Warner Music Exec Threatens To Cutoff Apple

[Alastor]

Warner chief threatens to scalp iTunes

A Warner Music executive has threatened to cut off Apple if Steve Jobs continues to refuse to give ground on iTunes Music Store pricing.

Digital strategy chief Michael Nash said during a discussion at a wireless telecoms conference that the music industry has let Apple get too much power in the digital downloads market.

'What if Jobs says 39 cents or 29 cents per download - what then?,' he said. 'The industry can say, OK we'll cut him off - very few people buy music from digital downloads.'

He added that he is sure that the Apple CEO would find another way to sell iPods.

Nash's comments echoes those made last week by Warner CEO Edgar Bronfman, who called for Apple to adopt variable pricing and share out revenues from iPod sales.

The record companies' position is based on the dubious argument that digital downloads sell iPods. In fact all the evidence points to the opposite: that iPod sales have driven demand for downloads. The vast majority of digital music sales are made by iPod owners. Cut off Apple and the labels digital sales will slump.

'The iPod drives people to iTunes, not the other way around,' Michael Gartenberg of Jupiter Research told Business Week.

In the longer term music bosses (and Apple's rivals) are clinging the idea that the iPod's dominance of the MP3 player market cannot go on forever. But such is Apple's overwhelming market superiority that other device manufacturers are complaining that they cannot get hold of flash memory because Apple is buying up the entire supply for its iPod nano.

A Korean news site reports that Apple is the only customer for Samsung's new MLC flash memory, which is cheaper and more efficiently produced. And because Apple is buying in much greater bulk than anyone else it enjoys further price benefits.

'It's true that the company that has the largest market will have the edge,' said Hwang Chang-kyu, CEO of Samsung's semiconductor division. 'Buying 100 units and buying one can't be same.'

The record companies cannot even be sure, as they once were, that music on mobiles will break Apple's dominance, now that the first of the major digital music services to offer phone support is iTunes. Nor have music subscription services from the likes of Napster and Real proved attractive; people, it seems, still like to own their music.

For the time being and the forseeable future, Apple appears to hold all the cards. Single-price downloads will be around for a while yet.

Simon Aughton

Original Link: http://www.pcpro.co.uk/news/78119/wa...lp-itunes.html
EDIT: Seems the link now requires registration.

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The RIAA is looking for control over iTunes pricing, and it seems they are serious. The RIAA wants iTunes to use a variable pricing skeam, no more flat fee. As they said in the following article last week:

http://www.redherring.com/Article.as...+Back+at+Apple

“He [Warner Music Group CEO Edgar Bronfman Jr.] called Apple’s across-the-board $0.99-per-song charge unfair.”

“Not all songs are created equal—not all time periods are created equal. We want, and will insist upon having, variable pricing.”

“Some songs should be $0.99 and some songs should be more. I don’t want to give anyone the impression that $0.99 is a thing of the past.”


Of course the last one is the most appropriate, obviously nothing will be below $0.99 as that would cut into profit margins. However, be assured that raising the price is “fair”.