Milking iTunes for Every Penny

by Chris Seibold Mar 03, 2005

Apple announced that the iTunes store has now served up a whopping three hundred million songs. This is impressive for a few reasons. First Apple accomplished this while peer-to-peer networks flourish and the second really interesting thing about moving 3 hundred million songs is the pace of acceleration. Take a look at this nifty graph. You don’t have to be Johann Gauss to note the graph is trending upward in a fairly astounding manner. Of course, if you remember the success of the iPod, the graph really isn’t too surprising. Surprise or not it is obvious that there is something about iTunes that people really like. 

There’s a lot to like about iTunes if you’re a consumer. A la carte pricing, convenience, a clean layout and a way to stay legal. Of course consumers aren’t the only ones who really like iTunes. iTunes offers a lot to a great many people. To Apple iTunes offers a method to make a little cash and incentivize everyone to buy iPods. Recording artists benefit from iTunes by exposing more people to their music. Perhaps no one benefits more from the iTunes store than record companies; with minimal effot they’re selling music in a manner once thought impossible. I suppose the only people that aren’t pleased with the success of iTunes are the Ogg Vorbis fans out there. And, honestly, if you only disappoint twelve people you’ve done a pretty good job.

Wow that seems like a win, win, win win…with a small loss for the Ogg Vorbis users. At this point most parties involved would be pretty satisfied with the results. By and large most people do seem fairly pleased with the current situation but one group doesn’t, the recording industry executives, and unfortunately that group has some stroke. The latest word about is that the music labels are chatting up the idea of raising prices for downloaded music. Here the most common thing is to solidly lambaste the label as bloodsucking fiends willing to do anything to get a little more money out of a consumer or artist. Why even the late, great Hunter S. Thompson has been quoted as saying:

“The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.”

Which is a misquote a lot of people seem to enjoy.

I don’t know any music executives so I can’t vouch for the accuracy of the description. It may be true that the labels are full of pimps and thieves or it may be that all those folks are really great people who keep their lawns neatly trimmed and have lots of barbecues for the neighbors. The question is moot, either way they are exceedingly forgetful business people.

The evidence for their forgetfulness is easily found, one only has to look to the RIAA website and wander through all numbers. Doing so is a tedious task but when all is said and done the careful researcher will note that, generally, as CD prices increase, demand decreases. Not exactly shocking if you’re Nobel Laureate in Economics but apparently beyond the ken of most music executives. At this point it is tempting to delve into demand curves and maximizations but suffice it to note that concentrating on growth (also known as DOING NOTHING in this case) is generally a good idea in a fledging market. And make no mistake, online music is still a new market, 2003 may seem like eons in terms of technology but in terms of business it is a very short period of time. New users are still coming aboard and occasional users are still becoming comfortable with the entire process. There may be an opportunity to raise prices in the future but this isn’t the moment.

Of course executives could be forgiven if they were suddenly incurring new costs for selling music over the internet. Predictably the cost is minimal as far as the labels are concerned. Apple and you pick up the bandwidth cost, there is no packaging to produce, and no songs to rerecord. It is as simple as uploading a file to a server. So without added costs and minimal added trouble it is hard to see any justification for a price increase other than pure unadulterated love of money.

Oh, wait. What about all the lost revenue because of, aargh matey, music pirates? Surely they have an effect (not nearly what the labels would have you believe) but why alienate the extremely honest folks? You’ll probably end up making more pirates. Finally I suppose the record companies might argue that the profitability of downloads is not as great as the profitability of selling physical CDs. Well, even though it is like arguing that you’re now making money by the mere fist full instead of by the wheelbarrow full there is a certain twisted logic to the argument. Oddly enough the CD sales seem to be rebounding, 2003 (the year the iTunes store was introduced) saw the drop in sales declining. Last year sales of CDs saw an increase. The industry folks will probably call it coincidence but I suspect online downloads are moving more product than the execs are willing to admit.

In a not at all related topic (because I still get e-mails on this): If you need a gmail account send and email to: [email protected]. I’ll send invites out as long as the fine folks at Google allow.

Comments

  • Vortigern,
    i actually sympathize with your position. I feel much the same way. If I buy a song it should be my song to do with it as I please.
    On the other hand there is reality to deal with and the music companies are so scared of pirating, to those guys every downloaded song is lost revenue, that they feel the need for massive protections.
    Music downloading is an imperfect thing whether it is napster iTunes or any other service (magnatune is pretty good but the choice is limited) so, at some point if you want to stay legal and keep the stuff easy you have to accept a little heavy handed stuff from the providers.
    And yes I know there are a bunch of Ogg Vorbis users but those guys are like mac users you mention Ogg Vorbis and someone is going to extoll the virtues.

    chrisseibold had this to say on Mar 03, 2005 Posts: 48
  • “Frankly magnatune suits me fine, just look at the T&C, want to use it as a backing track on your home movie to give to your family, ITMS, tough SH1T, Magnatune, go ahead.”

    Wow. The ignorance of some people still astounds me. Fact checking is a simple thing to do, but I guess spouting unfounded facts is the easiest way to make yourself look like a fool.

    While the RIAA may care whether or not you use a copyrighted song in your home movie (which is open to debate), Apple does not. Apple touts the ability to bring iTMS tracks from iTunes into iPhoto, iMovie, and iDVD for use in personal projects. This means you can use that 99 copy of “Ooops! I Did It Again!” in your Star Wars nerd video if you wish, as long as you don’t have paying public performances.

    I know, I know, don’t feed the trolls.

    Spider had this to say on Mar 04, 2005 Posts: 2
  • “While the RIAA may care whether or not you use a copyrighted song in your home movie”

    “Wow. The ignorance of some people still astounds me.”

    Please, come on. There is no need for the personal attacks.

    You have no license to use ITMS tracks and redistribute them in non commercial movies or slideshows. You even state as much yourself “While the RIAA may care ..” Please point out my ignorance:

    Here are some quotes from apple legal:


    “You shall be authorised to use the Product only for personal, non-commercial use, and not for redistribution, transfer, assignment or sublicence, to the extent permitted by law. For details of your rights and restrictions on your right to use the Products, see:”


    ” You shall be authorised to use the Product on up to five Apple authorised devices.

    You shall be entitled to burn and export Products solely for personal, non-commercial use.

    Any burning or exporting capabilities are solely an accommodation to you and shall not constitute a grant or waiver (or other limitation or implication) of any rights of the copyright owners of any content, sound recording, underlying musical composition or artwork embodied in any Product.

    You agree that you will not attempt to, or encourage or assist any other person to, circumvent or modify any software required for use of the Service or any of these Usage Rules, or interfere with, remove or alter any rights management information on the Products.

    The delivery of a Product does not transfer to you any commercial or promotional use rights in the Product. “

    Thats is from here:
    http://www.apple.com/uk/support/itunes/legal/policies.html

    Sure does not sound like you can give copies away to family to me (as I origionaly stated, and you called me ignorant and a troll. I am quite upset by this BTW.)


    If you could legally redistribute itunes tracks in this fashion, the P2P networks would be full of 1 or 2 picture slideshows with iITMS purchased tracks and the RIAA would be able to do nothing about it.


    I stand by my point you cannot (legally) redistribute ITMS purchased tracks in a non commertial movie (or slideshow), whereas you can from Magnatune.

    This is a bit of a side issue anyway, its not really a negative of ITMS as you can’t do it with a CD either. I was pointing it out as an advantage of magnatunes, and I think rather than accepting the T&C of ITMS, or WMA DRM type stores or even a CD, we as consumers should be pushing for more rights, not accepting, meekly, less.

    I know I wsaid I was done with this topic but that personal attack needed a response.

     

     

    vortigern had this to say on Mar 04, 2005 Posts: 25
  • “at some point if you want to stay legal and keep the stuff easy you have to accept a little heavy handed stuff from the providers.”

    I think this is where we disagree, if nobody bought the DRM tracks they would soon stop using it, I may be only one person but that is exactly what I am doing. If everybody was as principled as me (or maybe as much of an ignorant troll grin ) it would have an impact.

    “And yes I know there are a bunch of Ogg Vorbis users but those guys are like mac users you mention Ogg Vorbis and someone is going to extoll the virtues.”

    I would think most OGG users do not even know they are using it, never mind being able to extoll its virtues. For instance 1.2 million people became OGG users over *5* days in 2002, I would bet that most of them were not already using OGG at that time and that most of them did not know they were about to become an OGG user..

    As I said I would be very suprised if the total number of OGG users was not higher than the total number of Mac users.

     

    vortigern had this to say on Mar 04, 2005 Posts: 25
  • ” You shall be authorised to use the Product on up to five Apple authorised devices.

    You shall be entitled to burn and export Products solely for personal, non-commercial use.”

    Burning to a DVD in a non-commercial use is considered an Apple authorized device. (If that is copy and paste, Apple should run a spell check on their EULA). Although that is taken from the UK EULA, and not the US one which is the one I discuss. Terms and conditions differ when crossing borders.

    Apple, as part of their iLife suite of apps, allows the conversion and use of iTMS songs to iMovie, iPhoto, and iDVD. Each of these three apps allow burning to DVD (iMovie through iDVD).

    Back to the non-commercial point. Commercial use means that you will be making a profit from the end product. If you wish to open a DVD mastering company and use iTMS tracks, then you must get the permission of the copyright holder to put that music onto a non-commercial disc. (I asked legal advice on that one, as I am currently working on opening such a place.)

    If you are doing it just for the benefit of yourself/family/friends and are not making a profit off of the end product then you are allowed to include iTMS tracks into it, as well as CD import tracks, and any other legally obtained music you own the license/right to listen to. (We never own the music, otherwise we wouldn’t of had to pay for each successive type of media. If we owned it, we could charge a fee to anyone using it including the artist. We would of received a brand new CD pressing to replace our LPs, 8-tracks, and cassettes.)

    Answer me this: how is creating a home movie project, burning it to a DVD, and giving copies away free to friends/family a commercial use? If you take no monetary profit?

    (Legally, here in the US at least, you can charge cost of materials as long as it is actual cost. Little legal loophole.)

    Especially when Apple themselves allow this without any DRM circumvention at all? It is within their own software suite, built-in by them. If it was illegal to do, they would not of included this feature as the RIAA would be on them like maggots on a carcass. If they did include the feature, and it miffed the RIAA, then the RIAA would of pressured Apple into removing the feature much like Apple removed the net sharing from iTunes because of illegal sharing.

    Spider had this to say on Mar 04, 2005 Posts: 2
  • “Dude, it’s context. You stated the above. The context is “encode”. So, the response was about encoding your music.”

    As I have said I found no options for encoding my music at the ITMS, it seems to offer one option only.

    vortigern had this to say on Mar 04, 2005 Posts: 25
  • “You shall be entitled to burn and export Products solely for personal, non-commercial use.”“

    You have spent a lot of time arguging about the “non commertial” bit when that is obvious. Your home movies are not commercial, agreed.

    You have completely missed the more important “personal”, giving copies away is not personal, it is redistributing.

    The reason that Imovie ect allow you to use the tracks is for personal use, not giving them away.

    How is putting your movie on P2P commertial? Its not but it is certainly not personal, nor is giving ITMS tracks to people you know.

    vortigern had this to say on Mar 04, 2005 Posts: 25
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