EMI chief says iTunes prices will rise (and lower) within the year

Alan Levy, chairman of EMI Music, says there is "a common understanding" that Apple will begin to offer "differential pricing" on the iTunes Music Store within the next 12 months. You may recall that this battle became public when Steve called the labels "greedy," warning of an increase in piracy if prices are increased. Warner Music's CEO Edgar Bronfman then followed up with a waffle claiming the flat rate pricing was unfair and that the labels should "share in those [iPod] revenue streams." So here's the apparent compromise as stated by Levy: "First of all we would like to reduce pricing on new and developing artists and charge a premium for our superstars." That actually doesn't sound too bad, afterall — we're not much for Top 40 anyway, so we might actually catch a break and pay less if this love-in doesn't get broken up by The Man. Then again, that could just be their in, which they could use to leverage command over the pricing the way they really want; if granted it could well open the floodgates to price negotiations with all the other big labels in turn. Watch yer back, Steve!

[Killian @ Dec 19th 2005 2:06AM]

No way. They don't do that with CDs; if anything, it's the other way around, since most top 40 albums go for pretty cheap these days.

[Tony @ Dec 19th 2005 2:06AM]

This is just the record companies trying to front-load the revenue for the types of albums that sell a ton for a short time and then disappear. Just like the way Hollywood makes most of their money on big opennings. It's basically the opposite of The Long Tail.

What would worry me more is if they decided to have the prices adjust automatically based on the number of downloads. If there is a sudden run on some non-Top 40 album, they would automatically ramp up the price to squeeze the most revenue out of it.

[Steve @ Dec 19th 2005 2:06AM]

$1 a track is already too high in my opinion, raising the prices will just cost the labels money in the long run. The world or media is changing, adapt or die I say.

[lizocka @ Dec 19th 2005 2:06AM]

the different prices don't bother me, the bit-rates do. a lot. the lack of choices. which is the only reason why i get my stuff from the soviets. the only reason.
i have no problems with paying for a product, but as it is now they are asking me to pay for a jpg of a Picasso as if it was the original.

[Marc @ Dec 19th 2005 2:06AM]

i think that apple should not have to raise and or lower their prices just because the record companies say so. i mean who knew that apple would explode when they started itunes. but i think that if apple were to do a monthly membership..say $10 a month, it could work in their favor. say if you want vids too make it like 14.95 a month. either way apple is going to win this war.

[yonatron @ Dec 19th 2005 2:06AM]

What that guy doesn't seem to get is that it's stupid to charge a premium for the superstars, because their tracks are always gonna be the easiest to get via the p2p software of the week.

Also, as techdirt had pointed out, the labels should realize that essentially, they're the wholesaler and Apple's the retailer. If the labels want prices at the store to go up, they need to just stop bitching, raise the prices they charge Apple, and see if Jobs bites. I doubt Apple will have any interest in doing some kind of popularity-based time-variable pricing.

I do think sticking with the standard price scheme and having the occasional promotional discount on an obscure artist is a good idea all around.

[CapAmerica @ Dec 19th 2005 2:06AM]

Well when this happens I'll be going back to the P2P along with so many other people.

Way to screw up a good thing.

[alpha-sphere @ Dec 19th 2005 2:06AM]

So what there saying is that there not greedy but they do want a piece of the iPod pie....

My conclusion : They're greedy and in denial.

[Roopesh Sheth @ Dec 19th 2005 2:06AM]

#5 (Marc) - You're right and wrong. Subscriptions is the way to go. Which is exactly why apple will lose and Microsoft will win. And rightfully so. They've been offering subscription music for about a year now (through Napster and other partners) and it is working and it's awesome!

[Glancing Aft @ Dec 19th 2005 2:06AM]

I love music, hate the industry.

[Duke @ Dec 19th 2005 2:06AM]

This is one of the dumbest ideas I've seen in a long time. iTunes helped the music industry by selling music to people like me that didn't want the entire album and didn't want to get raped by the price of the CD single.

This is like having the new Harry Potter movie ticket go for $30 a pop because, hey, it's Harry Potter. It's huge and the movie studio should get more becuase it's popular!

It'd just plain stupid. You don't do that with mass produced media. You make your money in volume off the popularity, you don't raise the price and screw the fans. That's price gouging.

I will move back to P2P if they decide to rape the consumer once again.

[Mike @ Dec 19th 2005 2:06AM]

#9 (Roopesh) You're also right and wrong. The reason why Apple is so successful is because of the extremely easy to use intuitive UI, along with the iTunes software. The autonomy of Apple is what will make it 10 times more successful than any other service. And hey, it's already been proven = Apple iPod.

[business 101 @ Dec 19th 2005 2:06AM]

Classic scenario of the tail trying to wag the dog. The music industry doesn't realize it doesn't have the wherewithal to do what Apple has done; create a medium to provide a service. Their history proves it out. After all, if they had the ability to create a store front, they would have.

Instead they have always relied on distributors (Apple = Sam Goody). In the past they may have been able to influence a distributor via incentives and the lack of ability to aquire the distribution material.

Today, however, the distributor not only owns the channel (itunes) and its development, it also is not a slave to any of the producers because A) there are more varied producers out there than years past B) the retailer AND distributor is Apple.

Let's think Target for a second. If Tide wants to sell their product, they need to get it to a distributor to get to a retailer. Target doesn't buy from Tide, they buy from a distributor. Target however, can push on the distributor to get better pricing becaus they have to sell the product. If that product doesn't sell, well, Target sends it back for credit AND orders less or none.

Apple has cut out the middle man. So it's Apple who has to pick from the producers what they want to sell. The only thing (and its a big one) keeping Apple from telling them to "bite the big one" is competition. At better than 60% of the market belonging to Apple, there really isn't any competition out there...yet. Hence Apple's desire to keep the price at a buck.

Honestly, a buck a song ain't much, but it's also the most i wanna pay especially if I can find it on p2p.

[tennis guy @ Dec 19th 2005 2:06AM]

.
I've had four iPODs in my family, yet I've never bought a thing from iTMS. If they sold uncompressed .WAVs for $1, I'd probably bite. Until then, I'll buy used CDs coupled with the occasional download from Limewire.
.
Apple needs to cut the labels out of the equation. They need their own studio(s) and they need to develop their own artists. Music is like corn flakes--a commodity that anyone can buy dirt cheap. The money is in the distribution, which Apple is well on its way to controlling.
.
.

[Keirmeister @ Dec 19th 2005 2:06AM]

My question is, exactly what will be the studios' criteria for determining who is a "superstar" or not. I have the feeling it's a way for them to better control the prices. They'll start pricing UB40 right up there with U2.

[Michael C @ Dec 19th 2005 2:06AM]

The labels will kill iTunes. It's not like because people own iPods, that they're locked into using iTunes to get their music. Granted it's their only legal way to download music for the iPod (well, eMusic as well). So if they turn off consumers from buying it from iTunes, the logical choice for the consumer is to go back to p2p, etc. Granted some people will resort to buying and ripping CD's, but with iTunes, people have seen the light as far as only buying the individual song that they want. Just amazing that the labels don't see how this has benefitted them. I hadn't bought a CD for years prior to iTunes (and certainly not any since). But iTunes offered up a legal way for me to purchase music in a way that I actually liked, one song at a time.

Now as for the variable pricing, I'm curious as to what the range on pricing will be. And of course, as most who read engadget probably are, I'm not really into the labels' superstars. But just the idea of this type of deal getting started is scary enough, because you know as soon as an artist gets popular enough (a level set by the label, I'm sure) it will get a bump in price because it's reached "superstar" status.

Bah, just leave it alone, it's working, greedy bastards.

[Glenn @ Dec 19th 2005 2:06AM]

#1, CDs follow the exact pricing that EMI talked about for variable digital pricing. Developing artists cost considerably less than established aritsts. There are differences by genre, too. Rock tends to cost less than hip hop, and gospel is always as expensive as they come. The reason some popular CDs cost less than others is because Universal Music Group has a ceiling of $13.98 for almost all its new releases. Other majors are still in the $17.98 to $18.98 range. (These are suggested list prices, of course. Sale prices, especially at mass merchants, are far below list prices.)

Variable pricing will end up being good for consumers. Some higher prices will be offset by lower prices on a lot of titles. There's no reason older catalog titles should cost as much as new releases. There's no reason developing artists should be constricted by a flat price.

[digital_kid_97 @ Dec 19th 2005 2:06AM]

They are all greedy bastards, labels and Apple. Don't you be telling me that Apple is not the same. You guys keep on complaining that the labels are going to kill iTunes. If that's the case, it will kill Apple as well. Thus, you may think that Apple is fighting for the common people to keep songs at 99 cents. Heck the truth is, it is fighting for itself to continue to reap the benefits of its iTunes and iPod cash cows. Apple has said before that it doesn't make money by selling the songs. It makes money by selling the hardware.

[Michael C @ Dec 19th 2005 2:06AM]

I didn't mention that Apple was in the business to help the common people, but I think they just realize that 99 cents is good selling point that helps them keep moving the cash cow iPods.

[wg @ Dec 19th 2005 2:06AM]

I can't believe there's actually a dumber idea than subscription music! Let's charge MORE for noxious pap that morons are already stealing. Makes about as much sense as paying $20 a month for music that disappears once you stop paying $20 a month.

But hey, doesn't EVERYBODY want to rent music?

[Jay @ Dec 19th 2005 2:06AM]

Hardware companies are not saints. Have you checked the prices of the Ipod? Highway robbery.
But Apple knows how to market lifestyle and the public buys into it. If Steve Jobs says the labels are greedy people agree with him. They can relate much better to Steve Jobs than 'LiL John.

Ipods come Ipods go but music remains forever, so where's the real value?

[Whiplash @ Dec 19th 2005 2:06AM]

I don't understand what these guys are talking about. iTunes already charges different prices for different albums. I've bought albums for as little as $7 and as much as $11, and they weren't EP's or special editions either. They are already doing this, what's the big deal?

[jay @ Dec 19th 2005 2:06AM]

I am a little nervous about this situation. The record companies are really greedy and you know they will start pricing older songs or less popular at .89 cents and then popular at 1.99... So it looks like the consumer is going to lose and the record labels will get richer.

[nicholas @ Dec 19th 2005 2:06AM]

I have yet to purchase anything from ITMS for the simple reason that I don't want DRM, nor do I want 128 bit. I buy CDs, listen to them for a while, burn a "fair use" lower resolution copy, and a girlfriend snags the left over shell.

Unfortunately for the labels, I have been one of their top tier customers. Well, if you're Bloodshot or something similar.

[Justin France @ Dec 19th 2005 2:06AM]

lizocka

Uh, buy a CD. It's clearly not the only thing stopping you, you just like things for free, clearly. And so does everyone else, just be honest with yourself.

[Galley @ Dec 19th 2005 2:06AM]

Why buy Apple's 128Kbps garbage, when you can get CDs for $5.99 with free shipping?
http://www.yourmusic.com/
YourMusic.com is a service from BMG. I've been using it since Feb. :-)

[homer @ Dec 19th 2005 2:06AM]

I don't think that making tunes more expensive will drop the itunes sellings: When you become an apple-fun-boy you can't get out.

[Andrew L. @ Dec 19th 2005 2:06AM]

#26, I'm not buying music from Sony BMG _EVER_.

I say Apple should give the greedy record companies the "my way or the highway" ultimatum. Let's see how they like it when the world loses its most convenient form of legal music acquisition and instead turns to the illegal alternative.

Evil Fxcking Corporations.

[Dan @ Dec 19th 2005 2:06AM]

Supply and Demand

Top 40 typically is HEAVILY promoted (higher marketing and advertising) and involves a great deal of promotion.

Additionally, new artists are HIT and miss. It is portfolio manager. The winners pay for the losses associated with the busts, which is why many new artists that hit it big feel they are being "ripped off" by the music industry.

Existing, proven artists, with giant fan bases such as U2, the Eagles, Eminem, etc are proven commodities. They sell no matter what and could justify a LOWER price since they don't have to "prove themselves" every time they roll out an album. There doesn't have to be as much promotion/advertising to generate a "buzz."

The pricing suggested sounds like a scam to RAPE the consumer in the long-term. They (music industry) will eventually argue that they incur higher expenses and therefore should make more per song for such acts. The reality is that by charging more for their "superstars" they are essentially getting a larger guaranteed revenue stream vs. today.

What a crock....!

Dan