http://news.com.com/Music+moguls+trumped+by+Steve+Jobs/2100-1027_3-5671705.html?tag=st.rc.targ_mb

Music moguls trumped by Steve Jobs?

By John Borland

When Apple Computer CEO Steve Jobs walked into the suites of top record label executives in 2002, iTunes software in hand, he was welcomed as a trailblazer to a digital music future.

Now, nearly two years after Apple's iTunes launch, record executives have become worried that they have inadvertently ceded too much power over their industry to this charismatic computer executive.

Frustrated at what they see as Jobs' intransigence on song pricing and other issues, some record executives are now turning their hopes toward other partners, particularly mobile phone carriers eager to get into the business of selling music. They see this new focus as a way to broaden the digital music business, and lessen Apple's dominance over their market in the process.

What's new:
The dominance of iTunes and iPod has recording business moguls questioning their deal with Apple.

Bottom line:
Frustrated at what they see as Steve Jobs' intransigence on song pricing and other issues, some record executives are now turning their hopes toward other partners, such as mobile phone carriers.


"The (wireless) carriers' economics are aligned with us much better than Apple is aligned with us," said one senior executive at a major record label, who asked to remain anonymous because of his company's ongoing relationship with Apple. "The mobile market is very important, as important to us as the PC."

Jobs is given undeniable credit for jump-starting what is now a fast-growing digital music market, but some music executives complain that his company, with 70 percent of the digital download market, is setting the ground rules for their own business.

While iTunes is designed to propel the sales of iPods--more than $1 billion worth in the last quarter alone--the labels complain that Apple's policies are insensitive to their goals and limit their ability to grow their digital business even faster.

For example, Apple wants to sell all its songs for 99 cents each, a single price point that's easy for consumers to understand. But the record labels have pressed for the ability to vary prices to maximize their own sales. They want to sell older titles at a discount--like the $9.99 CDs available in most record stores--and charge more for popular songs to take advantage of market demand.

Jobs also has refused to license Apple's antipiracy technology, called FairPlay, to rival MP3 player makers, and has blocked music formats from other companies, such as Microsoft, from the iPod. This makes iPods and the iTunes store incompatible with rival digital music devices and stores, fragmenting the market in a way the labels fear ultimately limits sales.

"We hate the current situation," one top record industry executive said, referring to the issue of incompatibility between different companies' music devices and services. "There is one man who's going to decide this...No record company by itself can basically tell Steve Jobs, 'You're not going to get our catalog unless you open up FairPlay to Microsoft.' We can't do it together."

Apple declined to comment for this story.

Despite the critics, Apple continues to win praise from many customers and industry analysts. They point to Apple's clear success in spurring the download business as proof that Jobs is on the right track with pricing and other policies.

"Apple really understands that pricing models are critical," said Jupiter Research analyst Michael Gartenberg. "I think 99 cents resonates with consumers as a sweet spot."

Many customers like the convenience and pricing. "iTunes really sucks you in," said Jackie Kerr, an iTunes customer in Baltimore. "I don't mind the 99 cent cost, though sometimes I do feel stupid for paying $1 for some horrifying '80s band I don't want to admit liking."

When iTunes launched, most of the record labels were more squarely in Apple's camp. Part of the reason was Apple's limited role in the computer industry: They saw the Macintosh market--less than 5 percent of the total U.S. computer market--as a small, relatively safe way to experiment with Jobs' ideas.

Instead, iTunes, replicated on the PC platform a few months later, exploded into a popular hit that almost overnight defined the standards for the digital music business. Apple's iTunes store captures close to 70 percent of digital music sales, according to the most recent analyst figures. The iPod holds a similar share in the portable MP3 player market.

"I think it's safe to say that Apple has generated so much interest in digital music downloads as a paid service, the labels clearly understand Apple's influence," Gartenberg said.

Wireless, the music industry's new savior
For the most part, the labels have remained loath to push too forcefully against the company that still accounts for the vast majority of their new online sales.

Instead, they are turning hungrily to the mobile phone market, where phones are slowly gaining the capacity to play music. Executives note that there are many times more cell phones than iPods in the world, potentially offering a far larger digital music market. Already full-song download services for cell phones are operating in Europe and Asia, and are expected to come to the United States as soon as this year.

Part of the mobile market's attraction comes in pricing. Consumers around the world have shown they will eagerly pay $2.50 or more for a ring tone, a mere snippet of a song that costs just 99 cents for the full version at iTunes. Labels see these consumers as receptive to variable prices for different songs.

But some music executives also describe mobile carriers as simply better potential partners than Apple. Like the labels, the carriers' bottom line depends directly on selling content, while Apple's profit sheets depend on hardware sales.

The carriers' interests were underlined in the case of Motorola's iTunes-enabled cell phone, announced nine months ago but now delayed. As described by the companies, the phone would let people transfer their iTunes-purchased songs from computers to the phone.

Publicly, carriers say they are interested in the idea and will offer the phone to their customers if there is demand.

"Ultimately, the consumer is the boss," said John Burbank, vice president of marketing for Cingular Wireless. "We're going to create products that best match what the consumer wants to do."

But mobile industry sources say some carriers have been critical of Motorola's move, which would encourage consumers to buy music on a computer rather than over the phone network. Because most phones are sold with a substantial subsidy from the wireless carrier, their lack of interest has set back the release of the iTunes phone.

"Carriers subsidize phones and features when they drive network usage," said Iain Gillott, a wireless industry consultant. "Yet here was a phone that I was supposed to sync to my PC so I could buy music from Apple. Why would the carriers subsidize that?"

None of this means the labels are likely to stop dealing with Apple. Indeed, the companies continue to work closely behind the scenes discussing issues such as CD copy protection and new promotions. And label executives are quick to commend Apple for doing more than any other company to create the digital download business.

And any business relationship, particularly in new arenas, is bound to have its bumps, insiders say.

"The relationships are really better than ever," said Cary Sherman, president of the Recording Industry Association of America. "Everybody understands where the other side is coming from. Everybody understands that there is a market here, and everybody's trying to find a path. The dialog is healthier and more wide-ranging than it's ever been."

Oh, poor things. They wanted digital, they got it and now they are complaining? This sort of sounds like the Wallyworld deal. I much agree that the digital market is really overpriced. Seriously overpriced. If you think that I would pay for a ringtone, you gotta be outta your mind. $2.50 for a ringtone is it? That's not even a whole song. From what I hear it also is very limited in how long it works for you. No thank you. You keep your digital offerings, I will keep my money till something comes along I can live with. Neither of the above can I live with. Also there is one other condition to it. Change your business methods. If you can't do that, even prices going down won't encourage me to get off my wallet.

"Jobs also has refused to license Apple's antipiracy technology, called FairPlay, to rival MP3 player makers, and has blocked music formats from other companies, such as Microsoft, from the iPod."

So.. apple takes advantage of the DMCA along with everyone else and the music industry complains their product lacks compatibility?

Wow... well i guess they reap what they sew right, they outlawed compatibility with section 1201 in the first place. Funny how that little clause boomeranged back into their face.

maybe they wouldn't have these compatibility issues if they DUMPED DRM and switched to an open format which could *gasp* be converted into anything the customer wants?

"The relationships are really better than ever," said Cary Sherman.

"We hate the current situation," one top record industry executive said.

I'm thinking that Cary Sherman and Baghdad Bob are somehow related. Or at least studied at the same school of misinformation.

Steve Jobs is making us money. Waaaah!!!

So a monopoly.. Is afraid of Steeve Jobs.. Because he almost acts.. Like a Monopoly..

Is that anything like the Starbucks across the street from a Starbucks at the end of the Universe?

"I think 99 cents resonates with consumers as a sweet spot."


since when?

Good post Mr Moop!!!!!!!!!!!!!!

I can't believe that people would download songs from their phones for $2.50 when they could download them from iTunes for 99¢. What drugs are they taking if they think they are going to supplant iTunes that way?

Then again, I couldn't believe people would pay $100 for a music player that you can't even program or select tracks. Clearly Jobs has fashioned his business on the old aphorism, "There's a sucker born every minute." Those iPods have been flying off the shelves.

Clearly I am out of touch with what people are willing to spend money for. Jobs gives you less function for more money. Apparently the music cartel thinks they can succeed by giving less music for more money. The problem is that they don't have Jobs' apparent talent for effective hype.

"Wireless, the music industry's new savior"

LMFAO!! If they think wireless is their new savior, they are doomed to sink with the ship.

"Funny how that little clause boomeranged back into their face."

Great point awehr!!!

My mobile phone plays MP3 and open AAC. If I want new music I just plug it into the PC and download some MP3's. It costs me...nothing!

LOL! WHat is up with the idiots out there buying crap that only plays DRM infested shit?

I havent finished digesting this direction yet.
.."Part of the mobile market's attraction comes in pricing. Consumers around the world have shown they will eagerly pay $2.50 or more for a ring tone, a mere snippet of a song that costs just 99 cents for the full version at iTunes...."
What I think i see is that Cell users are ready to HAVE a defining tone.
A ring tone IS different to a cell user, in comparison to a "song".Even though a song's composition might very well be the basis of the ring TONE sequence.
As a cell user a ring tone defines how you want to perceive an incomming - message -.And how you want the rest of the world around you to perceive your choices -values if you will , depicted by your choice of ring tones.So ring tones now start to cross into the area of "Vanity" tones.Or maybe "identity" tones.Or get ready YOUR Freedom tone .[madison ave. here i come]
These are Very important concerns of the American public.
Music , in the form of "songs" is used by people to communicate to others of what they are about.And up till now that sphere of influence was of a more personal interaction by say having,friends over for dinner - or a party etc.
Over the years electronic devices have become small portable feature rich appliances.So cheap that ANYone can afford a device.So powerfull they can be heard over any thing, do almost anything , and so portable they can be anywhere.
So what appears to be happening at this moment in the arc of evolution is that 2.50 is a small price to pay for uniqueness and .99 cents is fair price to pay for a repeatable pleasurable music experience.

O.K ,it's begginning to pop up everywhere ,on talk radio ,infomerials and creeping into network T.V. On the net I've even read it refered to while being pitched a new and improved version of the same analgesic I've been using for years.
What , ? you may ask.
The Term " delivery system".Yep ,that's all I am talking about.
This is the distallation ,the essence , if you will of the idea that is behind all products and the delivery to their intendid "target".
Whoop's ,there I go again ,slipping in another of those "new " word idea thing's.
Target.No not the merchandise retailer ,but another idea.
Let's cmbine the two idea's ,delivery system and target.
Sounds very familiar.
Think back over the last couple of years of how the military arm of a particular government spent hours on the airwaves describing in detail the methods of delivery to the intend target.Kinda of glossing over the fact that what was being delivered was destruction and what was being targeted where in fact people ,not just ideas.
So it is no revelation to start to see the terminology of warfare creeping into the buisness vernacular.
It is afterall the most currently understood defining idea at the present in the american culture.
So what's my point.
Delivery system,,that's it .
The pop music side of the entertainment industry is struggling over the delivery system.

the medium is the message?

..."Carriers subsidize phones and features when they drive network usage," said Iain Gillott, a wireless industry consultant. "Yet here was a phone that I was supposed to sync to my PC so I could buy music from Apple. Why would the carriers subsidize that?"...
The phone is just like the PC in that it is a piece of hardware that enables the delivery system [carriers] .
Carriers can be either the old [copper and glass] P.S.T.N. [Public Switched Telephone Network]or the newer technology wireless pstn.Either way the medium [delivery system] is just a conduit.
For the medium to be the message you would more than likely own signifficant amounts of stock in a content PROVIDERs business.As that would be your bottom line.
Music recording industry basically has always channelized it's content.Hence the idea of distribution "channels".Such as record stores , concert stadiums ,M.T.V.All of which are distribution channels that operate for profit.

Essentially, the RIAA labels are whining that they cannot rip off the consumers as much as they want to, oh boo hoo.

Kudos to Apple & Steve Jobs, as little as I like iTunes.

*sigh* When you can physically isolate the transceiver circuits with an external switch, and there's a fully-functional Linux distro for cellphones, then I'll buy a mobile phone.

When I can get good-quality, 100% flat-rate internet on my cell, then I'll actually start turning the transceiver circuits on.

It's not as if I ever call anyone anyway. It's just that, by the time 30GB hard drives make it into portable devices, the only combo PDA and media player within my price range will be a cell phone.

...and I dare anyone who disagrees to find an existing pocket device that can play MP3, Ogg Vorbis, Musepack, .it, .s3m, .xm, .mo3, .stm, .mod, .hsc, .spc, and the half-a-million other esoteric formats I play. Heck, it's enough work just tracking down XMMS plugins that play all of them adequately. (or WinAmp plugins for that matter.)