Wednesday, January 07, 2009


In some 10 years the music business has rewritten itself and now has a different perspective on digital. Yesterday in San Francisco Apple finally announce that it would drop the anti-copying restrictions on all of the songs in its iTunes Store and also importantly change its pricing structure to allow record companies to set prices. Last year iTunes sold 2.4 billion tracks, but even this was not enough to compensate for the 20% decline in CD sales.

Apple had started the track based price revolution but was not now in control of it and the iTunes price point of 99 cents had to go as Amazon and others were blowing it away already. The result is that the majority of songs on iTunes will drop to 69 cents beginning in April, while the big front list songs will go for $1.29 and some will remain at 99 cents. The music industry hope that this will increase legal digital downloads and appeals to consumers.

More and more services now sell MP3 unrestricted files and the writing is clearly on the wall for DRM in music. Apple clearly seen this in 2007 and had wanted to move in the same direction. However, the music moguls at some majors wanted to play silly games allowing rivals to iTunes to sell MP3 files, whilst retaining the restriction on Apple. Apple are to now also offer customers a one-time fee to strip copying restrictions from music they have already bought. Some would even question the logic of charging 30 cents a song or 30 percent of the album price when consumers can do it easily for themselves for free.

The one interesting move that was announced was that customers would now be able to download songs directly from iTunes via wireless networks to their iPhone without having to go through their computer.

So what do we think of these announcements?

On pricing the reality is the music companies will find it hard to maintain this model and consumers will cherry pick the bargains and buy selectively at the best price. By creating multiple price points based, not on scarcity but demand, some may think that they will shoot themselves yet again in the foot. The reality is they have created only one price point - 69 cents and two that the consumer will object to paying for.

It is the consumers, not Apple, that have in 10 years overturned the music industry on DRM and its anti-copying restrictions and the music majors have finally been brought to their senses yet again.

Apart for the consumer, the one winner out of this is probably the iPhone.

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