ON APPLE'S DOLLAR DAYS CONTINUING (AAPL)

ONE STEP FORWARD

Well, looks like Apple may have won against the music publishers on keeping one standard price of $0.99 per track on iTunes (via Engadget and NY Post) this week.  This had been an issue I'd posted on back last November.  From Engadget:

"Jobs has long insisted that the store's 99-cents-per-song price point should stay in place, while record companies had argued for more flexible pricing, with newer songs going for a higher price, and catalog material selling for less..."

And there was a deadline approaching, as the NY Post explains:

"Negotiations between Apple and the four major music companies - with which iTunes deals all expire in the next two months - have reached a crucial point as several record executives now say they are unlikely to convince Jobs to allow variable pricing, sources said."

But as Engadget puts it later in the piece,

"The victory is, however, somewhat Pyrrhic for Apple; the company makes very little money (proportionately) from iTMS, and uses the store largely as a way to lure customers into buying iPods and lock them into its FairPlay DRM, which we all know works only with one audio player."

The issue if decided may be somewhat phyrrhic for consumers as well, as it maintains prices at a level that are still set to protect the off-line CD business models of the music publishers.  As I'd stated in the post last November,

"...the price per track (should) drop from $.99 to $.30 or less, as it's likely to do as the music industry takes out the current $.60 plus subsidy for packaging and distributing physical CDs that it uses to protect that distribution channel and revenue stream."

Well, that's what market forces would do if the music industry represented a market-driven economy rather than an oligopoly driven one."

But we'll take what we can get, especially keeping in mind that this is a modest victory in one battle in a long stretch of trench warfare.  And while it's involved music for some time now, it's also spreading to the video front with similar issues. 

And there are two separate battlefields, on the wired and the wireless broadband fronts.

It's a good step forward, but be prepared for some steps back in other places soon.

Comments

[Andy]

Michael - Understanding that AAPL has 90%+ share in North America, why do you think the music publishers won't just turn around and do the deal they want with Google? If I know I can get old Zeppelin songs for $0.30 on Google, I'll go there. For current James Blunt, where Google is charging $2.00, I'll go to Apple. This would break Apple. By then, it shouldn't matter, as consumers would become accustomed to paying variable pricing, and Apple won't care. Thoughts?