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Apple's relationship with the record labels starting to sour?

Peter Rojas
iTunes Music Store

Everyone usually gushes about how brilliant Apple was in being able to corral all the major labels together for the iTunes Music Store, but is Stevie J.'s insistence on everything being his way or the highway putting Apple's relationship with the labels at risk? Doesn't look like anyone is going to be pulling their catalog from the iTunes Music Store any time soon, but CNET does have a story today about the growing tension between the record labels and Apple. Nothing particular surprising—it's mainly that the record labels want more flexibility in being able to charge more for new hit songs and (supposedly) a little less for older titles and that they'd like Apple to open up its FairPlay DRM to other MP3 player manufacturers because they think it would help them sell more songs (they shouldn't get their hopes up)—but the twist here is that these dissatisfied labels are taking a good long look at the wireless carriers as alternative partners to Apple.

From the perspective of the record labels, the carriers offer a more secure retail environment (they can DRM all this stuff like crazy), and since the carriers are also dying to start selling wireless downloads, are probably more likely to give the labels the pricing flexibility they crave (they think they can get more than 99 cents per song for wireless downloads, which is probably wishful thinking on their part). Cutting a deal directly with the wireless carriers would also take advantage of their growing reluctance to carry handsets like Motorola's forthcoming iTunes phone, which they're not particularly stoked about because it encourages customers to load up their phone with music by syncing it with their PC rather than by downloading it directly over wireless networks (the carriers are counting on wireless downloads as an additional revenue stream).

So is Apple going to be knocked off its perch? They currently dominate the legal online download market, so it's hard to imagine any of the major labels refusing to let Apple sell their music via the iTMS, but it's also not inconceivable that they'd use partnerships with wireless carriers (as well as other online stores) to try and gain a little leverage in their dealings with Apple.

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