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who's mah bitch now?

.70 out of .99 euros isn't enough for him? The music execs are excellent at shooting themselves in the foot. All SJ has to do is let them keep talking and the customers will keep ITMS running for many years to come.

"At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said."

So does Apple make .20 euro a download, or is that .70 euro just the label's cut and the artist's cut is counted separately? I was under the impression that Apple was making less than .10 euros a download in profit.

In priciple, I have no problem with stratified pricing. Like anything else, some music is worth more than others. I just don't trust a company such as UMG to decide where to place the pricing demarcations.
And if some new, hot release is going to cost more than $ .99 then old cuts ought to be a lot less.

I think there is a typo in the report...

Quote:
"Wendlandt continues, "Vivendi is one of many large media companies that are trying to challenge Apple's grip on the digital entertainment market and obtain more control over pricing. It said it was in talks with rival distributors.""

I think it should read:

"Vivendi is one of many large media companies that are trying to challenge Apple's grip on the digital entertainment market and obtain more control over overpricing. It said it was in talks with rival distributors.".

There! Now it makes much more sense!

-- Hano

And this is why Apple doesn't license Fairplay.

Because if it did, Universal would remove the tracks from iTunes and go out and sign a deal with Microsoft, Best Buy, whoever, with new track downloads costing $5-$7 a song.

And from NBC's latest thing we now know what they were referring to when they said they wanted Apple to toughen iTMS DRM--what they were probably asking for was the ability to time-limit files so they would become unwatchable after a week, as NBC is doing with their own service. (Kind of a wasted effort, though, given that most of NBC's shows are unwatchable while they're being aired.)

Vlad, Apple has to cover its overhead costs on running the store (fileservers, bandwidth, transaction processing, staff, etc.) out of the cut they receive. Apple's bottom line profit is said to be about five or six percent of the track's price.

@Vlad

0.70 Euro is the labels cut. The other 0.29 Euro is shared between Apple, the Artist and the other interests. Artist's cut is generally about 0.08 Euros.

" I was under the impression that Apple was making less than .10 euros a download in profit."

Apple's .20 euro is what they take in. Out of that they must take out credit card fees, advertising, and all their overhead -- computer centers, electricity, heat, cooling, bandwidth, etc.

Leaving Apple with less than .10 euro profit per song. It could easily be less than .05.

And the artists' cut comes out of the labels cut.

"Vlad, Apple has to cover its overhead costs on running the store (fileservers, bandwidth, transaction processing, staff, etc.) out of the cut they receive. Apple's bottom line profit is said to be about five or six percent of the track's price."

Yes, I know... I just thought that they were making about 10 cents revenue and 5 or 6 cents profit after overhead costs, but that suggests they are making 20 cents revenue and I find it hard to believe it's costing them 14-15cents per track for overhead.

Fargin' corksuckers!

I've spent roughly 2-3 times as much on music since the iTMS opened then I did in the full 20 years combined. It is too easy to legally buy music now thanks to iTunes. The record folks are morons.

First it was NBC Universal not renewing its contract for TV shows available on the iTMS because they could not earn enough money on those sales. Now they're talking about music not being profitable enough. Do they hope to ditch the iTMS here too and lose a big part of their revenues ?

@ Vivendi Chief Executive Jean-Bernard Levy:
Sir, if I buy your shit music at all I buy from iTMS and you get .70 - not bad for you.
Screw the deal up so that I don't want to do that and I go BitTorrent and you get .00 - do you like that better?
Or is that indecent?

I don't understand... I thought they actually made more per album on downloads compared to the cost of a CD (shipping, packaging, distribution, etc.). Why the heck are they complaining?

Vivendi is (intentionally?) ignoring the fact that they benefit from the extended reach (world wide) at nearly no extra cost. 10 - dollars or Euros - is more than what they get for their archived CDs and it comes at little cost - a little parasitic leaching does go on. When the iTunes (Music) Store opened its doors it was expected to lose a little money while promoting the sale of iPods. Well ... it worked out and it not only "sold" many iPods - generating much profit - but it also sold enough songs - and now, movies/videos - that it turns a decent profit. Not quite what the studios were told to expect when the contracts were first offered. It isn't Apple's fault and Apple ought not be punished for doing so well.
Dave

"Yes, I know... I just thought that they were making about 10 cents revenue and 5 or 6 cents profit after overhead costs, but that suggests they are making 20 cents revenue and I find it hard to believe it's costing them 14-15cents per track for overhead."

A huge portion of those 29 cents go to Visa and MasterCard. Transaction processing fees for micro-transactions are huge (because transaction cost are something like $0.30-$0.60 + 2-4% of the total ammount). If you buy only a song at a time, I bet Apple is incurring a loss.

I'm confused by the recording industry's approach. Wouldn't the advent of digital music dramatically lower their costs? Shouldn't they be making more money now than ever? No more packaging required. Much lower marketing costs if they can distribute promo tracks to radio stations and music rags electronically rather than via shipped CDs. Or do they have a bunch of midlevel marketing and senior level execs who are no longer necessary, but they refuse to lay them off, hence keeping their overhead costs artificially high?

You know what it is? I think they've all gotten a huge amount of easy money in the last 15 years off of $4 for 3 months ring-tones. That's found money that escalated their quarterly earnings. But now that that that money is part of their bottom line, they need to grow profit even more in the future. (They are public companies after all, and the only thing more important than last quarter's earnings growth is NEXT quarter's earnings growth.)

How does one make more money by not producing the product, having no talent of their own, not being very good at nurturing new talent, not being very good at nurturing OLD talent, and being completely clueless about how to take advantage of lower production costs? Oh, I know . . . hold up the customers for more. We can call it 'information superhighway robbery.'.

Apple should send this to the EU. It only proves how rotten the labels are and should be heavily regulated and fined. There are the ones causing different prices across borders.

iSteve gets it exactly right: I spend more in a month on iTunes than I did for many, many years in brick-n-mortar music stores. The music industry got me back as a customer because of iTunes (and I switched to OSX the day the ITMS was announced). Now these greedheads want to screw things up. Between the fools who run the record companies, and the suits that run the networks, there isn't 100 IQ points to be found. These guys deserve whatever awful fate awaits them.

@Marian,
Do you really think Apple is paying the going rate for per-transaction credit card processing fees for the iTMS? (I'm not being snide. I'm just curious what people think. Wouldn't such a business have a huge incentive and a huge trading card to offer the credit card firms in order to lower these transaction costs? Apple must be a fairly large customer of the credit card companies these days and should be able to swing some significant deals in this area. Being a (near) monopoly does have its benefits

This whole price stratifying thing from Universal / Vivendi mystifies me, and I can't see how it could not be related to plain and simple greed.

For as long as I live ('m 45) prices of NEW singles and albums (and later CD's) have ALWAYS been the same. And ofcourse they have, if people in a shop would see one single/album two to three times the price of other ones, they most likely would reconsider. Being in a factual shop and having to pay with your physical wallet are strong guards against impulse buying.

It seems that they are now betting on a larger impulse buying potential when all people have to do is push a on screen button.

Greed, plain and simple.

And I too challenge them to make it happen outside iTunes. Give the general public prices two to three times of those on iTunes for "popular" releases, ans see wave after wave of consumer activism come over you...

I'm sure that they don't pay the rate that is paid by a regular web merchant. But I am also sure that they don't pay less then $0.20-0.25 + 2% per transaction! Look at the oligopolistic position of the credit card companies and their profits and you'll understand that nobody can get dirt cheap rates.

Let them leave. Apple doesn't need them. And we don't need NBC either. And the rest can leave too.... Woooo Hoooo Steve!!!!

If Steve says that the only thing we need on iTunes is EMI music, Disney movies and ABC TV, then as a fanboy, thats all ALL of us will watch... Anyone who wants to watch or listen to anything else is a Troll!!! Wooooo Hooooo .... Steve isn't scared, we don't need content!! Wooo Hooo

Woooooo Hooooooo - Let them all go!!!!!

Mr. Jack, you are a real marketing genius!!!!

They arent going to be happy until a system is in place that charges people for every single time they listen to a song.

@Tergenev
"Being a (near) monopoly does have its benefits"
Apple with its iTunes Store is not a monopoly in anything. It has 80% out of the 15% of the music sales (about 13%). So they don't control the music sales. They are only the #3 retailer. They have a very tiny percentage of the total credit card transactions (trillion dollars industry). They can't put any pressure on Visa or MasterCard.

Big market share for paid music downloads doesn't equal monopoly. If you wanna see what a monopoly means: DeBeers, Microsoft.

"Vivendi is one of many large media companies that are trying to challenge Apple's grip on the digital entertainment market and obtain more control over pricing. It said it was in talks with rival distributors."

Uh...isn't that, like...illegal? You know, acting as a cartel, fixing prices, eliminating competition....

People generally like to cheer for the underdog,
and hate those who dominate.

iTunes is the exception though when comparing the digital music market.

Booooooo - Vivendi!!!

And you smell bad too!

As I say in my blog, Apple needs a content subsidiary that bring fresh music, tv programs and videos. An independent content creator, unsigned bands and unemployed producers ready to make anything Apple requests.

-
whataboutmac.com

what is Walmart's cut on a sold CD?

And what's the share that the record companies like Universal Music Group (UMG) give to artists out of their $0.70?

Couple of cents I wouldn't be suprised.

What a depressing industry to have to work with. I hope Apple is isolating their iTunes contract negotiators from the people who are designing the store, the iPods, the Macs, etc. Otherwise I'd say there's a serious risk of all the hope and joy being sucked out of these people by contact. Yes, record company execs are kind of like the dementors in Harry Potter...

So, do the greedy bastards charge more for a CD by a big name artist? Nooooooooo! Is it not actually less than a no name CD or an old CD you have to look for? Big names sell more and that is where the money is. More volume, more money. How complicated can it be. Books follow the same principle and so do movies. The price for a DVD or a movie theatre ticket is not higher because they are more critically acclaimed or just because it cost more than 10x to produce than the next movie. Volume, volume and volume, that the key. Better or more well known sells more.

What is indecent is what the record industry has been doing to artists for the last... well, since the beginning of the record industry, starting with piano rolls. 70% of the revenue isn't enough for Vivendi? When they have $0 invested in digital distribution? Literally zero, by the way, as my understanding is that Apple does the digitizing for the iTunes store. .70 US dollars or .70 Euros for doing absolutely nothing but sitting on their fat, indecent asses collecting cash.

Mr. Jack and Vivendi deserve to be repeatedly reamed for the next 50 years by any distributor that can manage it, and it still wouldn't be enough for what they've done to the creative people who actually create the product Vivendi sells.

I take that back: Vivendi deserves to be reamed by the artists they have exploited, but the artists don't have the power to do so.

I feel the major labels are the most blatant example of pure, diseased greed in the corporate world today -- well, maybe M$ is worse, but if so only barely -- and as a small business owner myself I think their actions are beyond reprehensible.

MW: western, as in the record companies must be stopped, before they cause the fall of western civilization! (Okay, that part was hyperbole.)

differentiation can bve accomplished by not releasing new music to itunes until after it is not new. then i can be priced witht he 30 year old music. the fact they do not do that indicates the "differentiation" is a charade as many have stated for getting the buyer to pay more to get it early or go buy the cd. this is a strange corollary to apple's early adopter tax. the difference is apple holds the keys to the kingdom in music downloads and is unlikely to misplace them.

mw-miles, as in miles apart from understanding and connecting to what the consumer is willing to pay.

It's "Fargin corksoakers"
Iceholes.

I'm surprised he doesn't call for a cut of iPod sales, as they did with Microsoft's Zune. Maybe they *are* learning.

But, yes, they *are* greedy bastards who screw the artists while enriching themselves. Just how much work are they doing beyond delivering a digital master to Apple? It is iTunes that is doing the real work and bearing the cost.

But, hey, it's a free market. If they think they can make more money going with someone besides Apple, go for it. They'll be crawling back soon enough.

@why oh why

In physical distribution, you could argue that it is legitimate to charge more for a "big name" music artist or a "tent pole" movie, because the promotional costs are higher. In store displays, TV ads, etc.

But in digital distribution, like at the iTunes store, who's doing the advertising? Apple is, by putting someone on the opening store page. There are no extra costs, there are no "in store" displays, it's all -- to the labels -- free money. Charging more for a "big name" artist may actually lose money for the label, as the more money someone spends on the big artist the less likely they are to click on the "customers also bought" or "related artists" buttons. If I have a budget of $20, say, and a popular new release is $12.99, that is all I'll buy. But if it is $9.99, and so is a related artist or a catalog album by the same artist, I'll probably spend $19.98. That's ~$4.90 less going into the pocket of the label at $.70 out of every $.99.

Why doesn't he just make more and better music to compete against the publishing companies and stop complaining about his distribution channel.

I said this a while ago in this forum, and it is still applicable today. Apple does have a weak spot with respect to iTunes Store music and video content right now because the vast majority of content ownership is concentrated in the hands of a few industry giants.

The ability that the internet provides to independently produce and distribute media at low cost will change this situation over time, and the industry knows that. Some of the big names that were no longer under contract went their own way, and I'll bet that a lot of small independents have sprung up since iTunes started, too. But these independents may or may not choose to be part of iTunes. Eventually that could prove to be a challenge.

Long term, there is no guarantee that any existing powerhouse will stay in power. Historically, industries and companies have risen and fallen (and sometimes risen again, like IBM) over the course of decades, such as the railroad, steel and coal industries and companies like Xerox, Atari and Wang. I personally consider Microsoft to be near the beginning of a long downward trend.

Apple has done extremely well so far in evolving the iPod and iTunes and branching out with the iPhone. Hopefully, that trend will continue for many years to come.

Among other things, Levy called for the remuneration of a new release to be higher than for a 30-year-old classic. 'We should have a differentiated price system,' he said."

What's all the bitching about, this guy is right on!!!!!

iTunes should charge 99 cents for new release's, and 59 cents for 30 year old classics

All the record companies have to do is set up websites where they offer their music without DRM. Then they could bypass Apple, MS and everyone else who is making such indecent "profits" on their music.
But then of course the bilinous and bloated fantasy of a never-ending subscription model would have to be exposed for the vile and vacuous nightmare it really is.

Apple has a weakness in not owning content which is completely overshadowed by the media conglomerates' weakness in delivering content and total misunderstanding on how the consumer would like to buy and use content.

You've got to love this asswipe.

Earlier today, Apple and Starbucks announced a deal to distribute 50 million tracks - the latest in a series of promos over the last several years. Did UMG or Vivendi go and chase down those deals? No, they didn't - they sat back on their cocaine-filled asses and let Apple do all the heavy lifting and take all the risk, just as they did when Apple took the risk of setting up iTMS and all they had to do was digitise a whole load of content.

When Apple goes and signs a massive promotion deal, UMG will - if statistics are to be believed - normally reap the benefit of around 25-35% of the redeemed tracks; on a 50 million deal, that's about 15 million tracks and $12 million.

How many physical albums does UMG have to flog in order to earn $12 million? Let's look at record industry math.

For an average CD, this is the way the money gets divided…

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

Out of a $16.00 album, the record company and the artists/MU/publishers absorbs $11.30 (or around 70%).

In other words, it takes a million albums - the equivalent of discovering and developing a Platinum disc album.

Now let's look at the source of the complaint: under iTS, the record label takes a gross 70.7%; under physical distribution, the label takes a gross 70.6%. So it's not like as if the record label takes a decreased share of the pie.

But that's not the industry's complaint: their complaint is that they should be allowed to charge more for their digital product, whilst neatly ignoring the fact that their digital product costs less to make and sell.

Distribution through iTS (or any digital store) removes around $1.70 (around 17.5%) from the label's costs of physical manufacture and distribution and shifts those costs to the online retailer.

By my reckoning, that means that digital distribution would have the ability to make the record companies around 21.5% more money if Steve Jobs would simply allow the labels to charge for digital product on pari passu basis. And the basis of their complaint is that he doesn't and they merely have to contend with the same level of profitability they had before "the digital age".

It doesn't occur to these dinosaurs that a) they are not providing an equivalent product, b) that they took no commercial risk in developing a successful digital downloads marketplace (or that they fucked up numerous attempts in the era before iTMS/iTS), c) that a vibrant digital downloads market allows them to leverage a wider range of assets than would be practical under physical distribution or d) that pricing pari passu combined with DRM would simply recreate the conditions which led to massive piracy in the first place.

In short, Levy doesn't have a leg to stand on!

A couple of to-be-fairs regarding the MDN commentary:

MDN:If it was so "indecent," why did they sign the contract?

I don't know the hirings & firings, but it's entirely possible that this guy did not sign the contract -- was he even at Vivendi when the contract was signed?

MDN:we want to charge more for what people are buying and less for what they're not

This is standard supply-and-demand, which is one of the fundamental pillars of capitalism. Isn't it? If you had two websites, one called MacDailyNews.com and one called WindowsDailyNews.com and you got a million visitors to MacDailyNews.com and only 5 visitors to WindowsDailyNews.com, wouldn't you charge more to advertisers on the one that got the hits?

Just sayin'... not everyone who disagrees with Apple is automatically stupid or wrong. The guy wants a better deal and believes he can get it. We're gonna MOCK him into not? He owns a friggin' US broadcast network. He's doing just fine without Apple's help.

WWHHHHAAAAAAAAAA!!!! WWHHHHHHAAAAAAAAAAA!!!!!

we care... really we do.

PC Apologist,

He doesn't own "a friggin' US broadcast network."

You have no idea about which you hunt and peck.

NBC Universal is 80% owned by General Electric. Vivendi holds 20% of NBC Universal.

Indecent because they have been stripped naked by Apples policy and can no longer hide their pricing policy.

They cannot Drink Camel's Milk because if they were to fart after drinking it, their Arseholes would be blown wide open for all to see. Of course that sight would cause plenty of people to keel over!!!

Fuck all of you GREEDY FSCKING ASSHOLES IN THE MUSIC INDUSTRY. YOU SHOULD ALL DIE HORRIBLE PAINFUL TORTUROUS DEATHS. YOU'VE SCREWED MUSICIANS & CONSUMERS FOR YEARS... AND NOW YOU'RE STILL TRYING TO FSCK OVER THE WORLD.

It should be noted that Feist is a UMG artist, who got millions of dollars worth of cross-promotional exposure from Apple through the iPod commercials, resulting in expanding sales and enormous increased visibility.

No good deed goes unpunished.

PC Apologist…

Given that the contract was with UMG, it was probably signed by an authorised officer of that Vivendi subsidiary. And that officer would have been authorised by Doug Morris, the current CEO and Chairman of UMG who has held that position since November 1995, assuming that Morris himself did not sign the contract.

Morris has been a member of Vivendi's management board since April 2005, which doesn't exactly imply that his actions as CEO were repudiated by the board of his parent company.

I sometimes go out of my way to hold a contrary position to MDN, but in this case their take is so close to being 100% on the money that the difference is barely detectable by analogue instrumentation: the simple fact is that UMG - along with the rest of the music industry - gladly signed on the dotted line at the establishment of iTMS, simply because they had no choice given that their industry was being strangled by piracy and the fact that – despite sinking a bucketload of cash into Microsoft technologies – they had failed to develop a single commercially viable service.

Here's an interpretation of Levy's position…

"Mon dieu, we have been trying to sell this fucking record company since 2003 and nobody wants to take it off our hands because they have no idea whether the business will be viable once digital becomes dominant and artists realise they no longer need us to market, manufacture and distribute their 'product' on a global basis.

I think we need to make the company more profitable in the short-term, so some sucker like that brainless fuck-wit Bronfman will indulge in a massive ego-trip and pay us an unreasonable amount of money.

God, I wish Vivendi was still a sewage company: at least we knew what shit we were dealing with in those days."