Major labels 'force 70% price hike' on Apple
Posted by on May 8, 2004 at 3:22 AM

The world's five biggest music labels have successfully forced Apple to increase the prices it charges for songs on the online iTunes Music Store.

As we reported back in April, the major labels have been engaged in negotiations with the Mac maker in a bid to persuade it to put up prices.

According to a New York Post report today, citing sources close to the talks, all five have succeeded.

The sources claim Apple has now signed agreements with EMI, Bertelsmann Music Group (BMG), Sony, Universal and Warner that will see prices on some songs rise from 99c to $1.25, an increase of over 26 per cent.

Still, that's better than the $2.99 price point some labels had been pushing Apple to introduce.

Album prices are going up to. Many are likely to continue to be offered for $9.99, but some are appearing in the ITMS for $16.99, a rise of 70 per cent.

As one music industry source told The Register: "That will really ingratiate the public and discourage piracy, won't it?"

Apple does appear to have had it way in other areas, however. The NYP's sources reckon the company did not agree to label demands that some artists' songs only be sold in album batches and not as individual tracks.

In the past, some acts, most notably Radiohead and Metallica, have said they will not allow their songs to be offered individually. But that clearly runs against what many music consumers want: the ability to pick and choose the songs they want and not be stuck with all or nothing album offers. The old days of buying an entire album for one song are hopefully behind us.

We'd say it's about time the music industry started thinking that way too. There will always remain a place for albums - CDs too - but artists and labels have to start thinking 'outside the disc' if they're to reach a new generation of consumers now empowered to buy exactly what they want.

Other services may face similar demands, but there does seem to be a particular focus on Apple. Having established the market for legal downloads, Apple now seems to be facing a music industry paranoid about the power that success might bring the Mac maker.

Apple Tunes Up

May 7, 2004 -- Music fans may have to start shelling out more to download some of the most popular songs on Apple's iTunes digital music service, The Post has learned.

The five major record labels have been in negotiations recently with Apple over pricing and other issues associated with the year-old download service, which was launched to great fanfare last April.

All five of the deals - with Universal, Sony, BMG, EMI and Warner Music - have already been signed, sources say, and the new pricing is already being rolled out for albums.

EMI and Sony Music, which this week launched its own download service called Sony Connect, were said to be the most aggressive on pricing.

Under the terms of some of the deals, the prices for some of the most popular singles could rise to $1.25, according to sources familiar with the negotiations. Songs have previously been priced at 99 cents across the board.

"It allows for some flexibility down the road," said one source.

Meanwhile, some of the usage rules - such as how many times users can burn downloads - have been altered. For example, full playlists will now only be able to be burned seven times instead of the current 10.

However, Apple chief Steve Jobs stuck to his guns on his rule that artists are not allowed to only offer full albums for sale without offering singles. Some companies, especially EMI, had been pushing to allow artists to only sell albums.

The prices for albums - most of which have been priced at $9.99 - allow for some releases to be priced higher. For example, "Fly or Die," the latest album from rock-rap act N.E.R.D., is currently selling for $16.99 on iTunes.

Spokespersons for the major record companies declined to comment. A spokesperson for iTunes was not available for comment.

Apple's willingness to allow some singles to be priced higher than 99 cents indicates the company feels empowered by its current success in the download market and sees a chance to boost profits from the sales of digital music.

Such sales have mainly been viewed as a method to drive sales of its popular iPod digital music player.

At the 99-cent price, only about 10 cents from each song sale goes to Apple's bottom line, with about 70 cents going to the record labels and the other 20 cents paying for credit-card fees and distribution costs, sources say.

Sony's new service offers over 500,000 songs at 99 cents and full albums for sale at prices beginning at $9.99.

While iTunes has been hailed as a revolutionary service that popularized paid downloads, there are some signs its success has fallen short.

For example, a Pepsi marketing campaign announced last year that was supposed to give away 100 million downloads has resulted in only 5 million downloads by Pepsi drinkers, according to a source. Pepsi spent upwards of $2.5 million on an advertisement during the Super Bowl to promote the campaign.

Apple recently kicked off a new iTunes television campaign featuring the band The Vines' song "Ride."

U2 Talk iPod Strategy

Band's partnership with Apple has deep roots

By Warren Cohen


For two weeks before MTV debuted U2's video for the new single "Vertigo," fans had a chance to see the band perform the song on TV -- in an iPod commercial. The members of U2 are passionate proponents of Apple's iPod -- "It's the most interesting art object since the electric guitar in terms of music," says Bono -- but the band's new partnership with Apple Computer still qualifies as a surprise. In their twenty-five-year history, U2 have never licensed their music for commercial use or even accepted tour sponsorship.

With radio playlists strictly formatted and MTV showing more reality-TV shows than videos, many bands are looking for new ways to bring their music to the public. And so U2 launched the first single from their upcoming album, How to Dismantle an Atomic Bomb, with an iPod ad rather than a video. Apple is also releasing a special black U2-edition iPod for $349 with band autographs laser-engraved on the casing. Buyers get a fifty-dollar discount on The Complete U2, a $149 iTunes download package that includes more than 400 songs. "I see this as the beginning of a new era in the distribution of music," says U2 guitarist the Edge. "We're happy to be part of history and the future."

The U2-Apple partnership has deep roots. In early 2003, when U2 first heard that Apple was planning to launch an iTunes music store, the band met with Apple founder Steve Jobs at the home of Jimmy Iovine, the co-chairman of U2's label, Interscope Records. "Jimmy is a visionary and believes artists should meet with technologists," says Bono.

iPod ads have been helpful in album sales before, most notably for Jet, whose single "Are You Gonna Be My Girl" garnered widespread TV exposure before storming radio. U2 manager Paul McGuinness says, "The commercial was an attractive idea because iTunes was already selling our music, and the amount Apple will spend for airtime is out of reach for the record business." The band accepted no money for the ad but will get royalties on the U2 iPod.

And music execs are eager to see more of these partnerships. In September, the industry held its first-ever "upfront" -- a conference where the major labels showcased upcoming albums for representatives from corporations such as Procter & Gamble, Pepsi and Mercedes-Benz. "Target your brands with our bands," said Atlantic chairman Jason Flom, showing a video featuring bands on his artist roster that might appeal to baby-boomers (Phil Collins, the Doors) or soccer moms (Matchbox Twenty, the Corrs).

Commercials aren't the only route. Shows including The O.C. and One Tree Hill put music from new bands in every episode. When video-game maker Electronic Arts featured songs from Good Charlotte and Blink-182 in its sports games, it helped to break those bands. "We know there are other avenues to talk to consumers about music and other places to market to them," says Phil Quartararo, executive vice president of EMI Music North America. "Kids hear music on the radio, phone, iPod, video game and the Internet, so we have to go to where the consumers are."

As for U2, it's unclear whether their partnership with iPod will result in significantly increased exposure. After all, the band has already sold more than 120 million records worldwide. "U2 is an established act for radio and video, which is still the main driver," says Quartararo. But some think that the glow from Apple's hot product will reflect well on the band. "Whenever you're the first to do something, there's a hipness factor," says Bob Chiappardi, president of Concrete Marketing, a music-promotion firm. "It's a win-win situation." If it goes well, look for other bands to beg Apple for their own iPods too.

In their twenty-five-year history, U2 have never licensed their music for commercial use or even accepted tour sponsorship.