COPYCENSE

What do you do when a company creates a device that is so popular that it hands you a market that almost beats free? You get greedy and seek to raise prices. This is what is happening right now as the recording labels renegotiate iTunes license fees with Apple Computer and Steve Jobs.

To review briefly, the music industry has been unable to give away its music — even legally — for the past decade. In fact, hundreds of thousands of folks preferred to swap music (legally and illegally) online in various fora, including the download networks Napster and Grokster. The industry’s lawsuits didn’t stop free downloading, nor did Big Music’s feeble attempts at creating their own online marketplaces.

Then in late 2001, Jobs and Apple rolled out iTunes and the iPod. The response to both was so universally positive that even recording artists were pleased. (I recall reading Dr. Dre saying “Somebody finally got it right.”) in February of this year, Apple celebrated its 1 billionth download from the iTunes music store. At 70 cents per track (the approximate amount the labels share in fees for each 99 cent iTunes download), that means Apple has handed Big Music a market that is worth nearly $1 billion.

Again, before iTunes, Big Music had nothing more than dry hands and queasy stomachs when it came to online music.

Now, according to an Associated Press report, “some labels feel hamstrung by Jobs’ insistence on pricing all tracks at 99 cents. With the labels expected to enter into music licensing discussions with Apple this year, any moves by Apple to abandon uniform pricing will test whether music fans are willing to pay more to download music that many only a few years ago acquired for free.” Instead, Big Music wants to impose a pricing structure that mirrors how it sells CDs.

Here’s the problem with that: Big Music no longer seems to be able to sell its own product successfully. One of the reasons iTunes is so successful is it allows people to buy singles, which the music industry eliminated because it wanted to force consumers to buy (higher-priced) entire albums. But people (especially young people) did not want to pay nearly $20 for 20 tracks, 16 of which usually were filler. Instead, people either didn’t buy or shared files online.

And let’s not even discuss Big Music’s gambits like the Sony BMG rootkit scandal, which lead to a class action lawsuit and settlement over the label’s dangerous use of virus-inviting software in a DRM scheme implemented on several CDs. Say what you will about Apple’s FairPlay DRM: thus far, it has not been found to be a computer security risk

Now, Big Music wants to move past a proven 99 cent price point in order to get more money from a business that has proven it can sell music better than the labels. I can’t understand how these people stay in business.

Associated Press. Music Labels, Apple Divided Over Pricing As Talks Approach. SiliconValley.com. April 3, 2006.

CopyCense™: K. Matthew Dames on the law, business, and technology of digital content. A business venture of Seso Digital LLC.