales of both the iPod devices and song downloads, while the music industry has only one.

 

"I'm not making any money on this," he said. "I've got one revenue stream that a proctologist would have a hard time analyzing. It's not pretty."

 

On Tuesday, Apple shares gained $1.10, or 2.1 percent, to $53.74 in early trading on the Nasdaq.

 

WIRELESS SCEPTICISM

 

Jobs, whose company makes more by selling iPods than the music played on them, also cast a skeptical eye on the market for downloading songs directly onto mobile phone handsets. Some analysts believe wireless transmission will emerge as the next step in the evolution of music sales.

 

Apple two weeks ago unveiled a phone developed with Motorola that downloads up to 100 songs from a computer.

 

"It is not clear that buying songs over the air makes economic sense," Jobs said. "I am skeptical because of the cost ... but we will see."

 

Mobile phone operators, however, expect music downloads to be a significant driver of revenue growth after having invested heavily in technology and infrastructure to support the service.

 

Jobs also declined to say whether Apple was planning to launch an all Apple-made iPod phone.

 

"We do not say anything about future products," Jobs said. "We work on them in secret, then we announce them."

 

On a separate matter, Jobs said Apple was on track to ship computers fitted with Intel chips by June as targeted.

 

Apple had publicly expressed frustration with International Business Machines Corp. prior to severing its relationship with the company this year to adopt Intel chips.

 

Apple is now aiming to have all its computers fitted with Intel chips by the end of 2007.

 

Jobs said the company had a 4.5 percent share of the PC market in the United States and a 3 percent share globally.

[billman424]

did 99 cents a song actually deter anyone from piracy? 99 cents for each song ends up the same price as the cd, except no cd no cover art and the quality isnt as good.

 

30 cents a song is reasonable. the service i use 2 cents a mb is more like it.

[mikesown]

Well, that's jobs alright . He's definitly bold in what he says, be it discontinuing the well selling iPod mini, or telling record labels to <insert explicitive here> off. I have some respect for him in this, as most people would give in to the record labels, but jobs would rather drop a label than be blackmailed into increasing prices.

[Prog]

Music is too expensive. Plain and simple. Why would I want to pay 99 cents to download a song? And I don't even pirate music (anymore).

[Steven P. Jobs]

did 99 cents a song actually deter anyone from piracy? 99 cents for each song ends up the same price as the cd, except no cd no cover art and the quality isnt as good.

 

30 cents a song is reasonable. the service i use 2 cents a mb is more like it.

 

Don't trust the Russians. Allofmp3.com is illegal. Bad karma is all you'll get from them.

[Kintac]

Don't trust the Russians. Allofmp3.com is illegal. Bad karma is all you'll get from them.

 

Allofmp3.com is not illegal. In russia it is absolutely legal. I use for more than a year now.

[intradink]

Legal? Just about in Russia. Although I have a number of sources (who'd know) who've said that the labels/artists don't see a penny of the royalties from allofmp3

 

The industry is trying to get the loophole that allows the site to run legally (in Russia) closed.

 

That said, the model makes a lot of sense to consumers. But it's a catch 22, to come closer to being legal, they'd have to raise prices (to pay royalties), and so lose the attractive model.

 

The simple fact is that digital music production, hosting, serving, streaming, DR etc costs a lot of money. No one is interested in a site that offers 50 tracks. As a consumer you want a site that offers a very deep catalogue. Deep catalogues means a lot of money. At 99 cents each, you'll still need to sell millions of them, and hopefully over several years you've managed to make a return on your investment. That's why iTMS still isn't making a profit. But Jobs isn't bothered because his money is made by selling more iPods, not by tracks. So if he can sell tracks cheaper than the competition, it's even more reason to buy an iPod and help keep Apple from going under.